Comment

The Lebanese art of distraction

by Sami Halabi
written by Sami Halabi

 

For several excruciating months the Lebanese press has been subjecting us all to a whirlwind of speculation over the prospect that the Special Tribunal for Lebanon (STL) will issue an indictment accusing, in one way or another, Hezbollah of being involved in the 2005 killing of former Prime Minister Rafiq al-Hariri and many others. It is now all too clear that the “informed sources” quoted in various media outlets who told us with such certainty that an indictment would be issued by mid-October were wrong. This deadline passed without incident and yet the media conjecture continues, fueling the perpetual fear of sectarian civil strife.

The debate has reached fever pitch, with everyone from the American Secretary of State Hilary Clinton to Iranian President Mahmoud Ahmadinejad throwing in their two cents, and politicians from both sides of Lebanon’s political divide holding endless press conferences. But as the STL has descended into farce, Lebanon’s real problems have — as usual — taken a backseat.  

As we wait for Damascus, Riyadh, Tehran and Washington to decide on our “post-indictment” fate and our supposed leaders bicker over “false witnesses,” we should pause to ponder why we have allowed the STL to take progressive policy reform hostage. Scratch beneath the surface and what has everyone so hot under the collar reveals itself as little more than political posturing, hyperbole and the dark arts of distraction and deception.

Firstly, it is nothing less than comical to talk about witnesses before an indictment is issued, as no one yet knows whose testimony will be considered. The prosecutor has not announced who will be used as a witness or who will be accused; the furor is supposition.

What’s more, calls to try the ‘false witnesses’ in the Judicial Council — a permanent tribunal of five senior judges and no jury that adjudicates threats to national security based on a cabinet decision and therefore violates international judicial norms — is a testament to how far we are from real judicial reform or being able to ever realize “the truth.”

Even more illogical is the dichotomy at the heart of Hezbollah’s position: On the one hand the party has called for those who tried to contaminate the STL with false testimony be held accountable, but on the other it has accused the tribunal of being illegitimate and called for it to be scrapped. Hezbollah emphasizing the importance of the veracity of witness testimony automatically confers some degree of legitimacy to the proceedings and, ultimately, the outcome they lead to. They can’t have it both ways. 

On the other side of the fence, the so-called Hariri camp recently admitted politics motivated it to wrongly accuse Syria of involvement in the 2005 assassinations, while rumors abound of a collusion between the March 14 movement and the original prosecutor. Now, incredibly, they insist that the institution’s credibility has not been damaged.

Given the absurdity of these and other acts in the STL tragicomedy, the fact that both political camps continue to propagate the idea that at any moment the tribunal could cause the government to crumble, taking the country with it, is telling of how far they will go to avoid doing their jobs.

By contriving conflict with talk of violence in the streets and the collapse of the state, Lebanon’s politicians have conveniently drawn people’s attention away from the fact that their water tanks are empty, their food is rotting in the fridge as electricity cuts for hours in the heat and their cars are stalled in choking traffic.

It’s no coincidence that when these issues began to boil this summer, the STL card was played; nor will anyone be surprised when it’s promptly shuffled back into the deck. Everyone already knows that Lebanon’s bilad al kubra, the ‘countries of influence’; do not find sectarian conflict in their interests at this juncture and that no one, even if they wanted to, can fight Hezbollah.

By that time, our politicians will likely have found another excuse to keep us scared into submission and their pockets lined with our money. At some point the joke will get old. But until then, it looks as though we will all have to be content with being laughed at.

SAMI?HALABI is

deputy editor of Executive Magazine

 

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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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Last Word

Empire in austerity

by Executive Contributor
written by Executive Contributor

In an article earlier this year for Foreign Affairs magazine, the British historian Niall Ferguson discussed how quickly empires collapse. He noted that while many observers have tended to assume long cycles of imperial decline, a breakdown could come suddenly, “like a thief in the night.”

Ferguson has argued that the American empire is more likely to disintegrate for reasons related to the domestic economy than foreign policy. In his book ‘Colossus: The Price of America’s Empire,’ he argued that imperial America faced a ballooning fiscal crisis brought on by a propensity to consume much and save little, as well as an impending social security crisis caused by Americans living longer and overburdening the fiscal system.

In the Foreign Affairs article, Ferguson focused on the vital matter of perceptions of decline. Even if fiscal shortcomings were not enough to erode American strength, he pointed out, “they can work to weaken a long-assumed faith in the United States’ ability to weather any crisis.” Just look at the relatively minor sub-prime defaults that spread through the global financial system by “blowing huge holes in the business models of thousands of highly leveraged financial institutions.”

 Another scholar, Michael Mandelbaum, recently examined the implications of the financial crisis on American foreign policy in his ‘The Frugal Superpower: America’s Global Leadership in a Cash-Strapped Era.’ He argued that America’s debt obligations following the 2008 financial crisis, as well as its fiscal structure and entitlement programs such as social security and Medicare, prevented the country from continuing to play the leading international role it has for decades. 

 “[T]he public will no longer feel able to afford, and so will not support, operations to rescue people oppressed by their own governments and to build the structures of governance where none exist,” Mandelbaum wrote. “Interventions of this kind, which the United States has undertaken in the last two decades in Somalia, Haiti, Bosnia, Afghanistan, and Iraq, will not be repeated. The American defense budget will come under pressure, and so, too, therefore, will the missions that the defense budget supports.”

 All this raises an interesting question. If, as Mandelbaum affirms, the United States becomes more frugal abroad, will that not undermine America’s long-assumed faith in its ability to weather any crisis, as Ferguson pointed out? In other words: too much realism about American limitations may actually accelerate America’s waning.

Certainly that is true in the Middle East, where, under President Barack Obama, the US has visibly downgraded its commitments. Obama has withdrawn American combat forces from Iraq. He has overseen a significant tightening of sanctions on Iran, in part to better avoid being sucked into an expensive, hazardous war with the country over its nuclear program. Obama’s support for Palestinian-Israeli peace, while it fulfills a campaign promise, may be viewed as an effort to stabilize a region that might cost the US dearly in the event of new conflicts.  Even in Afghanistan, where Obama has deployed 30,000 additional soldiers, information recently published by the journalist Bob Woodward indicates that at the heart of Obama’s thinking were a clear-cut exit strategy and financial worries. “I’m not doing 10 years. I’m not doing long-term nation-building. I am not spending a trillion dollars,” the president told Secretary of State Hillary Clinton in October 2009.

That is sensible. However, America’s view of itself has always pushed in a contrary direction. It was John F. Kennedy who stated in his inaugural address that America would “pay any price, bear any burden, [and] meet any hardship… to assure the survival and the success of liberty.” For Obama to challenge that premise on financial grounds effectively denies Americans the self-assurance — some would say the egotism — a higher sense of purpose invariably brings with it. This in turn could hasten the demise of the American empire that Ferguson discusses.  Balancing national values with national accounts will remain a major difficulty for American leaders. But the process of change may be quicker than some imagine, as Ferguson believes. America may not be able to afford high ambition, nor might it long outlast excessive modesty. 

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Companies & Strategies

Buying back the Love

by Executive Editors
written by Executive Editors

A journalist from Executive magazine and 200 others from around the globe were flown to San Francisco last month on a junket that included airfare, two nights at the Hilton Hotel, gourmet cuisine and a perpetually open bar.

Clearly, hosts Microsoft had something they wanted to say, or more accurately, wanted the assembled hacks to say. While some events make news, others are made news, and the later was certainly the case with the launch of Internet Explorer 9 (IE9) beta.

But why such expense for the trial version of a ninth edition web browser? As Sebastian Anthony, an editor at the AOL-owned technology blog Download Squad said, it’s been a good few years since Microsoft has been able to generate decent media coverage, while at the same time “Apple sneezes and people write a story about it.” Thus, perhaps, the reason for the public relations bonanza.   

Internet Explorer (IE), at one point the default browser of nearly 95 percent of web surfers, has seen its market share slip through the noughties to just over 60 percent today, as competitors such as Mozilla’s Firefox, Google’s Chrome and Apple’s Safari have gnawed away at IE’s slice of the pie. Still, that’s 60 percent of the almost 2 billion Internet users worldwide.

“It’s a fun story to tell sometimes how IE has declined, but it is still very strong,” said Brian Hall, general manager of Windows Live and Internet Explorer. Microsoft officials promised, and in many ways demonstrated, at the September 15 launch in San Francisco that IE9 heralds the next generation of web browsing.

While developers and enthusiasts might ogle over its “hardware acceleration” and the evolution of HTML5 coding, the layman attraction is that web browsing with IE9’s minimalist interface feels cleaner, and is a whole lot faster than competitors when it comes to loading large websites. (IE9 requires Windows Vista or Windows 7, however, so those using Windows XP or older operating systems will have to fork out for something newer).

Weeks before the beta launch, Microsoft gave many of the world’s most popular websites advance access to the new code and offered support to help optimize the sites for EI9, thus securing customer usage and adoption even before the release.

Then it was time for the charm offensive in San Francisco for the beta launch, which Microsoft will use to gather feedback from users and developers before launching IE9’s final version, at an as yet undisclosed date.

Regional strategy

Asked whether Microsoft had a specific strategy to promote IE9 in the Arab world, Hall noted that the company operates in most countries around the globe and while there are some unique local Internet intricacies regarding bandwidth and latency in developing markets, generally, “the market dynamics are quite consistent, which is: enthusiasts set the tone, sites drive the real adoption, distribution helps with adoption.”

He said Microsoft will now work at “encouraging” PC manufacturers to ship IE9 with their products, and Microsoft has more than 1,000 staff who will seek out local partners to work with. “Even in Lebanon, we will have people who are meeting with companies that build the top sites in Lebanon, and we’ll want them to do work for Internet Explorer 9.”

What profit?

This all sounds very expensive, leaving one glaring omission: how will Microsoft make money off IE9?

“We don’t,” said Dominic Carr, director of Windows Communication. “Our business model is ‘happy Windows customers.’”

As Hall explained: “We have a little tiny business called Windows,” an operating system with more than one billion customers. “Especially for home users, the number one thing people do on their PC is browse the Internet… our job is to give the best web experience to Windows customers that we can, and that is the purpose of the browser.”

So will this strategy work? Will IE9 help Microsoft regain browser market share and put smiles on the faces of Windows users?

“No one thought they would succeed with the X-Box, but they threw enough money at it until it succeeded, and now it’s huge,” said Download Squad’s Anthony. “I think [IE9] will succeed — they will throw money at it until it is a very big success.”

“It comes down to how much they value their free browser app, and whether they just want to beat Google — that might be the pure intention: they want to smash Google to pieces.”

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Finance

Regional equity markets

by Executive Editors
written by Executive Editors

Beirut SE  

Current year high: 1,200.49    Current year low: 953.88

>  Review period: Closed Sept 23 at 969.34 points               Period change: 1.4%

Despite a minor improvement in the MSCI Lebanon index, Lebanese stocks are in the mode of attractive pricing; the Beirut market is the biggest loser so far in 2010. Political concerns were unabated in September as market participants marveled at fractious interactions between local, regional and international power brokers. Citigroup analysts confirmed that they continue to regard real estate scrip Solidere as having price potential far above the sub-$20 range it has been traded at lately. Bank of Beirut saw some selling after disclosing plans for a $159 million preferred shares issue.

Amman SE  

Current year high: 2,693.91                Current year low: 2,223.30

> Review period: Closed Sept 23 at 2,309.21 points             Period change: 2.68%

Although gainers outnumbered losers on the Amman Stock Exchange in the review period, the ASE index has a ways to climb to alleviate concerns over the Jordanian bourse’s poor performance and lack of stamina in 2010. One has to wonder if the mid- September announcement of a prime ministerial committee tasked with examining the reasons for the ASE downtrend qualifies as reassurance for investors. On the bright side, the industrial sub-index was the best gainer on the ASE in the review period. Arab Potash gained 11.8% while market cap leader Arab Bank advanced 4%.  

Abu Dhabi SM  

Current year high: 3,239.74                Current year low: 2,467.04

> Review period: Closed Sept 23 at 2,639.33 points             Period change: 5.64%

With a price return that was less than half of what was seen in Dubai, the Abu Dhabi Stock Exchange on Sept 23 nonetheless closed still ahead of the DFM in terms of to year-to-date performance:  3.8% in the red versus Dubai’s 6.3%. But the more important matter is that all GCC bourses recorded a period of gains as the region celebrated the end of Ramadan. Real estate, which was weak in August, was the outperformer among sector indices on the ADX, followed by banking. The consumer index underperformed. Abu Dhabi Commercial Bank gained 26.5%. 

Dubai FM  

Current year high: 2,373.37                Current year low: 1,461.80

> Review period: Closed Sept 23 at 1689.45 points                                 Period change: 13.87%

It seems that perhaps Ramadan prayers and spiritual discipline are as good for the books as they are for the soul, as the Dubai Financial Market had its most bullish moments for some time in September. As the DFM index reduced its loss for the year to date to 6.3% by Sept 23 market close, the telecoms sub-index led all active sectors in double-digit gains. Whether that growth is sustainable remains to be seen. Logistics firm Aramex leapt almost 28% higher; market cap leader Emaar gained 15.6%.

Kuwait SE  

Current year high: 7,882.60                Current year low: 6,319.70

> Review period: Closed Sept 23 at 6840.10 points              Period change: 2.27%

The upward trend across GCC markets allowed KSE investors to breathe easily as the bourse’s benchmark index loss for the year to date narrowed to 2.4%. Industry and insurance were the best performing sectors on the KSE, making September a real “in” month on the Gulf’s northernmost exchange. Share prices of market cap leaders Zain and NBK advanced 8.3% and 7.3%, respectively. Losers in the review period included First Takaful Insurance, down 15.6%, Kuwait National Airways, down 7.7%.

Saudi Arabia SE  

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

> Review period: Closed Sept 21 at 6,434.90 points             Period change: 5.38%

While the Saudi Stock Market still didn’t return to its former glory after regressing a month earlier, the solid gain in the TASI benchmark index indicated a return to greener pastures for the year-to-date performance, in step with the monthly growth. Petrochemical and agro sectors outperformed the market while retail underperformed. Gains were broad based across sectors and with few exceptions, stocks advanced. Holy and national holidays meant fewer trading sessions than peer markets. 

Muscat SM  

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

> Review period: Closed Sept 23 at 6,339.29 points             Period change: 3.15%

With a middling performance as compared to its GCC peers, the Muscat Securities Market benchmark index returned to a positive reading for the year to date but remained a bit too close to the drop zone to break out in full cheers. Led by the services sector, the MSM sub-indices for services, banking, and industry all performed modestly above the general index in the review period. The most exciting thing for the Omani market after the holidays was the opening of subscriptions for the Nawras IPO.

Bahrain SE  

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

> Review period: Closed Sept 23 at 1,445.75 points             Period change: 1.91%

Continued recovery brought the Bahrain Stock Exchange benchmark index back within one percentage point of its value at the start of 2010. With its price to earnings ratio of 11.49x, the BSE ended the review period less pricey than the average 13.69 P/E ratio for GCC bourses. Banking and investments led the market’s gains, while movements in the insurance as well as the hotels and tourism sub-indices pointed in the opposite direction. Gulf Finance House emerged on the losing side with a drop of 13.8%. Market cap leader Ahli United Bank gained 4.3%.

Doha SM  

Current year high: 7,801.33                Current year low: 6,502.93

> Review period: Closed Sept 23 at 7,661.67 points             Period change: 6.03%

The first market trend in the GCC this year that conveys real rally flair is the rise of the Qatar Stock Exchange along a 12-week upward path since early July. By its close on Sept 23, the benchmark index in Doha had worked its way into the gains range of 10% versus the start of 2010. Financial values outperformed the general index on the QSE in September while the sub-index for services lagged behind. Among market heavies, Qatar National Bank and Industries Qatar benefited from the upwind, while market cap leader Ezdan Real Estate was flat.    

Tunis SE  

Current year high: 5,599.28                Current year low: 4,021.14

> Review period: Closed Sept 23 at 5,531.97 points             Period change: 4.07%

From the uninvolved observer’s perspective, the 2010 Tunisian Stock Exchange performance borders on boring, but it must be different from the local investor’s point of view. The Tunindex extended its gains further and by Sept 23 was up 28.9% for the year-to-date. Directly after the Fitr holidays, the index shot up 200 points to yet another record but at least there was some profit-taking in the last two sessions of the review period. Newcomers Carthage Cement and Ennakl Automobiles were among the best gainers, up by 8.6% and 4.7% respectively.

Casablanca SE  

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

> Review period: Closed Sept 23 at 11,722.95 points                              Period change: -0.11%

The Casablanca Stock Exchange’s MASI was the only non-gainer in the September review period, and though its performance was a bit choppy the market does not deserve to be labeled as “weakening”. Market cap leaders Maroc Telekom and Attijariwafa Bank were in a good mood, gaining 2.4% and 3.6%, respectively. For Morocco’s top listed banking scrip, the share price at the end of the review period was almost back at its 12-month peak from June 10 of this year.

Egypt CASE  

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

> Review period: Closed Sept 23 at 6720.00 points              Period change: 4.87%

While volatility on the Egyptian Stock Exchange was more pronounced than North Africa’s other bourses, the EGX 30 continued to move nicely in a northerly direction. The vast majority of stocks showed gains in the review period, led by Arab Cotton Ginning which announced its highest dividend ever on Sept 13. The Orascom corporate values advanced modestly at 2.1% for OTH and 1.7% for OCI. Developer TMG fluctuated heavily after another set of headlines from a business-related court ruling.

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Economics & Policy

Executive Insight – Booz & Co

by Ahmed Youssef, Chady Zein & Raymond Soueid
written by Ahmed Youssef, Chady Zein & Raymond Soueid

Over the last decade, the state of private equity (PE) in the Middle East has gone from virtually nonexistent, to a booming prospect, to an industry facing a shakeup. In 2004, the region was home to just 26 funds, with a total of $3 billion under management; in 2010, 142 funds manage $34.5 billion.

The sector’s breakneck evolution has made it difficult for investors to get a clear picture of the industry’s underlying fundamentals, and they therefore have been understandably cautious about directing their funds to regional PE firms.

In fact, it is now becoming clear that the region’s heady growth over the last decade worked to cover up some critical weaknesses in the PE industry. Some issues are structural: Significant gaps remain in the region’s legal and regulatory frameworks and corporate governance requires development, as the influence of family-owned businesses may hinder corporate disclosure and limit transparency. Another challenge is the fact that PE firms in the region are still sitting on about $11 billion of unspent capital — much of which is contingent on the performance of previous funds.

Even if the appetite for PE investing were to return to the insatiable pace of 2006–2008 (around 70 transactions per year, with an average size of $30 million), it would take more than five years to deploy all of this capital. Considering that most firms average three to five years until they invest their funds, the mismatch could create significant pressure to invest quickly. The PE market in the Middle East would need to develop much faster in order to absorb the available capital.

In order to fulfill its potential and continue attracting global investment dollars, the industry will need to undergo some reform as it consolidates. PE firms that hope to operate in the Middle East should consider five key imperatives.

  • Develop an investment approach based on themes with staying power. Focusing on individual nations or sectors, as many firms outside the region do, might limit Middle East-focused PE firms’ pool of opportunities, thus restricting their ability to scale their assets with superior returns and in a reasonable time frame. Theme-based investments, by contrast, are built around economic trends and span numerous countries and sectors. For example, PE firms that focus on the theme of serving a growing and increasingly wealthy population will invest in sectors such as consumer and mortgage finance, real estate management, retail, and restaurants and leisure.
  • Tighten up risk management practices. PE firms will need to ensure that their portfolios are not over-concentrated. Naturally, this means that they should not be heavily skewed toward any single geography or sector. However, firms must also ensure that the companies in their portfolios are balanced between different stages of their development — i.e., between companies still in the growth stage that demand cash, and those that have achieved maturity and generate cash. Meeting this target is particularly problematic in the region, where many opportunities are at an early or greenfield stage. A better balance in the portfolio will create a hedge against the cyclicality of the business. In terms of individual deals, PE firms will need to practice more rigorous risk management before, during, and after each transaction.
  • Be an active owner. The robust economic growth that preceded the downturn allowed many companies in the region to chase top-line growth at the expense of working capital and profitability. Liquidity issues bubbled beneath the surface while the economy was booming, but rose to the top when the recession hit. These same companies are now struggling to get their house in order. Adopting the appropriate financing approach, anticipating a buildup of operational capabilities and strengthening relationships with key stakeholders and suppliers will require active oversight by existing PE backers, as leading firms KKR and Blackstone have demonstrated.
  • Deepen relationships with limited partners (LPs), especially institutional investors. Historically, the majority of LPs in the region were high-net-worth individuals. However, institutional investors now represent a more significant percentage of LPs — an important development for PE firms as they broaden their investor base. Firms should seek to strengthen relationships with institutional investors, whether regional or international, which are looking to make a play in the region. These may include banks, insurance companies, pension funds and others that have been adding private equity assets in hopes of achieving risk-adjusted returns beyond those possible in public equity markets. Deepening the relationship entails more rigorous relationship management, including continual reporting, and better understanding of the risk-return relationship that institutional investors seek. 
  • Build confidence through new fee structures and fund-raising approaches. Lowering entry fees will encourage investors to come on board and give fund managers the opportunity to prove their worth. Among limited partners globally, the standard “2 and 20” fee structure — in which firms take a management fee of 2 percent of the fund’s net asset value each year and a performance fee of 20 percent of the fund’s profit — has become a source of increasing dissatisfaction. Sensitive to investors’ concerns regarding these arrangements, some big PE firms around the world have lowered their management fees on committed but uninvested capital to 1.5 percent (and sometimes lower for LPs with large commitments); regional firms should consider doing the same. Another peculiarity is fundraising for specific opportunities — while cumbersome, this bespoke option appeals to investors and should be taken into account.

The region’s PE industry sprang up when equity prices were rising, and many local players enjoyed early success in the form of quick and profitable exits from investment positions. However, that dynamic soon reversed. Today, winning will not depend on timing or on external market factors; it will depend on more fundamental sources of value. As firms in the Middle East rebuild, they will need to do the basic things right: Identify sustainable investment ideas, create value within their portfolio companies, reduce their risks, and gain the trust of the best possible investment partners. These are things that will work, and remain important, in good times and in bad.

AHMED YOUSSEF is a principal, and CHADY ZEIN and RAYMOND SOUEID are senior associates at Booz & Company

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Economics & Policy

Turkish delight

by Executive Editors
written by Executive Editors

After a summer in which equity preachers in the Middle East and North Africa found their faith tested by an absence of offerings, Oman’s first initial public offering (IPO) in two years is welcome news indeed. Nawras, the sultanate’s second mobile phone player, has opened for subscriptions to 40 percent of its capital in a month-long offering from September 15 to October 14, with the intent of raising between $471 million and $609 million. The wide range in projected IPO revenue is because the company is using book building to determine the issue price for the $260 million shares on offer, a first in Oman’s stock market history. This method of setting the issue price also gives Nawras greater ability to stir interest among international institutional investors, whereas the region’s other IPOs in the year to date were either inaccessible or short on attractiveness for international money.

But, for all the good signals the Nawras IPO sends regarding the vitality of the Muscat Stock Exchange, it is only a light drizzle after a drought and regional primary markets show only the vaguest promise for the fourth quarter. 

This dusty picture was reinforced by corporate talk around the Gulf from late September when executives of Bahrain’s aluminum smelter, Alba, and United Arab Emirate information technology retailer Axiom, independently from each other touted the possibility of going public in the not-too-distant future. So far in 2010, similar announcements of possible impending flotation have far outnumbered the subscription offers actually put in front of investors. This is not to say that IPOs were a bad idea this year. According to Zawya, the thin crop of 2010 market entrants in the MENA — 21 companies entering bourses in Riyadh, Damascus, Amman, Tunis and Cairo — has seen eight stocks achieve massive growth. By September 20, each of these stocks was quoted at least at twice their issue price.

The list of gainers was led by Egypt’s solitary debutant, juicer Juhayna, which in a little more than three months rose from its EGP 1 par value to EGP 5.49 per share, however the real gain margin was much lower than 450 percent. The actual issue price, which included a hefty EGP 3.66 premium, indicates a three-month return rate of 18 percent since flotation.

On September 20, Three of the new market entrants were quoted lower than at the close of their respective first trading days. One of these underperformers was the largest IPO offered in the first 36 weeks of 2010: Saudi urban developer Knowledge Economic City. Its share price range in September was 12 to 14 percent below the stock’s SAR 10 issue price.

But there is one stock market in the wider Middle East which this year has been outperforming the region and most other finance centers on earth. The Istanbul Stock Exchange’s ISE 100 index, which closed 2009 below 53,000 points, has recently raced from one peak to the next, closing September 22 at 64,479.14 points. After a hiatus in new listings throughout much of the past decade, 2010 has seen IPO announcements bloom on the ISE.

According to the exchange, 14 IPOs in the first half of 2010 raised $842 million, and the official ISE list of current IPO applicants just added its 10th hopeful issuer on September 20: retail group Kiler, which applied to offer 13.05 percent of post-IPO capital of $93.8 million.

Of the IPOs in the Turkish pipeline, almost half are related to real estate — a traditional favorite of the Middle Eastern investor. According to the Istanbul Stock Exchange, four GYOs (the acronym in Turkish for real estate investment trusts) are in the 2010 IPO pipeline, the largest of which is the Emlak Konut GYO with a capital of TRY 2.5 billion, (Emlak Konut is an affiliate of Turkey’s Housing Development Authority).

Another fund is being floated by Akfen Group, which is known internationally for, among other things, construction and operation of airports. The Akfen GYO, which received approval for its IPO on August 25, is a partner with France’s Accor Group in hotel developments in Turkey, Russia and the Commonwealth of Independent States. 

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