Real Estate

Lebanon – No time for the past

by Nada Nohra
written by Nada Nohra

Passing through the bustling Gouraud or Pasteur Street in the Gemmayze neighborhood of East Beirut, one cannot help but notice the hive of activity in what was formerly one of the area’s biggest car parks. The site is walled off from the public but, peeking through the gate as a dump truck leaves full of dirt, the curious onlooker can see bulldozers and construction workers in early stages of excavation of what is slated to be one of the largest residential developments in the area.

Dubbed “Gemmayze Village,” work on the 7,000 square meter gated residential community was started last October by Conseil et Gestion Immobiliere (CGI), the real estate arm of Audi Saradar Group. Scheduled for completion by 2014 or 2015, the 37-floor tower will be surrounded by gardens and five housing blocks ranging from three to 10 floors each.

Real estate developments in Beirut proclaiming to set a new standard in luxurious living have become commonplace cliché in recent years, but two aspects of the Gemmayze Village make for less-than-ideal development. First is the discovery of archeological ruins at the site, which the Directorate General of Antiquities (DGA) is studying to determine their significance and how they can best be preserved.

Second — an issue that has increasingly loomed over Gemmayze in recent years — is the fact that the construction of another towering edifice will further erode the historical nature of the neighborhood, which contains clusters of traditional, low-rise buildings.

As architect and heritage activist Habib Debs asked: “Aren’t there other neighborhoods in Beirut where they can build towers?” 

He and fellow campaigners have fought against the construction of new high-rises in old neighborhoods for a number of years, but it has been a losing battle in the absence of adequate laws to control such developments. CGI declined Executive’s request to comment on the issue.

Archeology on site

According to Assaad Seif, coordinator of archeological research and excavations at the DGA, both archeological and construction excavation are happening simultaneously in different areas of the Gemmayze Village site, with the former working where artifacts have been found and the latter where they have not. The ruins unearthed so far date to the Roman period and include irrigation channels and water basins. Seif explained that the findings are being cleaned and assessed, and a report is being prepared to find an adequate method to preserve them. The directorate also found two tombs at the site’s entrance on Pasteur Street, which will be excavated later.

Officially, there are several approaches the DGA could take to preserve the ruins. If the remains are significant and need to be kept on site, the state could expropriate the land. If not, the artifacts could be integrated within the development, dismantled and reinstated within the site, or removed to be studied in archeological labs and scientifically recorded. The minister of culture has the final decision, which mainly depends on the department’s assessment and recommendations.

“Nothing is thrown away into the sea or done in a subjective manner,” said Seif.

As Executive went to print, the DGA had not officially announced its intentions.

Seif explained that on any land plot in the Gemmayze vicinity there is a high probability of archeological finds, given that the area has been inhabited for thousands of years. He advises prospective investors to consult with the DGA before purchasing land to limit the risk of lost investment opportunities in the case of land being expropriated.

Archeological concerns

Helen Sader, professor of archeology at the American University of Beirut, is worried about how archeological findings are being treated, mainly because rescue excavations – those carried in areas where construction of development or infrastructure projects are taking place – are largely being carried out by students and unqualified staff, while findings are not consistently reported.  Consequently, the public has not been kept well informed of what the directorate is uncovering.

“We never really hear of what is going on; when we do know, it is from the newspapers,” she said, adding that she is unsure whether the DGA is taking the appropriate course of action.

Once or twice per year the DGA issues a scientific journal called Baal, which includes scientific reviews and details of excavations that have taken place around Lebanon.

The information contained in the publication, however, can be more than a year old, as findings are only published when the studies are complete. The DGA’s Seif said that the Ministry of Culture was working to upgrade its website to include more up-to-date information.

Seif denied that workers at the excavation sites were unqualified, but conceded that there was a lack of archeologists in Lebanon and therefore the number of people working at the directorate is insufficient.

“We have 90 percent of all those who are graduating from Lebanese universities” working in the archeology excavations teams, said Seif. Currently those teams comprise some 45 people, or about one third of department requirements, he added.

The lack of staff members, particularly of people specializing in urban archeology, means archeological losses are occurring, said Seif.

“We prefer not to have losses but we are obliged to accept them,” he said. “We are working according to our potential.”

Impacting the past and present

Along with the Gemmayze Village’s impact on ancient ruins from bygone civilizations are the present-day implications of a 135-meter monolithic stone-clad tower dwarfing the quaint, low-rise ottoman and colonial-era structures which characterize one of Beirut’s few remaining heritage areas.

That developers want to build high-rise towers in Gemmayze is not new, however, and neither is residents’ and activists’ struggle to stop them by trying to deny them building permits.

Back in August 2005, the director general of urbanism (DGU) announced that it was putting Gemmayze under study due to the high demand for tower construction in the area, explained Joseph Abdel Ahad, head of the DGU at the time. The directorate has never actually had the funds to hire a private company to carry out a detailed survey, however, and to this day the study has yet to be implemented. A year after placing Gemmayze under study, Abdel Ahad said the DGU issued a circular laying out strict building specifications, which, if applied, would limit building heights.

“These conditions were preliminary until a study was done, but it never happened, and we are still applying the circular,” he said.

The circular includes many specifications, mainly forbidding merging several plots into one – which could lead to an increase in built square meters allowed and the rise of more towers. It also sets the building height limit at two times the width of the street and prohibits the practice of retreating from the street, which would allow developers to build taller buildings.

Despite the circular, however, tower permits are still being issued.

What went wrong?

As with many sectors in Lebanon, conflicts of interest abound in the real estate industry, with the lines blurred between developers and those meant to regulate development.

Take Ziad Akl for instance, who is both a member of the higher council of town planning at the DGU and the architect behind the Sursock Residence tower – the cause of much controversy in 2006 when the permit was issued due to its location between the historical Sursock Museum and Villa Linda Sursock. 

 

Akl argues that due to Beirut’s high exploitation factor – the maximum percentage footprint of a plot of land that a building can occupy – owners of large land parcels have to build high-rise buildings in order to take full advantage of their investment. He explained that the Gemmayze Village sits on one of the largest plots in the neighborhood.

“Those who have large land parcels and the right to build on them, they have to build high-rises, or else where are they going to put their square meters?” he said, adding that none of the towers currently in Gemmayze breached the DGU circular in any way. Akl said he would like to see the historical cluster of buildings preserved as well, but authorities should first find a way compensate land owners for the loss on investment.  

Debs, the architect and heritage activist, disagrees, saying that full utilization of the exploitation factor is not a given right, and authorities should be able to lower it if needed.

“Authorities have the right to lower the exploitation factor to protect an area,” he said. “The public interest should come before the private one.”

Still, every development in the neighborhood is studied case-by-case and altered according to DGU’s request. As Akl points out, the original design of the Gemmayze Village included just two high-rise towers; the directorate asked the developer to change this to one tower and several low-rise building blocks to better blend with Gemmayze’s aesthetic.

Does history have a future?

Whether towers should be built in Gemmayze or not, or whatever the steps the authorities should take in order to preserve historical clusters of buildings, what is almost certain is that building permits once given will not be taken away, and what is demolished will not be rebuilt in kind.

It also remains to be seen whether the Lebanese authorities will manage to begin the urban study of the Gemmayze area before new development obscures the historical character of the neighborhood forever.

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Finance

HSBC – Simon Vaughan Johnson

by Emma Cosgrove
written by Emma Cosgrove

As regional head of commercial banking at HSBC, Simon Vaughan Johnson has a front row seat to the resuscitation of the Middle East’s biggest corporate players. He recently sat down with Executive to discuss where we should be looking for the first signs of economic recovery in the region.

 

E  What will be the drivers of the recovery?

I look after commercial banking, so the Dubai government is not in my segment. However, we do have customers who are suppliers and contractors to that segment. I’ve been and come back to Dubai – I first saw it when it was pretty simple in 1988, then I came back again in 1991 and returned to live in the UAE again in 1995. I have seen an amazing transformation.

I believe that, in the long term, [Dubai] will absolutely come back again and HSBC as a group (and I personally) also believe that the government will get it right.

Clearly the sharp drop in October [2008] that we saw, particularly in real estate, came as quite a surprise to everybody.

I also think one of the biggest challenges is transparency. If we can help the economy itself and the operators within that economy to be utterly open about their financial position, that will bring in a much stronger foundation. This is particularly true where the larger corporates want to go into the debt markets, where you’ve got to be totally transparent.

E  Is this a singular view? Do you think that rhetoric concerning transparency is met by actual intention for improvement?

The only way for transparency to become a reality is if it is driven by the business community. I obviously see a lot of corporate customers and many of them are now bringing in far tighter governance, such as hiring internationally trained financial controllers. These companies are obviously very aware of the need to be transparent, however for it to become broad and widespread you need an environment that encourages transparency or even mandates it. Encouragingly, I do think that there is a broad recognition that greater transparency will be required to be able to access funding.

E  Any other predictions as to drivers of recovery?

We shouldn’t forget that Dubai still is the biggest trading hub in the region. That’s not going away. I think it is quite easy to look at the entire situation and think that we are in really dire straits but actually it is specific segments that have suffered, such as construction. Underlying trade, which is a really good indicator of growth, is very stable. They are about to open the largest passenger and freight airport in Jabel Ali. It is going to take a long while for other markets in the region to match such infrastructural strength.

We can see that the government is committed to supporting the economy. For example, there is a very strong push to support small and medium enterprises (SMEs) — a segment that typically is an engine for growth. In fact, we launched an SME fund in the UAE in January, which is a $100 million fund focused on helping predominantly local companies to grow internationally: helping them with foreign exchange risk, with opening letters of credit and that side of it. It’s been incredibly successful and is already over 70 percent drawn just five months after the launch.

The government has been very, very proactive in supporting this segment. As the SMEs develop, that support will increase and build sustainable growth for the Emirates. Additionally, there is strong government support for SMEs in Saudi and?Bahrain as well as Beirut.

E  How do you assess the legal tools available in the UAE to resolve disputes and non-performing loans (NPLs)?

The legal aspect is an important issue that needs to be addressed along with transparency. In a developing market, clearly you have higher litigation risk so I would definitely say that the limited access to these tools could feasibly be an issue. But have we been affected by that? Has the system let us down? No. It tends to be that very pragmatic approaches are taken when issues arise, but the lack of certainty does worry the business community.

E  Is it a deterrent for international investors that at the end of the line there is no transparent bankruptcy process?

It might be more of a deterrent for people who don’t understand the culture and the way that things work — who don’t have a banking partner with networks in the region. We’ve been around for a very long time. In fact for the first 20 years of our life in the Emirates, there was no other bank. We effectively had a monopoly, so we go back to the early 60s.

So yes, lack of transparency regarding bankruptcy might be a deterrent for a newcomer. However, these newcomers can partner with an advisor who can steer them through the risks and eliminate these risks. If you are into trade and you want to access the Middle East region, you’ve got to be in Dubai, so you need to look at how to overcome these challenges.

 

E  Most of the large international banks in the region are doing some strategic shifting right now. Is HSBC part of this trend as well?

We’re in the throws of a strategic planning exercise. For my business, it’s going to be about trade – about playing to our strengths. Trade has grown and is predicted to grow faster than gross domestic product, particularly in the developing markets.

We believe that from our analytics on trade flows, Middle Eastern and Asian flows are going to continue to grow very strongly, including flows between India, China and the Gulf countries. And if I look across the Middle Eastern countries, in every single country in which we operate, China is a top five trading partner since 2008. So trade is our number one focus.

E  How does Lebanon fit into your trade-focused strategy?

Having written a trade plan in 1992 for Lebanon, it’s really interesting to come back and see how the country has developed. If you look at the growth and compare that with the region over the last three years, there has been enormously strong growth of 9 percent since 2008 as an economy.

We project maybe an average of 6 to 6.5 for the next two years at least. It has been very countercyclical. We’re chasing down the opportunities that the present cycle presents.

E  Sixty-seven percent of HSBC’s corporate clients are from emerging markets. When did the bank decide that this was the place to be?

I would say in terms of making that a rallying cry or strategic group focus, the shift was about four years ago. But it isn’t new. It’s something that we recognize as very much a differentiator for HSBC group — it is a very important story.

You can’t overlook the fact that the major buyers and the major trading houses previously sat in the US and Europe, and now we see them shifting into Asia. We believe that Asia and the developing markets will increasingly become the engine for growth.

E  The Lebanese market is saturated with banks. Do you feel the constraints on growth in this market?

What we are hearing from our customers is that they are thinking very carefully about who they want to partner with. When I was last here, customers were very multi-banked because it was a risk diversification strategy. Typically they’d have [accounts with] three, four, five — up to six or seven different banks.

What you’re hearing now is that the larger names really want to build partnerships and relationships.

Apart from anything else, it’s horribly complicated to manage your pricing and your transactions with multiple banks. Having a single view for effective working capital management gives a clear view of which payments are overdue, it gives them one person to call who can solve issues and ensures that they are represented at both ends of a transaction in case something goes wrong.

What I am noticing is our larger customers wanting to focus in on a smaller number of banking partnerships because of the complexity of running multiple relationships.

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Real Estate

SWFs – Any given corner

by Nada Nohra
written by Nada Nohra

 

Since oil exploitation shot the Gulf into the realms of interstellar wealth, money, oil and foreign relations have always gone hand in hand. Whether to secure long-term returns on their energy bonanza or for political considerations, Gulf Cooperation Council governments have been expanding their investment portfolio since the 1950s. Today, GCC sovereign wealth funds (SWFs) represent 37 percent of global SWF holdings, according to the United States-based SWF Institute. The International Monetary Fund pegged worldwide SWF assets at some $1.64 trillion by the end of March.

The real estate sector takes a substantial chunk of SWFs’ overall portfolio, whether through direct investments in prime real estate in major world cities or by indirect investments in listed companies and unlisted property funds. However, since most SWFs do not publish their financial statements nor disclose where they invested, it is hard to find out how much of their fund goes into a specific sector. The Abu Dhabi Investment Authority (ADIA), for example, in its first ever annual report last year, said that 5 to 10 percent of its investment goes into real estate. Considering the sums of money involved at ADIA, the difference between 5 and 10 percent is a not insignificant $31.35 billion.

“For the most part they don’t tell you where they are investing, it is a sort of speculation… do they directly invest in properties? Did they have an indirect interest? We don’t know that, they don’t disclose it to such granular levels,” said Saud Masud, head of research and senior analyst at UBS, the financial services firm.

ADIA is currently considered the largest SWF in the world, with assets under management amounting to $627 billion, according to the SWF Institute.

After the crisis

Experts Executive spoke to said the wide fluctuation in oil prices in recent years had curbed regional SWFs investment bravado, while the global financial crisis also put dents in their portfolios. 

“You can guess that SWFs, in line with global investors, have suffered tremendously,” said Fadi Moussalli, regional director at Jones Lang LaSalle, the real estate services firm. “But the question is how much, since they don’t publish their figures,” he added.

Moussalli explained that while Abu Dhabi is dealing with its domestic issues, the most active SWF is currently Qatar Investment Authority (QIA), particularly in the real estate sector. The group has been acquiring large properties, mostly in London, through its investment arms such as Qatar Holding, Qatari Diar, and Barwa Real Estate. 

In a series of well publicized big-ticket purchases, Qatari Diar purchased the historic Raffles Hotel in Singapore for $275 million in April, after the company invested a 40 percent stake in Fairmont Hotels and Resorts, while Qatar Holdings bought the famous Harrods department store in London for $2.3 billion in May. Barwa Real Estate, which is 45 percent owned by Qatari Diar, also announced in June that it would be acquiring the $371 million Park House development, an office and retail project in London due to be completed in 2012. Although it has not been confirmed yet, Britain’s The Times reported in June that QIA will be taking over the London-based Songbird Estates — owner and manager of Canary Wharf, a large upscale office and shopping development in East London. The newspaper said that if the transaction takes place, the fund will be investing some $700 million to buy the 76 percent it doesn’t already own. Despite the rumors, Songbird Estates said that it had not been officially approached by QIA. QIA board member Hussain al Abdalla said at a press conference in March that most of Qatar’s $30 billion planned investment in Europe and the United States will go into commodities and real estate, according to Bloomberg.

“Qataris will emerge as the top investors and there are other large scale transactions cooking that will be announced soon to the world,” said Moussalli.

Why London?

According to Nicholas Maclean, managing partner at CB Richard Ellis for the Middle East, the reason Qatari SWFs are targeting the British market is because it is highly liquid and transparent, and thus assets could be disposed more easily than in other markets. The real estate market in London has recovered quicker than any other comparable market elsewhere in the world in the last six to nine months, attracting large amounts of capital.

Moussalli agreed, adding that the United Kingdom is currently offering investors the most tantalizing opportunities, in addition to some other major cities. “Paris is attracting more attention, Frankfurt, Rome to a lesser extent and also New York and Washington DC,” he said.

Maybe China?

BRIC countries (Brazil, Russia, India and China) are also offering tempting investment opportunities for SWFs due to their high return on investment. “The levels of return which have been reported [in China] are so strong so that the market cannot be ignored,” said Maclean.

In May this year, Kuwaiti authorities signed a Memorandum of Understanding (MOU) with China as a first step toward acquiring a Qualified Foreign Institutional Investor (QFII) permit, which would enable the Kuwaiti SWF, Kuwait Investment Authority (KIA), to invest in stocks of Chinese companies and increase their general economic involvement in the country.

QIA also announced that it signed an agreement with Agriculture Bank of China on June 17 and will be investing $2.8 billion in the bank’s initial public offering (IPO), Bloomberg reported.

With the high return on investment, Masud cautions that BRIC markets also represent high risk.  “Right now we are saying the BRICS are the strongest market, but what if China’s property bubble bursts? Then what happens?” he said. Masud also explained that since the SWFs deal in huge values, they might affect certain markets when moving in or out, and therefore they have to be careful when shifting their strategies. “When you are moving several billions of dollars out of a market into another, one has to reallocate carefully thereby not exacerbating any selling or buying pressures, which in turn impacts return on investment,” he added.

QIA is also showing high interest in investing in Malaysia. The SWF signed in May an MOU with Malaysian Development Bhd to establish a joint committee that would capitalize on investment opportunities in the energy and real estate sectors, with Qatar investing some $5 billion.

Expectations

While from the outside it may seem that SWFs are splashing billions of dollars about, relatively, they are being fairly conservative and selective. “There is a bit more care and due diligence in where they invest, perhaps they are a bit more risk averse given market volatility over last three to four years,” said Masud, adding that funds invest for the long run and might therefore sit on their investments for a while without being productive.

Moussalli thinks that with the oil prices stabilizing in the $70 to $80 per barrel range, regional SWFs will resume their investments, with Qatar emerging as the biggest player in the region and Abu Dhabi remaining relatively low-key while it deals with its domestic concerns.

As for real estate, Maclean thinks that many of the SWFs are going to increase their investment in the sector, mainly because they see it holding promise with minimum volatility. He expects SWFs will be back in the market in force by the beginning of next year, mainly focusing on the United States, UK and China.

“They are becoming even more important investors in the real estate market going forward… [but] they are cautious, they are analyzing the market place globally, very carefully to make strategic decisions,” he concluded.

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Business

Orascom Telecom holding – Khalid Bichara

by Paul Cochrane
written by Paul Cochrane

Khalid Bichara is the chief executive officer of Egypt’s Orascom Telecom Holding, which has operations in Africa, Europe, Canada and Asia, as well as managing the Lebanese telecom provider Alfa. Bichara sat down with Executive at the Alfa headquarters in Beirut to discuss privatization, market share and why Lebanon still doesn’t have 3G.

E  Samer Salemeh, after just a short stint as Alfa’s CEO, recently resigned. He had reportedly complained of political interference. Is this true?

As the CEO of the holding, I don’t work day in day out in the business here and I am not really in the right place to comment on that. What I will say is that the business in Lebanon is one in which we are aware of the human capital, and we have a lot of Lebanese employees that have long been involved in the sector — Lebanon in 1994 was the leading mobile player in the region.

The other thing is that the short-term view of renewing management contracts is negatively affecting the market because it is a long-term market and known for long-term investment, that is why licenses are for 15 or 25 years. Whenever you manage a market for six month or one year chunks it definitely does not deliver the best results, not for the operator, nor the government and not for the Lebanese consumer.

E  Salemeh also said that HSPA plus (mobile broadband technology) was tested and ready to be deployed. This hasn’t happened yet. Why?

I don’t think we need to test it here, as it’s been tested everywhere else. Again, the [question] is: what is your time frame and how can you do it. Things take time. We are not here to re-define whether the private sector is faster than the government; this question has been answered before.

E  The revenue sharing agreement that is due for renewal in the coming months is a lot more stringent than before, and on top of that there has been no movement to privatize the sector. This doesn’t exactly inspire confidence.

There has never been a change here — the government has always honored agreements [with us] perfectly well. They have never given an agreement and changed it. What we said is the term was never long enough for us to have long-term development of the sector. So far we cannot complain of our experience here; what you see is what you get.

E  What about full privatization?

We are a company that plays in a very regulated market worldwide, so we have learned that it is sometimes easy and sometimes hard, and you have to follow local rules.

When we came in, nobody lied to us and said the sector would be privatized tomorrow, so we knew we would invest in a management contract —  whether a long-term management contract, a BOT [build-operate-transfer], or privatization — to be ready and in the right position.

We knew that from day zero and that is why we came in. Every market has its own peculiarities.

Today we met the minister, and we reiterated the same message: we are happy, we are delivering results, and we have doubled our customer base in a year, and have increased salaries twice. But it is all building up for the future.

We cannot claim we have been negatively surprised, as we in the private sector always want more and if you give us more, we want even more. And we want more visibility and a more long-term relationship for the sector to take shape in the way it once had. For Lebanon to have been the first country to have an advanced network in the region and to have no 3G, it is a waste.

E  Alfa has been losing market share to MTC, which has a 57 percent share according to recent figures. Why is this happening and what are you doing to claw back market share?

We had a business meeting today and we’ve gained 3 percent market share. We are not only about gaining market share but value share. If you want to distribute one million SIM cards it is not a big deal, but to sell to people that use it and we can make money from, is the harder trick. It is really incremental. If you move fast it will destroy you, you need a network that is up to scale.

E  Are we ever likely to see calling rates go down in Lebanon?

As a management company we don’t fully control pricing. The simple focus on price per minute is not the right focus. When we go to talk to regulators, their main role is to foster competition, but they sometimes forget that. If you don’t have competition, then you won’t find companies like us investing $3 billion in Italy.

I think prices [dropped], last year, and people were happy. The right thing to do is lower the price incrementally, because if you just drop the price it will create weaker players, worse service, and little money to invest in the future. You have to create the right balance and manage carefully.

E  So it’s important to take baby steps?

Fast baby steps. Because at the end of the day, while I am talking about patience, patience, patience, in 10 years we’ve gone from 200,000 to 120 million customers, so we are not slow. But there is a difference between being slow and being careless.

We have learned in some markets the hard way, you expand and the market changes. The team has successfully delivered here, quality has improved and the customer base has doubled. That is an achievement. Things go on.

E  What is the outlook for Lebanon if political interference in the telecoms sector continues?

We think that from the current view and current discussions we are having, we are getting there. The view from operators and from the government is that we need more long-term investment and commitment, whether long-term management contracts, or BOT, or privatization; these are different means to the same goal.

Once that happens you will see much faster development in the market; as for when that will happen, I don’t think I am the right person to answer.

E  Looking to the future of telecoms in the Middle East, the Arab world already has around 265 million cellular lines and penetration rates are soaring. How do you see the market in five or even 10 years time?

I always joke that my boss gave me the hard job — since he started the company as Orascom Telecom  we have generated $15 billion in revenues and have gained 120 million customers in the span of 10 years, from 1999 to 2009. So when he passed the baton to me, looking at the next 10 years, can I add 120 million customers? Can we add and grow at the same rate doing what we have been doing? The answer is clearly no.

We are looking at adjacent services and value added services, online content, Internet and mobile advertising, mobile banking, data centers, submarine cables, and all the business adjacent to our business; we are not going to open burger shops but expand around this core business. And we will always say our customer base is our biggest asset.

Our idea is to sell more services and go vertical with our customer segments, to people that like music, who are in the trade business or into the IT business. What services can I give them and how can my business be more relevant to them? It is really changing from a volume game to a quality game; we have the volume so [now we] can build quality on top of that.

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Europe’s anomaly

by Michael Young
written by Michael Young

Lately, Arabs appear to have rediscovered Turkey, which they had previously tended to depict as something gruesome in its Ottoman personification. This shallow rediscovery — shallow for being pegged to Arab fears, mainly of Iran and Israel — comes amid more interesting dynamics related to Europe and the reversal of European integration.

In 2005, the European Union began membership talks with Turkey. As the EU was effectively delaying Turkish membership, this was less than Ankara had expected, after years of introducing reforms into its economic, political, and judicial systems to pave the way toward full integration. By then the tide was turning in Europe and its continuing difficulties in absorbing Muslim immigrants proved a major obstacle, as did the EU’s rapid expansion to 27 states by 2007. That year, Nicolas Sarkozy also happened to be elected president of France. Sarkozy had never hidden his hostility to full Turkish membership in Europe, a serious problem for the Turks given France’s influential role in the EU’s decision-making apparatus.

It is ironic that Greece has further undermined the aspirations of its old rival, Turkey. The Greek financial crisis and the initially sluggish, scattershot European response to it provoked a dual problem for the EU: it placed a big question mark over the viability of the dominant symbol of unification, the euro, and it cast doubt on the European enterprise in general. Today, Europe is awash in doubt, making the question of Turkish integration even trickier than before. However, this irony has hidden another. Turkey’s economy weathered well during this downturn, and according to the Organization for Economic Cooperation and Development, is expected to grow by 7 percent this year, albeit after contracting by 5.6 percent in 2009. The conditions for European integration, among them civilian domination of the armed forces, have also helped the ruling Justice and Development Party (AKP) push the Turkish military onto the defensive.

Yet this has come at a price: AKP is an Islamist party (or, as some say, a post-Islamist one), and has not been shy about attempting to advance Islamic values against the state secularism defended by the military.  The principles behind European economic and political integration were never supposed to be so contradictory. In the mind of Europe’s ideologues, economic integration and agreement over basic shared values by member states — open economies, rule of law, respect for human rights, secularism, and the like — were always supposed to reflect the liberal values of the EU’s core founders.

Turkey has muddied the waters, especially lately. Reforms have brought the country closer to the European ideal, and the AKP has defended open markets. The ruling party’s policy of “zero problems with the neighbors” has also been closely in line with the EU’s preference for nations to settle their differences peacefully.  However, Turkey has not fit the mold as snugly as the EU would like. While the AKP has sought compromise with Turkey’s Kurds, the Kurdish problem has not gone away, nor have its human rights implications. Turkish secularism has never been mistreated as it is today, by a ruling party with roots in the conservative region of Anatolia. And the EU could not have been happy with the government’s recent stance over Gaza, which brought it into confrontation with Israel and saw the prime minister, Recep Tayyip Erdogan, declaring that Hamas was not a terrorist group, in opposition to the official EU position.

 Some might argue that Turkey’s opening to the Arab world, and therefore its adoption of Arab political positions at odds with the EU consensus, has been a result of the slowdown in integration talks with Europe. That was the position of the United States defense secretary, Robert Gates, in June. But there must be more to it than that. In the same way that the EU has faltered as an idea lately, nothing in the European contract ever guaranteed that a complex state like Turkey would invariably take positions more appealing to the Western mainstream. Indeed, Turkey was always viewed as useful by the EU precisely because it had the cultural baggage to be a bridge to the Arabs.

Expect Turkey to play more on the contradictions between its European and its Middle Eastern and Islamic personalities in the foreseeable future. But don’t wait for Turkey to be more European than the Europeans. Europe hardly seems to know itself these days.

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UNIFIL’s thin blue line

by Nicholas Blanford
written by Nicholas Blanford

In August 1986, a French soldier from the United Nations Interim Force in Lebanon (UNIFIL) on sentry duty shot and killed two members of the Amal Movement during an altercation. That night, nine French UNIFIL positions came under attack by Amal gunmen. Over the next month isolated attacks were launched against UNIFIL positions, mainly those manned by the French. In early September 1986, a roadside bomb killed three French soldiers on a morning run, and days later another French soldier died in a bomb attack against his patrol. The slew of attacks led Paris to pull the bulk of its troops, leaving just a small detachment to protect the peacekeeping mission’s headquarters in Naqoura.

Given its bloody history with UNIFIL, one would think France would understand more than most the sensitivities and realities of peacekeeping in South Lebanon. But recent French moves to press for a more robust approach in fulfilling United Nations Security Council Resolution 1701, which ended the July 2006 Lebanon-Israel war and calls for the disarmament of Hezbollah, among other things, suggests otherwise.

A peacekeeping force can only function if it has the support of the majority of the population and political forces in its area of operations. UNIFIL, which has been in Lebanon since 1978, survived in the south because it learned how to interact with the realities of a complicated and evolving situation on the ground. The local population has generally been in favor of UNIFIL’s presence and even Hezbollah came to tolerate and cooperate with the force.

Even though UNIFIL was unable to fulfill a key component of its mandate for 22 years — overseeing an Israeli withdrawal from Lebanon and helping restore Lebanese government control to the south — the force became a symbol of reassurance for southern Lebanese and a vital mediator between Hezbollah and Israel in times of heightened tension.

Following the 2006 war, UNIFIL’s numbers ballooned from 2,000 peacekeepers to more than 13,000. The bulk of the troops were drawn from top European militaries and the initial deployment consisted of a large number of special forces troops, which could deploy rapidly but were wholly unsuited for peacekeeping duties in such a complex arena. The Spanish battalion quickly landed in trouble when its elite troops pushed the boundaries of the mandate by staging reconnaissance missions in Hezbollah security pockets, unearthing old bunkers and arms stockpiles.

Warnings were given: tensions mounted with local residents, and soldiers encountered newly-planted improvised explosive devices while on patrol, but the Spanish continued their weapons searches. In June 2007, a powerful and sophisticated shaped-charge car bomb exploded beside a patrol of Spanish battalion armored personnel carriers, killing six peacekeepers. The investigation into the incident is ongoing, but the Spanish modified their behavior and have faced no more trouble.

 A UNIFIL officer told me recently that if one asks an average UNIFIL peacekeeper the purpose of his mission, chances are he will answer that it is to ensure that the area south of the Litani River is free from weapons.

“That’s not the mission,” the officer said. “That’s the mission of the Lebanese army. We are just here to help the Lebanese implement 1701.”

The French have been grumbling recently that there are too few Lebanese troops south of the Litani and are seeking to tighten controls on arms reaching the border district. That presumably means adopting a more unilateral approach to weapons searches and less coordination with the Lebanese army, seen as an unreliable partner by many in UNIFIL.

The French, and perhaps some other battalions, are taking their mission too seriously. In reality, UNIFIL is almost irrelevant when it comes to war and peace along the Lebanon-Israel border. If Hezbollah or Israel want to go to war, UNIFIL can do nothing to stop it. UNIFIL’s only essential role is to act as intermediary between Hezbollah, the Lebanese army and the Israelis. An indirect bonus of the force’s presence is the economic and humanitarian benefits brought to the south.

If war breaks out, the UNIFIL battalions will either leave Lebanon as fast as possible or dive into the bomb shelters to sit it out. Those with gung-ho attitudes about mandate fulfillment should take a deep breath, relax and enjoy the summer sunshine. There’s not much else they can do.

NICHOLAS BLANDFORD is a Beirut-based correspondent for The Christian Science Monitor and The Times of London.

 

 

 

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Antiquities right of return

by Paul Cochrane
written by Paul Cochrane

I am among those fortunate enough to not only have visited the cream of the Middle East’s major historical sites — among them Persepolis, the Valley of the Kings, Palmyra and Baalbek — but also viewed antiquities taken from these places in European and American museums. Few people in Iran, Egypt, Syria and Lebanon have the same opportunity.

Though the ancient palaces and structures may remain, much of what they held is no longer on site, or even in the country. Spirited away over the past 200 odd years, many of the region’s most famous artifacts are in the West, torn from their historical and spatial context through acts of Elginism. The term — defined as cultural vandalism — was coined after the Earl of Elgin, who removed the Parthenon Marbles from Athens in the early 18th century to decorate his house in Scotland.

At the Louvre in Paris recently, I was taken aback by a huge Phoenician sarcophagus discovered in Sidon, far more imposing than any on display in Lebanon. It would be one of the centerpieces of the National Museum in Beirut, but instead is tucked into an underground gallery in one of the largest museums in the world.

I became only more indignant entering a gallery devoted to Palmyra, which shamed those in Tadmur or in Damascus. And then there was the Achaemenid exhibit containing sculptures taken from Persepolis. Why should I travel to Paris, London and numerous museums in the United States to see what should rightfully be shown in Persepolis, Palmyra or Sidon?

While I appreciate that millions of people have been able to admire the wonders of the ancient Middle East at these museums and that artifacts have been kept in safe conditions, there is a strong argument for the repatriation of relics.

Near perfect copies can be made if museums want to maintain their permanent collections or borrow items, a widespread practice. The idea that the region cannot look after its heritage properly is without merit and reeks of paternalism.

After all, the Lebanese National Museum managed to protect its collection throughout the civil war, while Syria, Egypt and Iran have all overhauled their museums. Indeed, one of the worst cases of cultural barbarism in modern history was instigated by the US-led invasion of Iraq, when the occupation forces failed to prevent the looting of what was perhaps the most significant collection of antiquities in the world at National Museum of Baghdad. There is growing momentum for artifacts to be returned to their roots, though this has been hindered by a well-meaning 1970 UNESCO convention calling for the restitution of antiquities and works of arts, but only for objects taken to other countries before that date.

The convention is one obstacle stopping the Rosetta stone, held by the British Museum for more than 200 years, or the 3,400-year-old bust of Queen Nefertiti at the Neues Museum in Berlin, from being returned to Egypt. While Lebanon has no official position on this matter, Syria, Iraq, Libya and Egypt are calling for the return of their cultural artifacts. In April, Cairo hosted a conference of 25 “countries that have suffered from theft,” as the outspoken head of Egypt’s Supreme Council of Antiquities, Zahi Hawass, put it.

“We will make life miserable for museums that refuse to repatriate,” said Hawass at the conference.

His threats have worked in the past. Last year Egypt broke off relations with the Louvre until steles stolen from a tomb in the Valley of the Kings in the 1980s were returned. Further arm-twisting came when Hawass threatened to ban French scholars from excavating in Egypt. The Louvre then capitulated.

But there are few precedents of Elginism being reversed — most pointedly exemplified by Greece’s as-yet unsuccessful 30 years spent lobbying Britain to return the “Elgin Marbles.” As Hawass suggested, cooperation between the aggrieved countries is needed to make threats effective, with countries putting together “wish lists” of what they want returned.

 These wish lists deserve broad international support to allow the artifacts of human history to be seen in their proper context, rather than in foreign museums thousands of kilometers away.

PAUL COCHRANE is the Middle East

correspondent for International News Services

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Israel spins its ship storm

by Stephanie Dotzer
written by Stephanie Dotzer

Anything we can do for you?” the Israeli intelligence officer inquired after 10 minutes of interrogation. Mohamed Vall, an Al Jazeera correspondent who had been on board the Mavi Marmara, was among the VIP detainees the Israelis were handling with care. His hands were cuffed in the front, unlike most activists whose wrists were bound behind their backs; and unlike others, he was allowed the luxury of using the toilet.

Were Mohamed not a friend of mine, I still would have no clue what actually happened after Israeli commandos stormed the Gaza-bound flotilla and cut communications with the outside world. Western media wouldn’t tell me. Sure, I read the newspapers and zapped from CNN to BBC and back again, but it felt like I’d heard it all many times before. The flotilla-part is new, the rest is a ritual: Israeli spokespeople say what they always say — “Any other country in the world would do the same!” — while journalists and politicians engage their conditioned reflex: if they’re Arab, they get carried away with emotions; if they’re Western, they get caught up in their own precautions and end up saying nothing.

While the world has gotten used to the killing of Palestinian civilians, a deadly raid on an aid ship with passengers from 40 different countries is much harder to ignore. But, by and large, the Western world managed quite well. Granted, the story made the headlines and even Israel’s best friends — such as the United States and Germany — showed an unusual degree of indignation that the attack occurred in international waters.

Nonetheless, Arab commentators who tried to transform the tragedy into triumph, arguing that the world is finally waking up to Israeli crimes, don’t seem to have read much of the Western press.

Contrary to what many analysts claim, Israel has not lost the public relations war. It can still rely on thousands of loyal journalists to steer the international debate into side streets before it ever gets to the point. For, if there is one thing more blockaded than Gaza, it’s human common sense when it comes to Middle Eastern politics.  How else can you explain that most international media got stuck in a dead-end debate over who had what weapons and who was provoking whom? If fully armed soldiers storm your vessel at 4 a.m., would you assume they’ve come to join morning prayer? Instead of focusing on the fundamentals (like if the blockade itself is illegal under international law, then an attempt to enforce it on a third party cannot be particularly lawful), many Western journalists concluded that “the facts are unclear” and all one can safely state is the need for an “impartial investigation.”

To quote the above mentioned Mohamed Vall: “You got the GPS parameters, you got 600 eye-witnesses, what else do you need?”  Eyewitnesses? Heck yes. But where are they? In most mainstream media (with noteworthy exceptions such as The Guardian), eyewitness accounts were scarce. The German press largely ignored even their own members of Parliament who had joined the flotilla, arguing that, if they were on that ship, they were obviously biased and anti-Israel. Instead of listening to passengers, many journalists bought the idea that they were either radical Islamists or crazy leftists “being used by Islamists.” The Western logic seems to be: if it’s a bunch of hippies with dreadlocks doing yoga on the deck, ok, let them reach Gaza. If they wear beards and pray five times a day, then it suddenly seems much more acceptable to stop them from… well, from bringing cement and medicine to a besieged population.

More and more people are not falling for the spin and are managing to think for themselves. But the closer the Western public comes to seeing what’s happening in Gaza, the quicker opinion-makers reassert that “Israel’s fears must be acknowledged” and that “a country that is so isolated urgently needs its friends.”

Israel doesn’t need sheepish friends. It needs to take advice from its critics — and listen to Mohamed’s answer to the question asked by his Israeli interrogators. Sadly, the right reply only came to his mind long after his deportation: “Anything you can do for me? Oh yes, you can. Lift the siege, stop mocking the world, consider Arab lives as precious as Jewish lives… and then, ahlan wa sahlan, live happily ever after.”

STEPHANIE DÖTZER has worked for Al Jazeera English and Germany’s ARD news network. She now freelances in the Middle East

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Flotilla fallout docks in Ankara

by Peter Grimsditch
written by Peter Grimsditch

The peripheral effects of the Mavi Marmara affair 100 kilometers off the Israeli coast on the last day of May have begun to remove some of the initial political glory that fell on Turkey.

Israeli commandos killed nine people when they stormed the former Bosphorus ferry to stop it from continuing to Gaza to deliver a cargo of humanitarian supplies. The nine victims were shot a total of 30 times and five were killed by gunshot wounds to the head, according to the Turkish council of forensic medicine. Ibrahim Bilgen, 60, was shot four times in the temple, chest, hip and back. Fulkan Dogan, a 19-year-old American of Turkish extraction, was shot five times from less that 45 centimeters in the face, in the back of the head, twice in the leg and once in the back. Five of the victims were shot either in the back of the head or in the back. 

 Ankara, justifiably angered by this disproportionate display of force, poured a tirade of vitriol upon Israel and appeared as a new and active champion of the Palestinian cause, which prompted outpourings of support for the government of Turkish Prime Minister Recep Tayyip Erdogan. While domestic political gains still abound, the fallout in various international arenas is spreading.

The jury is still out on the trite question of whether Turkey has killed off its chance of joining the European Union through currying favor with its eastern — and Muslim — neighbors. Politicians involved in the EU application deny any such policy shift. Indeed, friendly commentators in the United States and Europe point out that Turkey’s close relations with states like Syria and Iran make it a more attractive proposition for the EU.  It can boldly go for talks where few European politicians dare to venture.

Be that as it may, there are a number of areas where Turkey stands to lose out because of its public spat with Israel. Not least is in its campaign against the Kurdish Workers Party (PKK), in which some 50 members of the Turkish armed forces have been killed since March. One of the most useful tools in spotting PKK bases in Northern Iraq is the Unmanned Aerial Vehicle (UAV), or, more popularly, the drone. Six Israeli-made Heron UAVs stationed near the Iraq border have been providing surveillance data on PKK bases. The Israeli technicians present in Turkey to troubleshoot and give training are said to have pulled out two weeks after the battle of Mavi Marmara.

The Turks put a brave face on the withdrawal. Defense Minister Vecdi Gonul said Turkish personnel had been trained in Israel and would take over the task of operating the Herons. Other Turks say this is easier said than done.

But all may not be lost. In a triumph of pragmatism over principle, there is an unofficial agreement in Ankara that any decision to freeze military deals with Israel should be delegated to the defense ministry. Thus on June 22, as at a suspected PKK bombing of a military bus killed least five people in Istanbul, a Turkish delegation arrived in Tel Aviv to view the latest Heron tests and to take delivery of another four.

Meanwhile, Erdogan has claimed that “foreign elements” have been involved as a “subcontractor” in the escalation of PKK attacks on the Turkish army. It was left to acolytes lower down the line, speaking on convenient condition of anonymity, to point the finger at Israel. For good measure, there have been equally unlikely accusations that Israel was also behind the attack on a Turkish naval base at Iskenderun. This leaves a choice between believing that Israel is conspiring with the PKK to engineer attacks on the Turkish army, or it is cooperating with that same army to launch attacks on PKK bases. Turkey, like much of the Middle East, is replete with conspiracy theories.

Deteriorating relations with Israel could have another ill effect on Ankara. Israeli lobbies in the US have for decades taken up the cudgel on Turkey’s behalf to beat down attempts by the Armenian community to have the US Congress officially recognize the wholesale slaughter of 1915. Mike Spence, a Republican representative for Indiana, said if Turkey continued to become more antagonistic to Israel, he would reconsider his opposition to a resolution designating the events as genocide.

This has far-reaching financial implications. Congressional recognition of the genocide would make it possible for Armenian groups to sue for damages and seize Turkish assets in the US. The headline-grabbing flotilla unleashed a tide of events which could lead anywhere. Victory doesn’t appear to be one of the ports of call.

PETER GRIMSDITCH is Executive’s

Istanbul correspondent

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Bill’s American dream

by Riad Al-Khouri
written by Riad Al-Khouri

What do former American President Bill Clinton and the new Miss USA Rima Fakih have in common? Jokes about Clinton’s notorious womanizing aside, rather a lot, actually: Rima is a perfect example of Bill’s answer to America’s economic woes. 

Speaking in April about fiscal responsibility, Clinton said immigration was a key to United States central government budget deficit reduction, which in turn was vital for America’s future. He was quoted on the website of The Atlantic magazine as saying, “We [the US] need more immigrants. We need to reverse the age ratio. I see that as part of fiscal responsibility.”

Coming from the US president who will perhaps best be remembered for putting a long deficitary American federal budget into surplus, this is serious stuff. Expounding on his theme, he added that “the great virtue of this country, the thing we have over China and India, is that we have somebody from everywhere here, and they do well. This country still works for immigrants.”

He should have added that immigrants also work for their new country. Typically fleeing trouble spots or poverty pockets, of which there are more than a few in the modern Arab world, migrants from the Middle East tend to be hard working and — on the whole — economically successful. Only a short hop from my vantage point of Ann Arbor, Michigan, places like Rima Fakih’s hometown of Dearborn show the inspiring impacts of Arab immigration to the US.

The bustle of places like Dearborn allows Clinton to conclude that: “The changes we make will be less draconian if we get more people into the system. I don’t think there’s any alternative than to increase immigration. I don’t see any kind of way out of this [deficit] unless that’s part of the strategy.”

This brings us back to Ms Fakih. With his eye for the ladies, one wonders what Bill makes of Rima personally, but there is no doubt that he approves of what she represents: a young and successful migrant to America. Born in Lebanon but raised in the US, Rima Fakih is fairly typical of newly arrived Arab-Americans: from a modest background and flourishing in their new homeland in ways difficult to imagine had they never come to the US. These emigrants have been arriving in force from the Arab world for over a century, and they and their descendants are to be found in most communities around the US.

Rima Fakih - Miss USA

The contribution of these Arab-Americans to the US economy has traditionally not been easily quantified in dollar terms or labor market participation. That is partly because so many of them change their names and turn their backs on their roots. Not so Rima Fakih: though she will represent the US in this summer’s Miss Universe competition, she has shown pride in her Arab heritage. Yet even if she doesn’t win the world crown, her camera-friendly credentials are assured and she will doubtless go on to parlay the Miss USA title into serious money. That way, Clinton’s beneficent fiscal loop happily closes, with migrants such as Fakih working their way up and enriching the American system. Young and successful, they pay more in taxes and don’t rely on state benefits.

On another level, Fakih underlines the positive moral and cultural importance of Arab Americans living in US society. OK, she’s easy on the eyes, and she and her successful immigrant community cheer up the American economy, but this sort of prominence is also playing another crucial role. Fakih has come as an antidote to the “Islamist terrorist” xenophobia that is unfortunately commonplace in the US press, both before and after 9/11. Long prior to the destruction of the Twin Towers in September 2001, this kind of sentiment was — and remains — widespread in America. And though Fakih has not been immune to the conspiratorial accusations of the right-wing media, the general praise of the mainstream — despite the minor pole-dancing distracter — has done well to marginalize her critics and better the image of Arab Americans.

Hopefully, the new Miss America’s rise will help a little to clear the air in that respect, even as Bill Clinton’s thinking on the economic role of immigrants reminds us of their strong positive contribution. 

RIAD AL-KHOURI is a senior economist at the William Davidson Institute of the University of Michigan in Ann Arbor 

 

 

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