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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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Wanton democracy

by Peter Speetjens
written by Peter Speetjens

Words are like colors. They come and go with the seasons. Not so very long ago, words like “democratization” and “a new Middle East” were all the fashion in Washington and many a journalist, the trendy type, jumped on the bandwagon arguing that the Iraq war was about just that: democracy.

But the tune changed even under George Bush and today the “D-word” has largely fallen out of fashion. While it can still be used in criticizing such countries as Iran or Syria, it is generally avoided in reference to the rest of the region. Hence, we heard next to nothing about the democratic turns for the worse in Egypt and Jordan, which with Saudi Arabia, form America’s triangle of “moderate” Arab allies.

Despite a flood of promises not to, the Egyptian parliament on May 11 routinely and for the zillionth time extended the state of emergency that has continuously been in place since 1981, the year when Egypt’s former President Anwar Sadat was killed and his successor Hosni Mubarak took over.

While emergency rule per definition is a temporary solution to an extraordinary situation, a whole generation of Egyptians has come to accept as normal the suspension of their universal human rights. Members of Mubarak’s National Democratic Party (NDP), which has dominated Egypt’s political landscape since 1952, argue that the extra powers are needed to counter terrorism and drug trafficking. This hardly seems the ruling party’s only goal however. What’s more, the goal hardly justifies the means.  According to human rights advocates, many thousands of Egyptians spend their lives behind bars without charges and without a fair trial. Torture is widespread. Meanwhile, basic human rights such as the freedom of association and expression have been severely reduced. Censorship is everywhere.  It is no secret that the state’s extraordinary mandate has come in handy in the run-up to elections, when the NDP’s political opponents, especially members of the Muslim Brotherhood are arrested and locked up. Most of them are released once the elections are over, yet not everyone is that lucky.

When a civilian court in 2006 dismissed all charges against Khairat al-Shatir, the Brotherhood’s deputy supreme guide, and 15 other party members, Mubarak transferred their cases to a military tribunal, which in 2008 sentenced them to up to 10 years in jail. Naturally, the military court is no public affair, while the current emergency laws do not include the right to appeal.

Meanwhile, the ailing 82-year-old Mubarak continues to pave the way for his son Gamal to take over the presidential crown, while his second son, Alaa, keeps an eye on the family’s growing business empire.

The democratic barometer of Jordan does not peak much higher. Egypt’s eastern neighbor in May finally presented the long awaited new election law. King Abdullah II dissolved parliament late last year and parliamentary elections are set to take place by the end of this year.

While Jordan’s king publicly called for fair and free elections, he appointed Rajai Muasher, openly an opponent of political liberalization and reform, to take charge of formulating the new election law.

The end result is flawed, to say the least, and has been severely criticized by international human rights organizations. The main criticism concerns the fact that, while about half of Jordan’s population lives in Greater Amman, the new law has downsized constituencies and increased the number of seats in the lower house of Parliament to 120, which are spread all across the country. The obvious aim is to keep the “power of the people” firmly in the hands of the “true” Jordanian tribes, while Jordan’s capital remains underrepresented and with it the majority of Jordanians of Palestinian descent, as well as urban-based Islamic parties.

The color of the day is, therefore, not the “D-word” but “status quo,” and how to keep it no matter what. Having just returned from a trip to Egypt, the image that sticks in my mind as an epitome of the country’s politics is that of 40 elderly men protesting at the Ministry of Health against a cut in their benefits. They were faced by at least twice as many policemen in black, while around the corner two trucks filled with more uniforms awaited.

No image comes to mind regarding Jordan. The Hashemite Kingdom generally forbids demonstrations.

PETER SPEETJENS is a Beirut-based journalist

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Beware the black swan

by Natacha Tannous
written by Natacha Tannous

Forecast to reach an altitude of $55.4 billion by year’s end, the precarious flight of Lebanon’s arrears is ruffling far too few feathers among our policy makers. Instead, they’re counting on economic growth to dilute the debt by reducing the debt-to-GDP ratio, which differing sources currently place around 150 percent. In the words of Finance Minister Raya el-Hassan: “Don’t use economic textbooks to understand the Lebanese model.”

Is Lebanon somehow serendipitously always right on the money? Is the country some sort of economic maverick with a secret recipe for success?

True, Lebanon has never defaulted on its debt, but staking so much on our economic exceptionality to see us through can only help hasten the arrival of our ‘black swan’ — that unpredictable and improbable high-impact event left unaccounted for in the economic models, which could sink us into a debt deathtrap.

Prudence therefore calls for effectively managing the surging debt burden; we need to reduce the debt inventory and avoid renewing bonds at maturity while containing inflation amid excessive liquidity.  Our archaic infrastructure cannot maintain current growth rates indefinitely and only the gullible would believe the cyclical reduction in Lebanese bond yields are sustainable.

Financing long-term growth requires structural reforms. We must improve infrastructure and promptly implement, among other things, an energy policy to tackle the national power company’s $1.4 billion yearly losses; we must realize the potential of our natural resources and human capital, and create new initiatives in education. The government must quit beating around the cedar tree and properly address these issues to build a healthy economy.

In a modern country it is unacceptable that the 2010 budget, if endorsed by Parliament, will be the first budget passed in five years. And as it stands, this budget projects a $4 billion deficit, meaning debt issuance is unlikely to slow anytime soon. Central Bank Governor Riad Salameh admits he is “concerned about the growing deficit and we are incessantly calling for reforms to decrease [it].”

How though, is not clear-cut; in terms of expenditure, the quality and transparency of public spending must improve and the chronic leakages that plague the system need to be stemmed. On the revenue side, wages in Lebanon total approximately $20 billion; with direct income tax rate of 10 percent, government should be collecting some $2 billion annually, not the current $780 million. Closing the loopholes on tax dodgers will take time to implement; in the meantime, additional revenues could be mobilized through a 2 percent increase in value added tax, though this would likely spur social upheaval. Government officials have sung about privatization, public-private partnership (PPP) and securitization answering our debt woes, but none of these options can fully fix the problem.

In regard to privatization, between the telecom operators and the low value of the national airline, utilities companies, ports and airports, the government would be lucky to collect $10 billion and not sell at distressed prices, while it would also lose the revenue of telecom tariffs – currently a de facto form of taxation that earned government $1.36 billion last year. Privatization could help pay down the volatile part of the Lebanese debt — Eurobonds held by non-Lebanese — but it is no long-term solution. PPPs could help improve infrastructure without increasing the public debt, but require an autonomous capacity for the private sector to finance itself, and this is not self-evident. Such partnerships are complex, and potentially unsustainable. Ultimately, PPPs will not solve Lebanon’s debt bind.

Securitization is not the answer either, as future revenue streams from such a scheme must be proven viable before implementation. The fact is, the Lebanese market isn’t mature enough for it and the International Monetary Fund does not consider securitization proceeds as debt reduction, but rather an alternative type of debt. So as the government toys with wishful thinking on ways to balance the books and stalls on progress in substantive structural reform, our debt continues to take flight.

As long as the economic forecast stays bright and shiny, the country should be able to glide through debt refinancing by issuing more sovereign paper. The problem is the improbable — that black-winged bird which swoops down on us from above while we were gazing at how high we’d climbed. When our economic model begins its plummet toward reality, we will only have ourselves to blame.

NATACHA TANNOUS is EXECUTIVE’s financial correspondent

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Traditional airlines are caught in no man’s land

by Dward Clayton
written by Dward Clayton

Two trends in the Middle East airline industry have dominated headlines in the last decade. The first is the launch of premium carriers — such as Emirates Airlines, Qatar Airways, and Etihad Airways — which have taken luxury to new levels to appeal to an international jet set. The second is the rise of low-cost carriers (LCCs) — such as Fly Dubai, NAS, SAMA, Air Arabia, Bahrain Air and Al Jazeera — which have used a no-frills approach to make flying affordable to a larger group of people.

 

As carriers at each end of the spectrum gain more and more market share, they are putting pressure on the players left in the middle: traditional, full-service airlines that are caught up in the impossible task of trying to be all things to all people. They rely on a single product to serve both premium business passengers and budget travelers: The same seats, meals, flight attendants, reservations staff, check-in processes, and loyalty programs are expected to do double duty for those seeking a top-level experience as well as those on a $10-a-day vacation.

In the Middle East, the traditional airlines at risk are often national flag carriers. For instance, Wataniya and Al Jazeera are fighting to capture share from Kuwait Air; NAS and SAMA have begun competing with Saudia; and Egypt Air will come under pressure this year as Air Arabia Egypt launches its operations.

The weakening and even failure of a national airline has an impact far beyond its own operations. The citizens of a country that loses its national airline often lose many of their options for air travel, unless other carriers can profitably provide connectivity. National airlines act as global ambassadors to the customers they carry and a struggling national carrier can damage a nation’s reputation.

If traditional carriers are to succeed in the future, they will need to understand how to compete in an evolving industry.

Sizing up the competition

Premium carriers are the first threat to traditional carriers: In an effort to become global players, government-backed Gulf Cooperation Council luxury carriers are investing in new planes, expanding their networks, and intensifying their operations at a dizzying rate.

Gulf carriers Emirates Airlines, Qatar Airways and Etihad Airways are ranked among global leaders for high quality of service and expansive global networks: Qatar Airways is one of six airlines in the world with a five-star Skytrax rating; Emirates was nominated “Airline of the Year” twice; and Etihad has consistently ranked at par with Emirates and is considered a leading premier airline.

These three carriers have penetrated every major market in the world and grabbed market share from incumbents.

Government support has allowed these airlines to rapidly expand their fleets, forecasting their anticipated growth: The three combined have about 535 planned aircraft deliveries by 2015, and Dubai’s ruler Sheikh Mohammed bin Rashid Al Maktoum said in a recent interview with CNN that Emirates would order further aircraft at Britain’s Farnborough Airshow later this month.

Filling these planes will require Gulf carriers to gain market share from competitors. In the short term, they will primarily target Europe-to-Asia routes, which will set the stage for fierce global competition. Airlines that can offer outstanding service, efficient operations, and superb reliability — rather than sheer market presence — will enjoy the upper hand.

At the other end of the market, LCCs are making inroads with low prices and high efficiency. Nine LCCs launched in the Middle East between 2003 and 2010, with their market share increasing rapidly from 1.6 percent in 2005 to 7.1 percent in 2009. These airlines generally offer short flights, averaging 1,100 kilometers and 1.5 hours, with a turnaround time of about 25 minutes. LCCs’ low prices have led to increases in demand, but have also eroded airlines’ yields. 

Not everyone wants to travel on a no-frills low-cost carrier, and so it is doubtful that they could survive simply by providing a cheap alternative for existing passengers. The beauty of the low-cost carrier model is that it has attracted new passengers, creating its own market.

Meanwhile, traditional carriers cannot make up the loss of passengers to low-cost carriers by creating new markets for travel. Rather, they rely on filling their aircraft with more connecting passengers, who are less profitable and ensure traditional carriers remain shackled to their costly connecting hubs and all the associated costs, such as baggage sorting and transfer lounges.

Getting out of no man’s land

The expense of maintaining the illusion of limitless service for full-price ticket holders makes it nearly impossible for traditional carriers to compete with LCCs’ low costs. And because there is a real limit to the service they can afford to offer, they also can’t extract the same price premium that high-end carriers enjoy.

 

Worse still, as traditional carriers’ profits evaporate, so does their ability to invest in the next generation of aircraft and systems, which might go some way to helping them out of their misery by providing lower running costs as well as a better experience for passengers.

Operating profit margins of network carriers have plummeted. Most large Middle Eastern airlines are simply not in a position to transform themselves into low-cost carriers or premium hub carriers.

National flag carriers, in particular, have a responsibility to act in the best interests of their countries, rather than merely considering what is best for their balance sheets.

But there are five steps that can help flag carriers to develop a new operating model that integrates some of the best elements of premium airlines, low-cost carriers, multiple-brand airlines, and multiple hub airlines.

1. Unmask the real network: point-to-point flying. Traditional carriers typically carry both connecting and point-to-point traffic. Although point-to-point traffic generally has better yields, traditional carriers configure their business for connecting passengers — for example, by building their schedule around their connections. More emphasis on larger point-to-point routes — such as intercity trunk routes, holiday destinations, and small regional services — would improve their competitive positioning.

2. Take pressure off the hub. A traditional hub-and-spoke network allows an airline to connect the largest number of cities with fewest flights, but suffers from two limitations: People generally end up going out of their way to travel via the hub, and arrivals and departures at the hub are arranged to maximize the number of connections, which leads to costly peaks in demand for ground services and severe congestion.

The solution is to use multiple hubs, which often reduces both problems by putting connections through the most convenient hub and reducing the distance of journeys.  Also, by better allocating the main connections between two hubs, peaks at each can be reduced, easing pressure on both of them.

3. Give customers only what they want. Premium airlines are masters at understanding what services their customers are willing to pay more for. Often national carriers can tailor their services to exploit cultural or behavioral idiosyncrasies in their passenger base that will increase loyalty.

4. Remember that less is more. LCCs’ ruthless cost-cutting highlights just how much excess costs most airlines carry.

Traditional airlines can mimic LCCs’ use of as few aircraft types as possible, reduced turnaround times and higher utilization, their simplified and automated ground services and their flexible labor arrangements.

5. Share the pain. Many small or mid-sized airlines cannot generate the scale or cost benefits of large airlines; such carriers can save as much as 5 to 10 percent of their total costs by merging with a similar-sized airline.

There is no question that traditional carriers are squeezed by new competitive circumstances, as well as industry changes that have been difficult for everyone. But with the right strategy, they can find their way out of no man’s land.

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Economics & Policy

Bold reform – the gordian knot of prudent public finance

by Fabio Scacciavillani
written by Fabio Scacciavillani

On the whole, the Middle East seems to have been quite resilient to the global financial crisis thus far. Both the energy commodities exporters and the countries that do not enjoy large oil reserves have mostly been able to maintain healthy annual growth rates, even though they suffered the inevitable setbacks, especially during the most acute phase of the credit market meltdown.

For the Gulf Cooperation Council countries, the performance was driven mainly by the public spending capacity accumulated during the years of climbing energy commodity prices, which has allowed governments to maintain an unabated flow of funds into infrastructure investments. But for the Middle Eastern countries that do not enjoy substantial commodity resources, the resilience came from a structural shift in economic policy.

In particular in the Levant (Egypt, Jordan, Syria and Lebanon), the economy was able to withstand the impact of the global crisis thanks to the long lasting effects of the structural reforms enacted during the past decade (and in some cases even earlier), plus the improvement of the security situation, notably in Lebanon.

Economic liberalization spurs enormous gains in efficiency and productivity when the dynamics of free markets spring powerfully back to life. Sectors dominated by inefficient public management or widespread red tape are swiped by performance gains and innovation. The results are often stunning: double digit growth, stronger exports, strong capital inflows, creation of small companies, improved services and so on.

This notable feat, however, cannot hide the fact that the effect of the reforms have been considerable for certain segments of the general population, but have rarely translated into a broad based improvement in living standards, especially for the lowest income brackets. The pattern we often observe in the Middle East has a familiar tinge, as it tracks the experience of many places where economic freedom sprouted after decades of repression, including Eastern Europe, China, India and parts of South-East Asia. The most blatant example was the so-called Russian oligarchs, who made exorbitant fortunes acquiring the crown jewels of the Soviet Union’s state-owned enterprises during the dismantling of the Soviet’s control and command system, benefiting from opaque procedures brought in by hasty privatization. 

The failure of the ‘trickle down’

But even where the excesses that characterized Boris Yeltsin’s time as the Russian premier were largely avoided, the process of liberalization tended to favor those with better connections to decision makers, family ties, the right professional skills (finance or engineering above all) and plenty of money, or simply those who happened to be in the right place at the right time.

The consequence is often that income disparities fuel resentment from those excluded or left at the margins. A middle class fails to emerge and actually, when buoyant growth leads to price increases, notably in real estate, the living standards of the salaried might even decline. Adding to the plight, with faster growth infrastructure becomes obsolete and overwhelmed, environmental problems are exacerbated, chaotic urbanization creates congestion and, at times, social tensions, while social services struggle to adjust.

The reaction to these woes is often a political backlash against the reforms and the reformists – in Eastern Europe and India, for example, governments that had pushed for liberalization ended up losing elections – but even where elections are not held resentment and cynicism can mount.

Hard to handle

Obviously, the authorities are not completely blind to these dynamics and effectively redistribute in some form the larger revenues resulting from additional tax collection and privatization receipts. Egypt doubled civil servant wages between 2005 and 2009, while Jordan and Syria also doubled public sector wages and pension outlays over the same period. Sometimes the tax windfall is channeled into less laudable areas; the doubling of defense expenditure in Jordan over the last five years, for example, is hardly justified by intensified security threats.

The redistribution of economic benefits through public expenditures, whether justified or not, carries two risks. On the one hand, expenditures and entitlements are politically difficult to undo, especially if exceptional economic growth is taken for granted – when it inevitably slows, governments are suddenly saddled by unsustainable deficits. Also, public expenditure tends to favor certain groups, resulting in patronage, dependency and complacency toward mismanagement of funds.

More generally, redistributive public policies represent a quick fix that might work in the short run but fail to address the key issue: why doesn’t the economic liberalization extend to the lower segments of the population through private sector mechanisms?

The reason, in my view, lies in the fact that liberalizing economic reforms are relatively easier to engineer, if only because extensive literature and widespread international experience outlines the practical steps to take. But liberalization is just the first step to extend opportunities and welfare.

The second, most critical and difficult task is to create a level playing field for all, not just for the privileged or canny few. A level playing field requires independent institutions that prevent special interests exerting an undue influence on the decision making process, assuming a dominant position in key sectors or hijacking resources for their own use. In short, it requires the establishment of an adequate system of economic governance hinging on three planks.

Foremost is a judicial system that carries justice without particular regard for the powerful and enforces property rights without being prone to external influences. Second are public bodies which are impartial and do not shy away from tough decisions, even when they upset the government or anyone in a prominent position. Third, since institutions are not abstract entities but result from the actions of men, it must be assured that those who perform public duties are shielded from political pressure and must not be penalized when they disappoint the rulers. Other policy actions ought to complement the governance framework, such as sound regulation, appropriate labor market laws, credible monetary and financial supervisory authorities, consumer protection and a business environment open to foreign investments.

In essence, the journey toward full economic freedom requires impartial institutions whose decisions cannot be subjected to the interests of individual or groups, however prominent they might happen to be. In the absence of these basic rules, reforms risk a dire destiny. They will end up substituting an old oligarchy with a new one, though not necessarily a better one.

 

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