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Banking & Finance

Riad Salameh

by Executive Editors June 3, 2010
written by Executive Editors

With Lebanon’s bank deposits representing four times the country’s gross domestic product, Executive sat down with Riad Salameh, the governor of Banque du Liban, Lebanon’s central bank, to find out which way Lebanon’s backbone will be leaning next.

  • Lending to the real estate sector is expanding. Is this trend threatening to create a bubble?

We constantly run surveys on the relationship between credit and the real estate sector. Our surveys are showing that we have no bubble; [the growth] is based on real demand because the activity in real estate has not been fueled by credit from the banks.

The total credit to the whole construction sector represents around 18 percent of the total loans of the country. If you want to take it as a percentage of the total balance sheets of the banks, it doesn’t go over 15 percent. Housing loans represent around 8 percent of the total balance sheets of the banks… so we don’t have a bubble.

A few years ago, there were circulars from the central bank capping the credit that a bank could give on a real estate project at 60 percent, so 40 percent had to be pure equity. Now for housing loans, the banks are assessing the risk by themselves, but they do require deposits of around 20 percent according to what we hear… I don’t think we have a bubble situation here.

  • How do you ensure that there is no speculation in the market?

Speculation exists, we cannot prevent it, but it is not being fueled by credit, because of the circular limiting the level of credit to 60 percent of any real estate project.

Effectively, the bubbles [elsewhere in the world] were created by excessive credits related to real estate, which is not the case here.

  • What can you tell us about consolidation in the sector? What is your opinion?

We have reinforced the law that allows mergers among banks and the possibility for the central bank to fund the cost of these mergers and [allow] the legal simplification of the formalities for that.

We think that in the future there will be a few mergers. But our position has been stated clearly that we will not accept mergers among the country’s top 11 banks because we think, for competition’s sake and risk diversification, it is a better structure to have this spread over many groups.

We do think that below the first 11, there is an interest for banks [to merge] and there is a decrease of the risks and the costs for the country if there is consolidation through mergers. This can be done among middle-and-small banks or it can be done by having the big banks acquire the middle-sized or small-sized banks.

But we will never force banks to merge. We will only let them agree on it, and then we interfere if these banks are not in compliance with the requirements of the central bank.

  • Oversaturation in the market is currently forcing you to encourage banks to expand  abroad — will the allowance of mergers quell this trend?

Expansion abroad is a strategy that we agreed upon with the banks a few years ago. Today Lebanese banks are present in almost every Arab country and they are also present in Africa and other continents.

[Those with a foreign presence] are deriving around 20 percent of their revenues…from their external activities. So we believe that this can increase.

Our objective here is to decrease the sensitivity of Lebanese banks to the Lebanese sovereign rating and also to have a sector that would enrich our balance of payments and provide opportunities for employment, because the Lebanese have skills in financial services and banking and you can see them working everywhere in the world.

The banks also have the possibility to invest abroad without being physically present abroad and we have limited that to 50 percent of their own funds.

  • Can international expansion really improve banks’ credit ratings?

When more than 50 percent is derived from [abroad], when they get to this level, then the rating agencies will have to look at not only the Lebanese risk, but to the overall picture. And that will improve their ratings.

  • Can the lira ever be a lending currency?

We have seen that there is sensitivity between loans in Lebanese pounds and the interest rates. These circulars have proven that if interest rates are low or not very far from what is charged on debtors’ accounts in dollars, then people don’t mind having their loans in Lebanese pounds. The return of the Lebanese pound on the credit market has been successful because we are seeing now that three of every four loans are given in Lebanese pounds. Although we have, from previous activities, a large stock of loans in dollars in the banking sector, new Lebanese pound loans are progressing quickly.

We were able to succeed because the balance sheet of the central bank is rich now in foreign currency and therefore we don’t mind seeing, or we are not scared to see, loans in pounds that ultimately get turned into US dollars.

There is the demand and supply between Lebanese pounds working smoothly and there are everyday excesses in US dollars that we are buying. So, if the interest rate structure on the Lebanese pound remains low, the Lebanese pound is going to gain more and more steam in the credit market.

This is good for the economy because the expansion in credit can be more aggressive by banks because it is in Lebanese pounds and they know that the central bank, as a last resort, can provide them liquidity when they need it. Also, it reallocates a role to the central bank in the economy because now by changing the interest rates, we will have influence on the credit market in the country.

  • Regarding the public-private partnership (PPP) and build-operate-transfer (BOT) deals being discussed, are these kinds of plans something that you would advise and how would you make sure that they are soundly structured?

Lebanon has engaged in the application of the criteria of Basel II and the level of solvency has been determined to be 8 percent, and today we are on average at 10 percent. Mismatching, which can be created by this type of credit, is also weighted in Basel II. So as long as the banks can provide the long-term credit and at the same time maintain the acceptable solvency, it is normal business for them. It is exactly as housing loans have been done for the last 17 years. So we will look at this aspect. We are going to monitor that the solvency ratios of banks are still respected and it’s up to them to do it or not.

Another way to do it is that the banks have the right to put up funds, which can issue shares that can be bought by banks’ clients. This method can fund projects related to PPP or BOT.

What has to be very clear is that we will always continue to take a prudent approach concerning credit because it is very important and because we follow these solvency ratios. The banks will use their judgment to see what they can operate as direct credit and what should be funded through other types of products directly by their clients.

  • Do you think that these products are a realistic goal for the near future?

I think that there is an opportunity for Lebanon today to develop various sectors that could improve the quality of life of the Lebanese. These projects are from different sectors, from infrastructure, environment, energy, education and transportation – we need these projects. And we need to do it without increasing the public debt and there is enough confidence today to do that.

Personally, I hope that the different political parties in the country will agree on such a scenario, but of course I cannot know how fast they are going to move on this.

“The returun of the Lebanese pound on the credit market has been successful [as currently] we are seeing that every three or four loans are given in Lebanese currency”

June 3, 2010 0 comments
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Banking & Finance

For your information

by Executive Editors June 3, 2010
written by Executive Editors

BLOM launches Egyptian investment fund

BLOM Bank’s investment arm, Blominvest, is to launch and manage an investment fund in Egypt called the BLOM Pyramids Balanced Fund. The new fund will invest in the burgeoning Egyptian market, where gross domestic product is forecast to grow beyond $200 billion in the next few years. 

The fund is to invest a minimum of 50 percent in Egyptian debt instruments and a maximum of 50 percent in equities. Subscription and redemption in the fund is conducted on a weekly basis with a starting unit price of $5,000.

Checking on the up

Lebanon saw a 38.7 percent rise in check clearing activity in the first quarter of 2010. According to figures released by the Association of Banks in Lebanon, total cleared checks came to $16.9 billion. The increase was attributed to a 43.1 percent surge in foreign currency denominated checks, 22.7 percent higher than in local currency.

Activity peaked in March, up by 56.6 percent on the same month last year, and 17.4 percent and 32.6 percent higher than January and February, respectively. The rise in foreign currency denominated checks has led to an increase in dollarization to some 80 percent in the first quarter versus 78.4 percent over the same period in 2009.

Credit handout boosts inter-Arab trade

Credit Libanais, Fransabank and Banque Libano-Francaise (BLF) signed $50 million worth of new agreements in May with the Arab Trade Financing Program (ATFP). The program, a joint Arab financial institution that promotes trade between Arab countries, has to-date provided credit lines worth $7.6 billion, out of which $1.4 billion went to Lebanon.

Credit Libanais inked a new credit line with the ATFP worth $20 million to finance trade transactions between Lebanon and other Arab countries, bringing agreements signed between the two parties to $170 million.

Fransabank signed a $15 million, two-year agreement to boost inter-Arab trade, bringing its total credit with the AFTP to $105 million.

BLF signed a $15 million agreement to fund external trade and enhance Lebanese product competitiveness internationally.

BLC joins World Bank as an issuing institution

The private sector arm of the United States-based World Bank, the International Finance Corporation (IFC), added BLC Bank as an issuing bank to its Global Trade Finance Program (GTFP) last month. The $1 billion global finance program facilitates trade by providing  guarantees to support both import and pre-export financing to cover the payment risk in trade transactions with local banks in emerging markets. “BLC Bank will use the facility to increase trade finance offerings to expand their trade finance transactions within an extensive network of countries and banks thus supporting their clients, including small and medium enterprises that help drive job creation,” the bank said in a statement.

BLC is the fourth Lebanese bank to join the program following Banque Libano-Francaise, Bank of Beirut, and Fransabank. In January, the IFC acquired 8 percent of Byblos Bank shares, paying $100 million for common shares in Byblos Invest Luxembourg. BLF was the first bank in the Middle East, and second in the world to join the GTFP program, since expanding its ties with the IFC through becoming a confirming bank.

The IFC has provided trade guarantees worth more than $482 million to Lebanese banks since the finance program started in Lebanon in 2006, while last year committing over $184 million in trade finance to the banking sector. Worldwide, the GTFP has issued over $6.5 billion in guarantees to 177 issuing banks in 80 countries since 2005.

Lebanon weathers the euro crisis

Central Bank Governor Riad Salameh said during his monthly meeting with the Association of Banks in Lebanon that the Lebanese economy and banking sector has not been affected by the Eurozone crisis, which has forced the European Union and the International Monetary Fund to provide close to $1 trillion to bail out Greece and other flailing economies. The governor said that Lebanon was spared from the negative effects of the crisis, and that the deterioration of the euro against the United States dollar is not expected to yield negative repercussions, due to deposits in foreign currency other than the dollar not exceeding 10 percent of total deposits.

Salameh added that Lebanese banks operating abroad have also not been affected.

Saudi banks still hungry for foreign investment

With domestic credit slowing in Saudi Arabia, the country’s banks have continued to focus on foreign investments, according to the central bank, the Saudi Arabian Monetary Agency.

Last year, Saudi banks invested an unprecedented $12.8 billion into foreign markets, bringing combined foreign investment by the country’s 12 commercial banks to $29.9 billion. Foreign outflows slowed in the first month of 2010, but continued to rise in the rest of the first quarter, gaining $1.6 billion to reach $31.5 billion at the end of March. Total foreign assets are marginally down from $56 billion at the end of 2009 to $52.2 billion as of March, attributed to a fall in bank dues from foreign banks and branches.

Lebanon ranked 5th in region for access to capital 

Lebanon was ranked fifth out of 12 countries in the Middle East and North Africa region in the United States-based Milken Institute’s Capital Access Index 2009. The index, which measures how countries support economic activity by providing companies with access to capital, reported that Lebanon’s regional and global ranking has remained unchanged since 2008, but remained 10.5 percent higher than its 2007 rating.

Lebanon performed well in the macro-economic sub-index, which assesses a country’s conduciveness to business, coming second in the MENA region after the United Arab Emirates. In the financial and banking sub-index, Lebanon came fifth regionally, and ninth in equity market development. In terms of international funding, Lebanon placed second. In overall MENA rankings, the UAE took the top score, followed by Kuwait, Oman and Saudi Arabia. Iran, Yemen and Syria had the lowest rankings.

Popularity of plastic payments sees surge

The number of credit and debit cards issued in the first two months of the year rose 3.4 percent on the same period in 2009 to reach 1.6 million, according to figures released by the central bank. Point of sale (POS) purchases with cards have been on an upward trend over the past decade, with average monthly domestic payments amounting to $67 million in the first two months of 2010, up 28 percent on last year. In 2007, $34 million in POS purchases were reported in the same period, and in 2008, $44 million. Debit cards account for the majority of plastic payments in Lebanon, at 63.6 percent, followed by credit cards at 20.7 percent, and charge cards at 10.3 percent. The number of ATMs increased 6.8 percent this year on the first quarter 2009.

June 3, 2010 0 comments
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Special Feature

Partnership for prosperity

by Lara Alameh June 3, 2010
written by Lara Alameh

American President Barack Obama’s administration has been seeking ways to strengthen ties with Muslim majority countries.  In April, he made true on his June 2009 Cairo speech promise and hosted a presidential summit on entrepreneurship, which was intended to serve as a catalyst for expanded entrepreneurial cooperation, as well as economic growth in Muslim nations.

The summit brought together more than 275 participants from 50 countries to discuss the ways in which they can work together to galvanize entrepreneurialism in their respective industries and states. But it is the product of the summit, rather than the rhetoric, that will determine how the Middle East can capitalize on this initiative.

What is needed are tools which empower the private sector to pressure governments in the region to strengthen the legal and economic structures necessary to support a healthy business climate. However, even if these tools are created, their successful implementation will not be sustainable in the absence of an environment of peace and stability. Despite Obama’s best intentions, no amount of entrepreneurial success can replace the urgency of a comprehensive Middle East peace, which is fundamental to the region’s economic development.

There are many divides to be bridged and obstacles to be surmounted. Competing national visions, inherited conflicts and misconceptions, and large disparities in standards of living stand in the way of development.

Even among the friendliest neighboring countries, economic integration has been stalled, except for a few isolated attempts. Reforms have been in demand for decades, yet delivery has been cosmetic at best. As a result, the gap has been widening between the countries of the region, within those countries and, most alarmingly, between their citizens and leaders. The levels of unemployment, real growth and poverty in a region endowed with so much wealth and so many resources makes clear that the current system is not working, and strengthens the case for the kind of leadership and solidarity seen at the summit.

Governments in the region, with the support of the international community, should take a proactive stance in working to support the private sector via institutions that will ensure competition in national economies. Existing governments need to recognize the value of human resources in the region. The wealth of Arab countries lays not in the export of their natural resources, but instead in the opportunities and capabilities that are afforded to their people.

An institutional framework is needed that will breakdown clientalist structures, reform education to meet the demands of national economies and strengthen regional infrastructure projects. 

In his remarks at Cairo University, Obama articulated the need to deal with our problems through partnership. The United States has a central role to fulfill in that partnership, and is the only party that has the influence to bring peace to the region. The US should regain its leadership role in fostering this or any other fair peace initiative to avert further deterioration of security in the region or a potential war. In the end, expanded economic success and the democratic imperative in the region can only be sustained by peace. 

The Middle East has traditionally been a meeting place, a crossroad of civilizations. Trade routes passed through ancient Arabia for centuries with prosperity, tolerance and mutual benefit. The region cannot be allowed to slide into a whirlwind of conflicts, polarization and violence.

 This can only be avoided by the foundation and empowerment of political and economic institutions that will provide the mechanisms to support sustainable development, participation, accountability and peaceful interaction among the various components that make up Middle Eastern societies.

Through the establishment of peace, barriers that prohibit the creation of these institutions will be reduced and incentives for politicians seeking a new legitimacy in a post-conflict region will be gained through the investment allotted to their citizens.

LARA ALAMEH is the executive director of the Safadi Foundation USA

June 3, 2010 0 comments
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Special Feature

Kenneth Morse

by Executive Editors June 3, 2010
written by Executive Editors

Kenneth Morse is the co-founder of 3Com Corporation, Aspen Technology Inc. and a number of other startup companies. He is also the former managing director of the Massachusetts Institute of Technology’s Entrepreneurship Center and currently holds the chair of Entrepreneurship, Innovation and Competitiveness at Delft University of Technology. Executive caught up with the business guru during a tour of the region promoting entrepreneurship to gather his insight on how governments and young business leaders can spur the creation of new and innovative enterprises.

  • What steps should governments in the region take to promote entrepreneurship in their respective countries?

They need to become good customers, meaning that they quickly make decisions to buy, and then pay on time. Governments have a tough time making quick decisions because they are rewarded more for not making mistakes than for doing the right thing — and because the press love to jump on mistakes.

This makes them risk averse. In the Middle East, the worst thing about governments is that they don’t pay their suppliers on time. It is easy to kill start-up companies by being slow customers who pay late.

  • But what about e-procurement models that we have seen some governments adopt in the region?

Do you think that is really happening? Every small company that I have found tells me that it is impossible to sell to governments. And the corruption problem compounds the challenge. They take a long time, then they want a bribe; you have to pay somebody off, so your profit is all lost in the bribe. Or, hopefully, the small company says it will not pay the bribe. Compare that with North America and parts of Northern Europe where governments like to buy from start-ups because they are more innovative. Of course, corporations need innovation and they love to buy from start-ups.

  • The bureaucratic processes that are part and parcel of governments in this region don’t give new businesses that luxury and facilitate corruption inside of government itself. Have you seen any progress on this front?

I have seen both some very exciting start-up companies here and some sincere commitment to start-ups.

  • In terms of public policy?

The leaders in the United Arab Emirates, Jordan and Lebanon know that the public sector has reached its limit in terms of its ability to create meaningful jobs. So they have turned to the private sector. Large companies in the private sector are growing and are so the small companies. It’s simple Aristotelian logic.

  • We have seen an increase in the amount of aid being supplied to the region by the United States since President Barack Obama’s 2009 speech in Cairo. Could there really be a paradigm shift in the US’s strategic policy for the region, or is it more likely that this is a public relations stunt?

There is a paradigm shift in thinking for sure. For example, one of the proposals in [Obama’s] speech in Cairo on America’s relations with the Muslim world was to have a conference on entrepreneurship in Muslim Majority Countries.

  • But these are just conferences. They may look good on paper but they don’t necessarily have effects on the ground.

Entrepreneurship is still a good thing for America to export to the world. It’s not controversial. However, I’m not sure how well implemented the new policy is.

  • Why are you not sure of the implementation?

Well, not if they work it through the United States Agency for International Development (USAID). USAID is reluctant to pay any of their consultants more than $565 a day, and I don’t think [they] are going to be able to attract fantastic entrepreneurs at those rates. 

  • So you think there needs to be more funding? 

The funding is there but they won’t spend the money because they are not willing to face up to the fact that [$565 a day] is a low sum.

  • But does it have to be done through USAID? 

There are competing forces in Washington but USAID claims that [the funds] should go through them — and they are brain-dead. Still, entrepreneurship is a message of hope and an export from the US, and there is plenty of interest in importing entrepreneurship.

  • So where do we go from here?   

There is a program that builds on all the current initiatives. It’s called the ‘10 by 20 program’ where each year 10 companies form a paragon [of companies] and commit to achieving $20 million in annual revenues within 5 years. This is an ambitions target; if you are not ambitious you need not apply.

The firms involved are given training and helped to access markets through the diaspora and other means. You were also talking about another model: public private partnership. The public sector could provide the money — it could be through the central bank — and the private sector would administer it because they [are more efficient], and then those companies that were in the program could take off like a rocket.

  • But many governments are in debt and may not be willing to put up the capital.

The payback on the [similar] Quebec program took one year; after that it was tax revenue. It’s about job creation — you take people off unemployment and onto the payroll.

  • When do you think young entrepreneurs should take the dive and start their own businesses?

The ambitious small and medium-sized enterprises of today are the big companies of tomorrow. I am not in favor of having kids start companies right out of school. They don’t know enough to achieve sustainable growth.

I am more a fan of having young people participate in business plan competitions to taste what entrepreneurship is about and then work for well managed, rapidly growing companies, where they learn how to sell, get a purchase order, how to move though an organization and how business processes work, and then start a company with a large team and a critical mass.

  • Where do you see the greatest growth potential in the Middle East?

Women. Female entrepreneurs in the Middle East are [proportionally] the highest percentage in the world. I teach at Delft University (in Holland), where only one in 112 CEOs that I have taught during my tenure [are women]. In the Middle East it is 25 to 30 percent.

This is because entrepreneurship does not suffer from a ‘glass ceiling’. When there is no glass ceiling, you start your own company, you are the president and you are all set.

Women entrepreneurs in the Middle East are doing well for other reasons. They work harder, they are more dependable and the men tend to be lazier.

Who would you rather buy from? Someone with hustle, or someone who is complacent?

  • Do you think this is a long-term trend?

I have observed it for seven years; I don’t know what you think long term is. It doesn’t seem to show any signs of letting up.

  • If you could speak to policy makers in the region about entrepreneurship, what do you think would you say?

Promote ambition. Fix the bankruptcy laws. Become good customers.

June 3, 2010 0 comments
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Feature

A new American intervention

by Executive Editors June 3, 2010
written by Executive Editors

The policy of aggressive democracy promotion in the Middle East, a hallmark of former United States President George W. Bush’s administration, seems to have been sidelined by his successor in favor of a softer approach to international relations. While not renouncing the democracy campaign altogether, Barack Obama’s government has refocused its methods toward State Department projects that target economic advancement, education and job creation in the region.

This shift was exemplified by the Presidential Entrepreneurship Summit on April 26 and 27, where more than 250 delegates from 50 Muslim majority countries (MMCs), as well as Secretary of State Hilary Clinton, Secretary of Commerce Gary Locke and several members of Congress, gathered in Washington, DC to discuss methods to foster entrepreneurship as a means of spurring economic growth and community development.

The summit signals a wider move in the administration to position the Middle East as part of a worldwide religious community, rather than the home of the ‘axis of evil’, as America reformulates its role in the region. The US’s long history of involvement in the Middle East, however, begs the question of whether this new initiative is a genuine policy shift or whether the White House has simply entered another phase of the decades-old strategy of quietly promoting civil society development while maintaining relations with heads of state.

On the surface, the White House appears eager to trumpet its departure from previous US policy. At April’s summit, Secretary of State Clinton cited Obama’s June 2009 “New Beginning” address at Cairo University as the administration’s “new approach to foreign policy.”

In a press statement, the Chief of Media and Cultural Affairs at the US Embassy in Lebanon, Ryan Gliha, said he considered changing the way the US administration was seen in the region as the “crux of the point” for the event.

Many of the new programs differ in that they favor local expertise over imposing an external agenda for development or aid. Yet their details remain largely unknown, and citizens’ suspicions of American intervention lingers.

A new beginning

Former Secretary of State Madeleine Albright will partner with Walter Isaacson, president of the leadership-oriented Aspen Institute, and Muhtar Kent, the Turkish-American chief executive officer of the Coca-Cola Company, in launching the “Partners for a New Beginning” program — part of the State Department’s push for innovation. Described as “a team of eminent Americans from across sectors and industries who will lead an effort to engage the US private sector in carrying out our vision for a new beginning with Muslims,” little additional explanation was given as to the program’s specific plans.

Two other initiatives, the Silicon Valley-based Global Technology and Innovation Partners and the Innovators Fund, have already been set up by venture capitalists following Obama’s Cairo speech and aim to “support innovation” in Egypt, Jordan, Lebanon, Turkey and Malaysia.

Having already reached out to Jordanian venture capitalists Oasis 500 and several American firms, the Innovators Fund plans to expand.

Secretary Clinton also mentioned the e-Mentor Corps, a project that will allow entrepreneurs seeking advice to access mentors on-line from Intel, Ernst & Young, the Kauffman Foundation, TechWadi, the Young Presidents’ Organization, Babson College and Endeavor.

While many of the schemes sounded well intentioned if vague, Clinton delved into greater detail regarding the Global Entrepreneurship Program (GEP), which is set to begin in MMCs and grow from there. Clinton said that the private sector will partner with civil society groups to “help create successful entrepreneurial environments” by providing access to capital, business education from US business schools, mentoring programs and by identifying promising ideas. Launched in Egypt in April, the GEP pilot  will soon start in Indonesia, the countries with the largest Arabic speaking and Muslim populations, respectively.

Egypt exemplar

Egypt’s GEP was launched under the auspices of the US-Egypt Business Leaders Forum, the latest manifestation of a decades-long collaboration between wealthy Egyptian and American businessmen, such as Taher Helmy, co-founder of Hamza, Helmy & Partners Law Firm, and Steven Farris, chief executive officer of the Apache Petroleum company, Egypt’s largest US investor. Helmy and Farris, co-chairs of the Forum, explained that after years of economic and financial reform, Egypt is ready to receive support for entrepreneurship.

“Reforms [have been] substantially successful, the private sector controls over 75 percent of the Egyptian economy…our primary focus has shifted to entrepreneurship and education,” Helmy told The Daily News Egypt.

Egypt’s willingness to undertake controversial reforms won it recognition with the GEP pilot program, and Clinton urged other nations to follow suit: “We need to encourage your governments to make the legal and commercial reforms needed to encourage trade, allow for the free flow of ideas [and] lower the barriers to launching new businesses,” she said in her speech.

Endeavour sets the pace

Although the efficacy of the State Department and its affiliates in promoting innovation in MMCs remains untested, Endeavor is an independent organization already active in the region. Initially focused in Latin America, the non-governmental organization began giving entrepreneurs access to mentors and angel investors in Morocco, Turkey and Egypt in recent years and is contemplating a Beirut office.

Endeavor’s method — identifying successful small businesses and helping them grow to scale, becoming role models for other entrepreneurs — represents what Elmira Bayrasli, policy and outreach coordinator for Endeavor Global, refers to as a “paradigm shift” — offering support to successful local initiatives rather than descending with a list of externally-generated goals.

“We don’t apply a cookie-cutter model. We have a framework that is driven by finding local business leaders and local networks that will then define how their own framework is built,” she said at Endeavor’s International Selection Panel in Cairo in March. “It’s really up to them to drive it forward in the vision they feel is best suited to that country.”

The event brought Endeavor Board Chairman Edgar Bronfman to Egypt to advise small business owners hoping to partner with the group. Bronfman, the CEO of Warner Music Group and heir to one of the wealthiest families in Canada, explained his commitment to facilitating entrepreneurship, particularly in the Middle East: “I’ve always believed that the more people that have jobs, the greater the opportunities for peace and the fewer opportunities for anger and frustration,” he said. “This is true everywhere, but especially important in the Middle East.”

His statements echo those made by Clinton, who listed a strong economic foundation and a stable middle class as “essential” to good governance and the rule of law. While the words “democracy” and “US security” enter the vocabulary of the Obama administration with less frequency than that of his predecessor, its policies represent the unspoken understanding that Bush had the right agenda but the wrong methods.

As a congressman, Obama’s record for democracy promotion included co-sponsorship of the Advance Democracy Act, while in 2005 he introduced the Democratic Republic of Congo Relief, Security and Democracy Promotion Act. Monetary support for democracy in the Middle East may re-emerge after trust has been re-established by the US’s respect for sovereignty and international rule of law.

America comes first

In the meantime, civil society groups in Egypt, Jordan and other countries have watched funding disappear. United States Agency for International Development told the Associated Press that cuts resulted from a drawing down of military aid, especially to Egypt.

The DC-based Project on Mideast Democracy reported that funding in Egypt fell from $10 million in 2008 to $2.6 million in 2010, and that only groups registered with the Egyptian government may receive funding, a hindrance for those attempting to monitor the upcoming presidential election in 2011, for example. Perhaps in an attempt to counterbalance this loss of civil society funding, the Obama administration has sponsored social entrepreneurship in the region.

Ultimately, the Presidential Entrepreneurship Summit’s role as a catalyst may be more important than the event itself. For example, it inspired the recent Arab World Social Innovation Forum in Cairo, hosted by international social entrepreneurship NGO Ashoka and attended by representatives from Microsoft, Price Waterhouse Coopers, the Arab League and USAID, among others.

However, this one summit should not be taken as a sure sign of fundamental change in US policy in the Middle East. Although the White House may seem to have changed its methods, it will undoubtedly continue to pursue policies to promote what it considers best, both for the region and for its own interests.

June 3, 2010 0 comments
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Feature

Bred to kill

by Executive Editors June 3, 2010
written by Executive Editors

For the aficionados, dog fighting is more than a sport — it is a platform to play God with the violence of Darwin’s natural selection.

“I have Hitler’s mentality,” says 35-year-old Mike Kennel, a pseudonym he chose to maintain anonymity. “I aim for humans to advance, just like I am allowing these dogs to advance — I only let the most intelligent marry each other and the strongest marry each other.”

On the outskirts of Beirut down a winding road off the Hadath highway, an iron gate opens onto a secluded path bordered by agricultural land. Yet the organically grown plots, the picturesque greenery and the peaceful ambiance camouflage a farm of another kind: This is doggie boot camp.

A seemingly abandoned building at the end of the path houses dogs enrolled in a rigorous training regimen, and on the other side of the clearing, leafy fichus trees shade a square fighting arena, in which they are trained to tear each other apart.

Apart from fulfilling his competitive lust, Kennel claims he stages fights to test for specific traits to ensure the preservation of the species.

“I check for the dog with the stronger jaw, the strongest mind and the longest breath, and I use it for the selection I breed. To test it, I need to put it in the ring,” says Kennel. “We believe in the rule of the jungle. We believe in the survival of the fittest, because the fittest will make stronger offspring, and prevent the extinction of the animal.”

When these canine “ultimate fighters” are in the ring, the faceoff is brutal. American pit bull terriers (APBT) have been bred for their capacity to fight and inflict maximum damage. It is also their “gameness,” or ability to attack regardless of their physical condition, that is one of their most appealing attributes for their masters.

APBTs have a predisposition to tolerate pain through anesthetizing compounds that their bodies naturally secrete. The selection and genetic make-up, rather than the use of any drugs, says Kennel, have allowed the development of strong, feisty pit bulls that are born with a predator’s instinct to hurt other dogs.

What started for Kennel as a fascination with animal competitions at age 12 led him, by 16, to become a professional dog-fighter, trainer, breeder, trader, handler and referee; in other words — a dogman. Today he says it is also a lucrative business, but one that he declined to quantify to avoid litigation by auditors from the Ministry of Finance.

Kennel owns 75 dogs that he trains and breeds; 25 are APBTs, which are the only species he raises for fighting purposes. Kennel’s work in breeding and training has earned him a region-wide reputation: in his workshop he builds self-powered treadmills that he sells for $600 around the Middle East to improve the cardiovascular fitness of the dogs without exhausting them.

Dogs also wear weighted collars, usually four kilograms, to increase upper body strength, and their biting power is improved by having them chomp on a hanging rope from which they are suspended for extended periods. Kennel has also developed strict nutrition regimes complete with vitamins and minerals to complement dogs’ training.

A puppy is trained until the age of two before entering the ring for the first time. Formal matches are usually arranged two months in advance to give time for training, with the details — such as the wager of each owner and the weight class of the dogs — drafted into a contract for the competing parties to sign.

Lord of the ring

Just before formal matches dogs are weighed to ensure they adhere to the agreed weight category, and if not, the party in breech of the contract pays a penalty, usually half the value of the bet, or an average of $2,000, to cover the cost of the training. The opponent can then also choose to cancel the bout.

After passing the weigh-in, the dogs are washed to remove any possible poison hidden in their fur. Handlers then bring the animals into the pit, or “ring” — a four meters by four meters square with walls up to 75 centimeters high. They hold the dogs by their hips behind “scratch lines” in opposing corners as the dogs prepare to attack.

The referee stands in the middle of the ring, ready with a wooden or plastic “breaking stick,” which is the only way to pry open a pit bull’s locked jaws. At the signal of the referee, handlers release the dogs for the first “scratch” — dog fighting terminology for an attack — and the animals leap at each other in a fever of bloodlust. 

“We don’t tell the dogs ‘Go’,” said Kennel. “The dog has an instinct to go on its own. If we have to invite the dog to the fight, we don’t want it.”

At the fight Executive attended last month, the dogs became entangled in a “dance of death” standing on their hind legs, then took turns mauling each other, quietly encouraged by their respective handlers with words the dogs were conditioned to hear when striking opponents.

During the first scratch, the dog that locked its jaws on its opponent first won a point. The dogs were then pried apart with the breaking sticks — no one flinched as blood oozed from the wounded animal.

At this point in the match the owners and the referee will check for the dog’s gameness.

“Even if the dog gets wiped, if it still has gameness then it is selected for breeding,” said Kennel.

At the second scratch, the dog that lost the first round will be released to attack his opponent. If after a 10 second count by the referee the dog still has not attacked, then the other dog must scratch and secure a lock on its opponent. If the second dog fails to attack as well, then the dogs are even and the match is over.

“Both dogs will go bye-bye,” explained Kennel with a hint of sarcasm. “They can’t be sold, there is no breeding, and their value will be zero even if they cost $10,000.”

When a dog loses, it gets a loss added to its title record, and if it does not display gameness it will never be bred or enter a ring again.

After each fight, Kennel injects the dogs with antibiotics to speed their healing. He confirms though that unless it’s a finishing game, where a dog has to be kept in the fight until its last breath, no owner would let his dog die in the ring. 

“No one kills a dog worth $4,000,” he said, though Kennel admitted that dogs often die the day after a fight due to injuries.

As a result, medical care for the dogs before and after the fight is essential in preserving their value and improving its performance.

Gambling on gore

With the blood sport underway in the ring, betting outside goes into full swing, with 10 percent of all bets going to the referee and ring, which usually go together. Kennel says there are three rings in Lebanon for professional fights.

“There are no limits for bets,” he explained. In Gulf countries, bets can reach up to $30,000, and can include automobiles and property.

Kennel says that in Lebanon,  the bets don’t go beyond $5,000, and the big betting is usually limited to a handful of insiders. The dog-fighting circle is secretive and clandestine, with heavy emphasis put on the anonymity of participants given the involvement of some of the country’s prominent businessmen, according to sources that also declined to be identified.

The price of a gladiator

As a fully-fledged dogman, Kennel takes a lot of pride in his lineage breeding. The price of a puppy ranges from $500 to $1,500. After that, prices increase with the level of training, the titles a dog earns and the owner’s emotional attachment to the animal.

With each match victory, a dog’s value normally doubles; three wins earns a dog a champion’s title, and five wins earn it the title of grand champion, which can elevate the price to as much as $50,000 in Lebanon.

Kennel’s endeavors have evolved into a highly disciplined enterprise compared to “street level” dog fighting. Sources, which asked for anonymity because they have received threats from dog fighters in these other circles, describe them as being associated with criminal networks, with bouts staged in secret locations that are only revealed to the participants shortly beforehand via SMS mobile messages. Dogs fighting in these settings tend to be subjected to extreme abuse, often deprived of food and forced to live in darkness to increase their aggressiveness.

Kennel, who sees himself as a professional, abides by the “Cajun rules,” a detailed list of guidelines related to dog fighting created in the 1950s in the United States. He argues that street dog fighters are amateurs and ignorant of important information pertaining to adequate dog training, such as the fact that darkness weakens the eyesight of a dog and makes him aggressive towards people in daylight.

“A dog that is aggressive towards humans is not allowed in [our] ring,” he says.

In fact, Kennel now recruits amateur dog fighters to join his training camp, teaching them how to be professional handlers and trainers in the creation of true canine predators.

“I recommend that anyone who has a pit bull, go to a professional to learn… the value and the love of the dog,” said Kennel.

There are currently no laws in Lebanon that pertain to dog fighting. Kennel says he believes that dog fighting should be regulated, and that those who fail to ensure a safe and secure environment for their dogs should be penalized. Inspection and regulation should be the job of the government, he says, and not that of animal rights activists who don’t understand the emotional and financial value of game dogs and want to “castrate” them.

“Why don’t we castrate Mohammad Ali? Or all the people who like boxing?” says Kennel.

“We don’t have to be enemies with animal rights activists, we can work together,” he said. “Instead of stifling those who are addicted to this sport, we can teach them to do things right. This is a dangerous sport and safety procedures have to be respected.”

June 3, 2010 0 comments
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Deadly dithering in Yemen

by Abigail Fielding-Smith June 3, 2010
written by Abigail Fielding-Smith

If your knowledge of Yemen was gained entirely from donor briefings and government statements, you might think it was a politically troubled, developmentally challenged country, like Egypt on a bad day.

When the international community was spurred to ‘do something’ about Yemen, following the attempt to take down a United States-bound airliner by a would-be suicide bomber — who apparently trained there — the impulse was not to send over emergency relief, like Ethiopia in 1984, but to set up working groups to investigate Yemen’s complex developmental challenges.  

But as donors deliberate the best way to boost the country’s long-term institutional capacity, increasing numbers of its citizens are living on the margins of survival. In the capital, Sanaa, when your car slows down even for a few seconds, thin fingers will inevitably begin tapping on the window begging for money. Poverty and privation is even worse in the countryside.

On a trip to Al Mazraq refugee camp last year, I saw people who had fled the war in the northern province of Saada shouting angrily into the sandy wind that they had nothing — no means of ensuring their own survival. Their situation has since become much worse.

Yemen may superficially be a part of the Middle East — a “middle income” region — but its statistics are in a different league. Child malnutrition rates are second only to Afghanistan, and a recent shortfall in funding to the World Food Program (WFP) means that, quite simply, more children will die this year as their plates go empty.

“We are expecting the moderately malnourished children to fall into a severe malnutrition state, and those who are already severely malnourished will sustain life-long implications,” said Wisam al-Timimi, a nutrition specialist with UNICEF in Yemen. “Their survival will be jeopardized.”

According to the WFP, one in three Yemenis, some 7.2 million people, suffer from chronic hunger and 1.7 million people will become unable to meet their basic nutritional requirements with seasonal food price rises this summer. Lack of funding will force the WFP to withdraw assistance from 80,000 beneficiaries in July, and it has already almost run out of food for the 270,000 internal refugees from the northern conflict — between Houthi insurgents and government forces — who are completely dependent on aid handouts. As of last month, the agency began distributing half rations to trickle out the supply longer. 

“Anyone arguing this is a nightmare scenario wouldn’t be wrong,” said one humanitarian expert I spoke to.

Its not just the WFP that is suffering a funding crisis — an appeal for $177 million in humanitarian assistance for Yemen launched by a coalition of international agencies last year has only received around 30 percent of this target. 

“It’s puzzling,” said Gian Carlo Cirri, head of the WFP in Yemen. “There’s lots of talk about helping Yemen, but very little money.”

Some speculate that the Haiti earthquake has caused donor fatigue. Yemeni political analyst Abdul-Ghani al-Iryani blamed the government in Sanaa — which disputes the WFP’s findings — for not making food security a high profile issue due to the potential political embarrassment. 

“The callous position of the government on the issue of hunger is costing each year more lives than all the wars that Yemen has seen since its founding,” said Iryani. “The most vulnerable group is too powerless to protest.”

Another theory is that humanitarian aid has become the victim of development aid policy concerns . 

“Expectations that Western donors would give more money have not materialized,” said the Deputy Finance Minister Hisham Sharaf. Western delegates at a conference held in London after December’s failed bombing attempt didn’t pledge new funds to the country, but instead vowed to direct $5 billion donated following a 2006 conference, much of which remains untouched.

Donor desire to implement a considered development strategy that avoids propping up a system notorious for its corruption and inefficiency is understandable, but the country’s immediate humanitarian needs are too acute to be held hostage by such concerns. This is not only a moral issue, but a strategic one as well.

Protests have already begun in Saada after the announcement of half-rations for internal refugees, and there are fears the $35 million WFP funding shortfall for food supplies to feed these people could destabilize the situation in the north, where a fragile ceasefire is holding.

After all, $35 million is, as Cian Carlo Cirri keeps telling reporters, a relatively cheap price for stability.

ABIGAIL FIELDING-SMITH  reports on the Middle East for the Financial Times

June 3, 2010 0 comments
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Editorial

Tomorrow’s zeal

by Yasser Akkaoui June 3, 2010
written by Yasser Akkaoui

Last fall, I was teaching a business ethics course at the American University of Beirut and explaining the ‘double bottom line,’ the concept that in modern business, a healthy bottom line must also include a firm commitment to corporate social responsibility and corporate governance. Two of my students, Omar Touma and Linda Sawaya, asked me how Executive could call itself a responsible company, and presumably claim to have a double bottom line, when it prints 25,000 copies of a magazine every month.

They had a point. So much so that Executive immediately set about improving its green profile. We started by only sourcing paper made from wood grown in sustained forests, while internally we began recycling. But it still wasn’t enough. We still felt we were falling short of being on good terms with our carbon footprint.

It was only back in the classroom this spring, this time teaching strategic management, that the final piece of the jigsaw fell into place. Another group of students suggested that for every magazine we distribute, we should make a commitment to collect up to three more, of any publication, for recycling.

We are empowered and inspired by the enthusiasm, awareness and talent shown by our young business leaders. What is all the more remarkable is that they have demonstrated such maturity in the face of a society that has dragged its heels in embracing the ethics, not only of the modern business community, but the wider world. That they have done so is a testament to the power of the media to cross borders and positively affect us all.

I am telling you this, not only because I am proud of the way Executive has reacted in its own small way to embrace best practice, but because the solutions came from our youth, our future leaders. It is the duty of our generation to ensure that they, and the generations that will follow as they mature, have a world worth inheriting.

Finally, it was with profound sadness that Executive learned of the sudden death of Melhem Karam, who for 50 years was head of the Lebanese Journalists’ Union. He was 78.

As a journalist and writer, he penned many works including ‘The Storm,’ ‘A Thousand and One Nights’ and ‘The Secrets.’ Karam also founded the Arabic weekly Al-Hawadeth, the daily Al-Bayraq and the magazines La Revue du Liban and Monday Morning.

He will be missed.

June 3, 2010 0 comments
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Economics & Policy

Tightening inflows

by Executive Staff June 3, 2010
written by Executive Staff

Total net private financial inflows to the Middle East and North Africa are projected to be $12.9 billion in 2010, a decrease of 23 percent from 2009’s $16.8 billion, according to the International Monetary Fund.

The estimate accounts for 6.1 percent of global inflows to emerging and developing economies, projected at $210 billion. By comparison, Latin and Central America are slated to be the largest recipients of net private inflows in 2010 with $80 billion, or 38 percent of the total. The IMF’s predications, however, vastly differ from those of the Institute of International Finance, which forecasts inflows of $709 billion globally.

The IMF forecast net private direct investment to the MENA region at $71.7 billion this year and $77.8 billion in 2011, up from $70 billion in 2009. The body also estimated foreign currency reserves to increase by $60 billion in 2010 and $71 billion in 2011.

June 3, 2010 0 comments
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Economics & Policy

How peace pays

by Josh Wood June 1, 2010
written by Josh Wood

For the past 32 years, UNIFIL — the United Nations Interim Force in Lebanon — has been a thread in the fabric of life in Lebanon. While most mentions of UNIFIL relate to Lebanon’s numerous conflicts with its southern neighbor and violations of the UN-mandated Blue Line that ostensibly marks the border with Israel, there is another face to the peacekeeping mission: its economic impact.

Over the past year alone, UNIFIL spent $32 million on contracts with local Lebanese firms, according to UNIFIL spokesperson Andrea Tenenti. UNIFIL’s nearly 13,000-strong military force and civilian staff also pump millions of dollars into the local economy through privately purchased goods and services – and the mission says that it is the largest single employer of Lebanese citizens in the south. In addition, in an effort to improve its public image, the mission invests millions of dollars every year in building infrastructure for local communities and offering direct aid to the population of South Lebanon, which is among the poorest areas of the country, having endured the 22-year-long Israeli occupation.

While UNIFIL is by no means an economic savior for the south, it is certainly a crutch. Its continued presence has provided a steady stream of income for the local economy for more than three decades, with the amount of money being spent soaring in recent years as troop numbers have grown. After Israel’s 2006 war on Lebanon UNIFIL rapidly began increasing its personnel numbers, from less than 2,000 before the hostilities to around 11,500 military personnel by the end of 2006.

These new troops were not cheap: UNIFIL’s 2006 to 2007 total budget topped $495 million, a 543 percent rise from the $91 million spent a year earlier.  For 2009 to 2010, the appropriated budget reached nearly $590 million.

The procurement spending spree

Most of UNIFIL’s budget is given to countries that contribute troops to the mission, money sent to cover the salaries of soldiers. While the Lebanese economy sees some of this money later through troops’ private spending, it is UNIFIL’s procurement budget for goods and services which offers the largest cash injection into the Lebanese economy.

Items on UNIFIL’s yearly procurement budget include everything from condoms to laptop computers — estimated to cost UNIFIL $136,763 and $138,500 respectively, in 2009. The most costly this year — and nearly every year — is food rations to feed UNIFIL staff and soldiers, with an estimated tab of $18.2 million.

In filling its procurement needs UNIFIL turns to companies around the world, but has, over time, shown a preference for awarding contracts to Lebanese businesses.

“As a rule, [UNIFIL] generally tries to buy most things from Lebanon — if you can find it here of course,” said Timur Goksel, a longtime UNIFIL spokesman who now teaches at the American University of Beirut.

This year, 160 Lebanese vendors and firms were awarded roughly $33 million (40 percent) of the total anticipated procurement budget of $82 million, according to Executive’s calculations.

While UNIFIL was unable to produce similar statistics for most other years, in 2007 UNIFIL spokeswoman Yasmina Bouziane told the international media that the mission was set to spend $36 million of its $90 million spending budget in Lebanon — again about 40 percent. In October 2006, shortly after the Israel-Hezbollah ceasefire, UNIFIL’s acting Chief Administrative Officer Jean-Pierre Ducharme said UNIFIL had spent $40 million on Lebanese contracts that year and that 60 percent of its total procurement budget over the last three years had been spent locally.

The largest contract with a Lebanese company has been an exclusive deal with Medco to supply fuel for UNIFIL jeeps, armored personnel carriers, helicopters and other vehicles, as well as generators. Since 2006, these contracts have totaled $50.7 million, with contracts signed in 2007 alone running at $22 million.

With UNIFIL’s increased demand for new bases and extra space on existing bases to accommodate its mushrooming numbers, Lebanese construction firms have also benefited.

The largest construction contracts UNIFIL has disclosed have been with Hanna Khoury and Brothers Company ($9.3 million), Dalal Steel Industries (at least $3.2 million), Maroun Assaf ($1.5 million) and Daher Contracting ($1.1 million).

UNIFIL’s Miguel de Cervantes base near Marjayoun — considered “the best UN base in the world” by many UNIFIL personnel — was little more than a campground in 2006. Marwan Dalal from Dalal Steel Industries said that his company provided 90 percent of the steel and prefabricated buildings used on the $16 million base, which was primarily built using prefabricated structures.

Major goods procured by UNIFIL in 2008

Major goods procured by UNIFIL in 2008 - Lebanon

Major services procured by UNIFIL in 2008

Major goods procured by UNIFIL in 2008 - Lebanon

Dalal added that the company had been responsible for similar amounts of work at other UNIFIL bases and positions.

Besides working with UNIFIL, Dalal Steel has also maintained contracts with American forces in Iraq and Afghanistan, the Lebanese Armed Forces, as well as with other UN missions across the world. While not disclosing exactly how much the company makes per year, Dalal said that contracts with UNIFIL could account for up to 20 percent of the company’s yearly business.

While arranging construction and procuring petroleum require fairly large contracts, UNIFIL also maintains smaller contracts — covering everything from gardening to mobile phones — with more than 150 other Lebanese firms.

Local jobs for local people

UNIFIL claims that its 800 or so full-time local staff make it the largest single employer of Lebanese in the area. Many more Lebanese also work with the peacekeepers on a temporary basis.

UNIFIL’s permanent local staff members are attracted by comparatively high salaries, jobs that have room for professional development and the opportunity to eventually take their career outside of Lebanon.

“Most of the Lebanese who started off with UNIFIL in the early years have now become permanent UN staff members all over the world,” said Goksel.

About 140 of UNIFIL’s permanent local staff are translators. Amal Kahawaji, a translator with UNIFIL’s Indonesian battalion, said that translators are paid about $2,000 per month – an attractive sum for young Lebanese university graduates whose average starting salary on entering the workforce is usually much lower.

For contractual workers, the jobs are also welcome but they do not reap the benefits of full-time UNIFIL staff.

Several cleaners from One World (a company working exclusively with UNIFIL providing cleaning, maintenance and landscaping services) on the Miguel de Cervantes Base said that they didn’t feel that their $500 per month salary was fair compensation for the work they were doing. However, the women, all from the surrounding villages, said that they were still lucky to have the jobs as work was scarce in the area.

All in all, former UNIFIL spokesman Goksel estimated that around 2,000 families in South Lebanon rely on UNIFIL for their livelihood.

Yoga and reconstruction

While contracts between UNIFIL and Lebanese firms clearly represent the most significant economic contribution of the peacekeeping mission, direct commitment of UNIFIL money and resources to local communities in the South also has a major impact on the area.

Civil Military Cooperation (CIMIC) projects are aimed at capturing the ‘hearts and minds’ of local residents and improving the public’s perception of UNIFIL.

“Quick Impact Projects” are the most common CIMIC operation. These small-scale projects cost up to $25,000 a piece and are primarily aimed at reconstruction and infrastructure building.  Examples of such projects include building sports facilities in villages and renovating schools.

The UN funds $500,000 worth of these projects a year — enough money for 30 projects in 2009.  Individual troop contributing countries, however, fund the majority of the projects. In 2009, Italy led the field, completing 112 projects worth $2.1 million. The Korean contingent completed 25 projects, totaling $1.3 million.

UNIFIL also provides a host of other activities within the local communities, from clearing unexploded ordnance to hosting free health clinics and even Yoga and Taekwondo classes, organized by the Indian and Korean contingents respectively.

Last year, UNIFIL’s clinics and medical teams treated more than 40,000 local patients, and since the beginning of 2005, a total of 150,000 people have received such treatment.

While Yoga might not have the same tangible benefits as other contributions such as free healthcare, UNIFIL stands by these endeavors, saying that they improve the quality of life for residents. Educational courses, such as language and computer classes, also help build skills to boost residents future job prospects.

A home away from home

On the tree-lined roads leading up to UNIFIL’s Miguel de Cervantes base near Marjayoun, Spanish flags fly outside of shops and locals greet foreigners with a friendly “hola, como estas?” At the Mirage Bar, camouflage-clad men drink $2 Almaza beers while their comrades scope out the prices of Hezbollah souvenir items and electronics next door.

This scene — repeated in permutations across South Lebanon — is a direct result of combining foreign troops with comparatively high disposable incomes and entrepreneurially minded members of the local population.

“If every soldier spends just $1, it will be very good for the economy,” said Jallal Ramal, who runs the PX (military jargon for an on-base store) at UNIFIL position 8-33 on the Lebanese-Israeli frontier.

While it is difficult to calculate exactly how much money UNIFIL soldiers and civilian staff regularly spend in the local economies of southern Lebanon, it is certainly far higher than Ramal’s $1.

Countries that contribute troops are given $1,028 per month per soldier by the UN. Additionally, the UN directly pays soldiers $1.28 per day for serving in Lebanon. As this wage is well below the standard salaries offered in some — especially Western — troop contributing countries, some contingents’ home countries subsidize this pay quite heavily. 

Other, poorer countries pay their soldiers directly out of the UN-provided stipend, though not necessarily always the full $1,028 per month.

Neither the diplomatic missions of most troop contributing countries nor UNIFIL headquarters in Naqoura were willing to comment on troop salaries for the various contingents, making it difficult to ascertain exact troop spending across the board.

However, Lieutenant Colonel Mar Guslin of the Indonesian battalion estimated that each soldier in his unit spent a minimum of $100 per month in the local economy. 

With around 1,000 troops stationed on the battalion’s Adchit Al Qusayr base, this would equate to at least $1.2 million spent on consumer goods and services in the surrounding villages each year.

Salaries for Spanish soldiers are much higher. Including the UNIFIL stipends and subsidized pay from the Spanish government, soldiers’ salaries start at 3,500 euros ($3,954) per month, according to Colonel Rafael Ropero Bolivar, a liaison officer at the Spanish embassy in Beirut. 

Pay grades go all the way up to 8,000 euros ($9,866) per month for Spanish generals serving in Lebanon.

With much more disposable income than other contingents, it is reasonable to assume that troops from European countries spend money more freely in the local economy.

While admitting it is difficult to calculate exactly how much cash a soldier might splash, Lieutenant Colonel Ismael Muro, a public information officer for the Spanish contingent, said that the average soldier might spend between $200 and $330 per month, with some spending up to $670 monthly.

By the lower-end estimates Muro supplied Executive with, annual local spending by the 1,076-strong Spanish contingent would be more than $3 million.

The presence of peacekeepers with money to burn has spurred a growth in shops, restaurants and services that cater exclusively to UNIFIL. 

“I don’t have any local customers,” said Khaled Nahra, the owner of Casa Elias, a large gift shop near Marjayoun that sells everything from blue beret-wearing stuffed animals to hard liquor and ninja throwing-stars to its peacekeeping clients.

In some of the predominantly Shiite Muslim southern towns, such as Naqoura, market demand has outweighed Islamic conservatism, with shops and restaurants selling alcohol for soldiers.

As stores catering to UNIFIL across the south expand their warehouses and the mission’s gargantuan headquarters in Naqoura sprawls even further in a flurry of construction, it is apparent that the word “interim” has lost its meaning.

With troops entrenched in the south for the foreseeable future, companies, communities and families in the area can look forward to continued economic benefit from the restive reputation of the land south of the Litani.

June 1, 2010 0 comments
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Since its first edition emerged on the newsstands in 1999, Executive Magazine has been dedicated to providing its readers with the most up-to-date local and regional business news. Executive is a monthly business magazine that offers readers in-depth analyses on the Lebanese world of commerce, covering all the major sectors – from banking, finance, and insurance to technology, tourism, hospitality, media, and retail.

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