Finance

Commission in crisis

by Emma Cosgrove
written by Emma Cosgrove

 

It is no secret that the backbone of Lebanon’s economy is the banking sector. And right now, the watchdogs of Lebanon’s banking industry are without leadership.

The Banking Control Commission (BCC) of Lebanon is the auditing body housed in the country’s central bank. The Commission is charged with the duty of supervising Lebanon’s banks, financial institutions, money dealers, brokerage firms and leasing companies, to ensure that they are operating within the circulars and regulations of the Central Bank. But, due to sectarian disputes and cabinet deadlock, it is currently without a board of directors.

The cabinet must appoint the five members of the BCC’s board of directors at the end of every five-year period, with the latest term expiring January 31 this year.

 There are no term limits for board members, and as such all five outgoing directors had already served at least a decade at the BCC through reappointments. Despite this tradition of continuity on the commission, the Council of Ministers, Lebanon’s cabinet, has not been able to agree on who will sit at the BCC for the current term.

According to several industry sources, seats on the commission’s board of directors are usually filled without delay. But as Executive went to print, the seats had been empty for almost a month, pushing both banking professionals and government officials to insist on a swift resolution.

Central Bank Governor Riad Salameh has taken over the responsibilities of the board until the members are appointed. On February 2, just days after the previous board expired, Salameh met with the Higher Banking Commission, the body responsible for the enforcement of central bank regulations, to discuss whether there was a legal framework that would allow the Higher Banking Commission to appoint the members, instead of the cabinet. But it was determined that the decision must legally stay within the responsibility of the cabinet.

Prime Minister Saad Hariri announced on February 13 that he hoped the commission would be filled by February 17 or 18, but as Executive went to print, no announcement to that effect had been made.

Who’s the boss?

Under Article 8 of Law 28, enacted in 1967, the president of the BCC must be a university professor or a specialist in banking and finance. A second board member must be recommended by the Association of Banks in Lebanon, and a third recommendation comes from the National Deposit Guarantee Institution. The other two positions have no legal specifications other than clear expertise in the banking field.

Positions on the board of the BCC are full time, thus all appointed members must leave their current positions before they accept the job. Board members are also forbidden from taking a job at any Lebanese bank for two years after they leave the commission.

As some board members come from Lebanese banks, objectivity is an issue of concern. But Marwan Kheireddine, general manger of Al Mawarid Bank, said that appointees have no problem cutting ties with their former places of employment.

“Banks in Lebanon are not tribes: banks are professional institutions, they are for-profit and they think objectively,” he said.

In addition to the board of directors, the BCC has 137 employees, including administrative staff and “examiners” — auditors who perform continuous reviews of Lebanon’s financial institutions through on and off-site examinations. Both BCC Secretary General Souheil Jaafar and banking professionals stressed that the commission is still functioning normally, despite the absent board.

“Middle management is there. It’s just the top management of this commission is now absent or vacant. But the usual work is continuing,” said Elie Achkar, director of research and statistics at the Association of Banks in Lebanon.

And though no expressed legal framework exists to allow Salameh to take over the role of the board in the interim, there have been no public objections to his doing so.

“The importance of any executive anywhere in government at any time is not looking at specifically legal wordings here and there, but filling a vacuum in a process of such imperative importance to the national security of Lebanon and its people,” said opposition Member of Parliament Ali Osseiran.

In fact, Kheireddine said that confidence in Salameh’s management of the commission may have taken pressure off the decision, causing ministers to take even more time, now that they know that the commission is being looked after.

Who’s on board?

The outgoing board members are Walid Alameddine, Farouk Mahfouz, Amine Awad, Kamal Samaha and Abdallah Attieh.

Mahfouz and Awad have been resubmitted for another term without objection, which will bring Mahfouz’s total years on the commission to 25, and Awad’s to 15.

Media reports have suggested that Osama Mikdashi — the former managing director of Citigroup Credit and Risk Management UK and a current board member at BankMed — and Ahmad Safa, the assistant general manager for operations at Lebanese Canadian Bank, are up for appointment.

A Lebanese banker who spoke only on the condition of anonymity but has been highly involved in lobbying for a new commission, said that Fouad Touma — secretary to the board of committees at Byblos Bank — and Mansour Bteich — a member of the board of directors of BLC Bank — are also being considered. This source added that Touma is the only contentious appointment, with some members of cabinet critical of his qualifications. Osseiran confirmed that the appointments are being held up by just one name, but could not disclose which.

Despite the usual speedy confirmation of board members, Kheireddine is not surprised by the delay. “This is very typical of Lebanon. These appointments are political,” said Kheireddine. “Political in the sense that a lot of people that are qualified present their CVs and, typically, there is a lot of pulling and pushing, which happens when such posts are available and politicians or political parties try to push their candidate as opposed to another party’s candidate.”

The government is currently backed up with many of the 79 ‘category one’ appointments for empty senior positions and industry players and politicians have been lobbying to bring the BCC posts to the top of the pile.

“The position of one person on this commission is minor. But having the whole commission is very important. We shouldn’t think in terms of our sects, we should think of who is the best person to have in this position,” said Osseiran.

And since no one project or audit is run by less than two bankers, the BCC’s Jaafar implied that no one board member could harm the entire group.

“This is corporate governance. We don’t have a one-man show,” said Jaafar.

Kheireddine said that the names circulating through the media were proof that the lobbying had paid off and highlighted the appointment of the BCC board members as an issue separate from the other appointments that the cabinet has yet to make.

Who’s watching?

Even with Salameh at the helm, industry outcry for a full board is still going strong due to the damage the delay may cause to Lebanon’s international financial reputation.

“People abroad do not look at political life in Lebanon as much as they look at the organization, the control and the confidence that everybody has in the Lebanese financial system,” said Osseiran.

After a whirlwind year of international recognition for successfully weathering 2009’s financial storm, bankers are worried that this political squabbling may damage the progress that Lebanon’s banking sector has made on the international stage.

“It is critical that we do not have any glitches anywhere that could send the wrong signals both to international organizations and to potential players within the industry and potential depositors or investors,” said Kheireddine. “So it is simply not appropriate not to have a banking control commission.”

 

 

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Imagery intifada

by Michael Young
written by Michael Young

 

This March 14 will be the fifth anniversary of the massive gathering that took place one month after the assassination of former Lebanese Prime Minister Rafiq Hariri. And while the politics of the event continue to divide the Lebanese, there is a less-publicized aspect of the popular demonstrations of 2005 that merits retrospective consideration: their branding by advertisers and activists.

The visual success of the independence intifada was its most enduring feature. It highlighted an instinctive understanding by the organizers of how politics and imagery could be combined to advance a political agenda, and how this required capturing the imagination of markets in Lebanon and worldwide. Above all was the international media market – which permitted demonstrators to access foreign audiences – but also the market of association, since the imagery pushed people inside Lebanon and out to mentally associate what was happening with similar efforts that had taken place abroad – such as the color revolutions in Ukraine and Georgia.

Perhaps the surest sign of success was the fact that the Lebanese upheaval was given a catchy name, the “Cedar Revolution.” The importance of the media attractiveness of the Independence Intifada/Cedar Revolution and its association with other popular undertakings, was that it pushed the same buttons a successful advertisement campaign would; it allowed those participating in the event, or watching it, to interpret what was happening in both pluralistic and individual ways. Lebanon’s emancipation effort became whatever one wanted it to be.

In retrospect, there was no “revolution” in Lebanon in 2005, just as there were no revolutions in Ukraine and Georgia. The word itself was a remarkable jump over the far less ambitious, but more accurate, “intifada,” by which the Lebanese opposition first labeled their endeavors. Yet “revolution” had a far better echo in the marketplace; it allowed one to dream, and everyone likes a dream.

The branding of the demonstrations inside Lebanon was built around a simple sentence and specific color pattern: the phrase “Independence ’05” and the red and white of the Lebanese flag. This was the brainchild of advertiser Eli Khoury of Quantum Communications, collaborating with the late Samir Kassir. Their plan was initially to unfurl their campaign during the parliamentary elections of 2005, but Hariri’s assassination created a far more dramatic context for it.

Other advertisers entered the fray after February 14, and the activists and political figures who had begun planning the demonstrations in the first days after Hariri’s killing also addressed the matter of imagery. There was an immediate sense that the protest movement against Syrian influence in Lebanon could only survive by being given an identity – one that was both elastic and conciliatory, able to embrace the many very different identities of those descending on Martyrs’ Square.

In subsequent years the two sides in Lebanon’s political divide poured enormous sums of money into advertisement campaigns. But there was a difference between those efforts and the events of February-March 2005; the emancipation movement’s branding compensated for the fact that the state was controlled by the political foes of the demonstrators, with the weapon of ideas serving as a potent leveling mechanism.

What were these ideas? Not least that the demonstrators were behaving heroically and serving a higher purpose. The demonstrators saw themselves as fulfilling an ideal, against difficult odds, and that only increased their impetus to mobilize. They created a narrative for their actions, placing themselves at its forefront. That was a clever, inherently liberal way of dealing with their predicament. It also showed a grasp of what modern politics is about.

The branding of the 2005 movement set up a context for this narrative — or rather the infinite number of narratives brought down to Martyrs’ Square. But it also led to dissension when the narratives momentarily diverged. For a while the red and the white rapidly became the colors of those whose priority was a Syrian military withdrawal, then Hariri’s Future Movement adopted sky blue as the color of their campaign, focused on uncovering the “Truth” about who had killed their leader. This difference was papered over by the time March 14 came, but the recrimination would last for some time.

In an odd way, the friction confirmed how important the branding was.

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Old Lebanon’s final frontier

by Nicholas Blanford
written by Nicholas Blanford

 

Just shy of the ides of March, the Lebanese army is to host (snow permitting) the second Raid des Cedres, in which teams of three race through Mount Lebanon on skis and snow shoes. The teams begin in the pre-dawn dark from the entrance of the Tannourine cedars, before a long climb up Wadi Bayda to the southern crest of the mountainous amphitheater that half encircles the Cedars of Bsharre, at Al Arz.

One of my most memorable moments of more than 15 years in Lebanon was pausing toward the top of Wadi Bayda, and seeing behind me in the darkness what looked like an army of glow worms, as the competitors slowly ascended the valley using headlamps to light their way. Then, the dawn sun gradually rose above the mountain peaks to the east, suffusing the snow with soft pinks, while the icy wind whipped up a knee-high snow drift.

Despite Lebanon’s tiny size and rampant urbanization over the past four decades, it is remarkable that there are still large tracts of lofty unspoiled wilderness to be visited and enjoyed less than two hours drive from Beirut.

The vast plateau that forms the top of the Mount Lebanon range from south of Jabal Sannine to north of Qornet es-Sawda — Lebanon’s tallest mountain at 3,088 meters — presents a desolate and awe-inspiring vista. The terrain varies from gently undulating hills and valleys to dauntingly deep sinkholes, separated by knife-edge ridges of weathered, razor-sharp limestone, beautiful to behold yet a nightmare to traverse.

No one lives up there permanently. The only inhabitants one might stumble across, and only in the summer months, are shepherds and their families living in canvas tents, who offer the rare passer-by glasses of strong sweet tea, bread and fresh goats’ cheese. Then there are roaming shepherds, as agile as their goats, following their flocks up and down rocky slopes during the day, before lighting a fire and sleeping in the open at night.

In early February, I took a day off work mid-week and headed to Warde, above Faraya, for a day’s snowshoeing to the top of Sannine. Brilliant sunshine held up a deep blue sky over well-wrapped and colorful skiers and snow-boarders who, even on a school day, were packing the slopes. But once I had trudged up, over the first crest and beyond the pistes and ski lifts, I had the mountains to myself and saw not a single person for the rest of the day.

The deep layer of sugar white snow softens and smoothes the jagged, frost-shattered landscape of the summer months, creating a misleading impression of benevolence. But the weather can change quickly above 2,000 meters. When a thick mantle of cloud is draped over the mountains, not only is visibility reduced to a couple of meters, but the absence of the sun also removes all shadows and contrast in the snow. Without carefully probing ahead with a ski pole, it is easy to mistake a sudden 10-meter drop for level terrain.

When the Sannine hills are free of snow, the detritus of the civil war can be found here: shallow fox holes ringed with rocks, rusted shrapnel, tarnished brass cartridge cases and coils of barbed wire. In some places, unseen beneath the surface of the stony soil are landmines, still uncleared and potentially deadly. No one should hike the area between Ayoun es-Simane and Jabal Sannine without knowing exactly where the mined areas are.

Yet landmines are not the only man-made threat facing the limestone grandeur of Sannine. A few years ago, the Sannine-Zenith project was launched with the promise of building the Middle East’s largest tourist resort on 66 square kilometers — yes, 66 square kilometers! — of Sannine’s northwestern slopes. Other than ski slopes, the project would include residential housing, hotels, cinemas, an 18-hole golf course and a helipad.

Sannine-Zenith received the green light from the government to proceed in 2004, but thankfully the project has yet to get off the ground. Not only would it destroy one of the most beautiful and remote areas left in Lebanon, it would set a precedent and risk opening up the rest of the unspoiled wilderness between Sannine and Qornet es-Sawda for more tourist site proposals.

May Sannine-Zenith remain nothing more than a set of blue prints gathering dust, leaving the mountains unsullied for those that appreciate and enjoy them.

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Iran is no China

by Gareth Smith
written by Gareth Smith

When United States President Barack Obama came to office promising engagement with Iran, American observers recalled Richard Nixon’s 1972 trip to Beijing which opened the way to normalized relations with China.

In practice, “engagement” has meant two meetings in October, and Washington is no nearer to diplomatic relations with Iran. There is even a hollow ring to the Obama administration’s argument that it has encouraged Moscow and Beijing to back further United Nations sanctions over Iran’s atomic program. While last autumn’s cancelation of a US missile shield scheduled for eastern Europe has eased tension with Russia, Washington’s standing with China is falling. Notably, Beijing has not sent a senior representative to the leading powers’ discussions over Iran.

American analysts argue China’s Iran policy is based on economics, especially its thirst for Iranian oil and gas. Naturally, this is a factor. Visiting Hong Kong in January, Mohammad Nahavandian, head of Iran’s chamber of commerce, reported bilateral annual trade of $25 billion, up from $7 billion in 2004. But the Iran issue is just part of wider economic and political rivalries between Washington and Beijing. Obama’s decision to meet the Dalai Lama has alarmed China, which has long accused the exiled Tibetan leader of undermining its rule in Tibet. Further, Beijing sees Obama’s recent $6.3 billion arms sales to Taiwan — a self-ruled island over which China claims sovereignty — as a breach of a 1982 US-China agreement that such sales would “not exceed, either in qualitative or in quantitative terms” those following the thaw after Nixon’s visit.

China’s disagreement with the US over Iran focuses on its view, shared with other developing countries such as Brazil and South Africa, that international rules should apply consistently. At the Munich security conference in February, Yang Jiechi, China’s foreign minister, called for continued diplomacy between the P5+1 (the permanent members of the UN Security Council plus Germany) and Tehran. Yang said the Nuclear Non-Proliferation treaty (NPT) gave Iran as a signatory “the right to the peaceful use of nuclear energy” — a stance at odds with US, European and Israeli officials who argue Iran should not enrich uranium.

“When we talk about equality and freedom of speech,” said Yang, “we are talking…not only on an individual basis, but also on the basis of countries and democratization of international relations. One country or a few countries definitely cannot decide the future of the world.” President Obama has evaded this argument. In his State of the Union address in January, he bracketed Iran with North Korea, which has atomic weapons and is not a signatory of the NPT.

Hillary Clinton has gone further. The secretary of state said in Doha last month that the US did not “want to be engaging while they’re building their bomb.”

Such outbursts offer no basis — in Chinese and other eyes — for Obama threatening Iran with “growing consequences” if it ignores its “obligations.” Obama is sending confusing signals to Tehran. It is not even clear if “engagement” is over or not, and it’s not only Beijing that’s perplexed. An end-of-December deadline for Iran to accept the P5+1 proposal to export most of its enriched uranium in return for nuclear fuel for medical use passed without incident. But Yukiya Amano, head of the UN’s International Atomic Energy Agency, said in January that dialogue was continuing. But the US has also announced the deployment of warships in the Persian Gulf and the installation of missiles in Kuwait, Bahrain, the United Arab Emirates and Qatar. Talk in Washington is of further sanctions. While the administration is skeptical over congressional proposals to bar from the US any companies supplying Iran with gasoline from the US, it has said it will seize assets of some affiliates of the Islamic Revolutionary Guard Corps (IRGC) and may go on to exclude  any companies trading with IRGC entities from the US.

Proponents of sanctions justify these measures as much by the IRGC’s role in policing demonstrations since last June’s disputed presidential election as by its part in the nuclear program. But targeting the IRGC, whose constitutional mission is to defend the Islamic Republic, seems a way to convince the authorities in Tehran — or those in Beijing — that the US wants regime change rather than engagement.

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Society

Press and proliferation

by Spencer Osberg
written by Spencer Osberg

Mikhail Sergeyevich Gorbachev, the Union of Soviet Socialist Republics’ (USSR) final head of state, changed the course of modern history. Among other things, he ended the Cold War and a nuclear arms race with the United States and implemented the policies of ‘glasnost’ (openness) and ‘perestroika’ (restructuring) in the USSR through the 1980s, leading to a dramatic increase in social and political freedom, an end to the state’s centralized economy and the eventual dissolution of the Soviet Union in 1991.

Mikhail Sergeyevich Gorbachev, the Union of Soviet Socialist Republics </p> </div> </div> <div class=

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Society

Review: What’s really wrong with the Middle East

by Executive Staff
written by Executive Staff

There are many people in the Middle East who hold an opinion on the region’s ills, but whatever their view, very few choose introspection over finger pointing. Brian Whitaker, the former Middle East editor of The Guardian, in his new book “What’s Really Wrong With The Middle East” aims to realign the trend of shifting blame.

“The problems of the Middle East are always someone else’s fault,” writes Whitaker. “While the West blames dictators and extremists, Arabs often turn the tables, blaming centuries of foreign interference. Both sides are right, up to a point, but they both also ignore a large part of the picture.”

Education, education

The picture that Whitaker offers after interviewing “intelligent, independent minded people” (meaning not government officials or religious extremists) covers four central issues: knowledge, equal rights, secularism and citizenship. 

In surveying these four topics, Whitaker leaves no doubt that there is something deeply wrong with the region, underlining his views with a damning array of statistics.

Whitaker explains that, “Arab societies have, in the past, [balanced] science and Islam very successfully. But many of Islam’s contemporary manifestations are backward looking and anti-intellectual, while the high value placed on conformity in Arab societies is suffocating change.”

A lack of freedom is the fundamental problem that cuts through all the issues discussed in the book. Unlike the neoconservatives, Whitaker does not believe that regime change is the solution: “It is not enough simply to point to the prevalence of authoritarian regimes and imagine that whoever cuts off the monster’s head will be welcomed with flowers.”

Operation family freedom

Instead, Whitaker comes to a controversial conclusion that puts the problems of the Middle East into the homes of everyone in the region. “The regimes — even the most unpopular ones — are products of the societies they govern and to grasp the nature of the problem we have to start by looking at society’s buildings blocks.”

For Whitaker the family is the essential building block of society and he views “the Arab family as a microcosm of the Arab state.”

The book outlines the Arab family to be suffocating, patriarchal and authoritarian, and a structure, much like the Arab state, which suppresses individuality and imposes conformity. Whitaker does draw striking parallels between the family and the state but does not fully and convincingly explain his logical jump from the family as a microcosm of the state.

This is further complicated when Whitaker explores the issue of citizenship. As Egyptian journalist Khaled Diab, quoted in the book, states: “Arab regimes are more akin to those of colonial rulers than a government which has genuine roots among the people.”

It is no secret that the lifestyles of the ruling elite in the Arab world bear little resemblance to those they rule over. This gap of course is often caused by external powers propping up the various regimes in the Middle East, which is why some have called Whitaker’s argument an insult to the people of the region.

But of course this is just the kind of argument that Whitaker is trying to move away from. While not ignoring the issues of foreign interference, this book is an important call to focus on issues that are more immediate and malleable. Far from insulting the people of the region, this is a book that illustrates how people in the region can be empowered. In many ways Whitaker’s book is an important call to action, and highlights the fact that true regime change not only “starts at home,” but in everyone’s homes.

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Society

Communication of faith

by Nohad Mouawad, Zeina Loutfi & Ramsay G. Najjar
written by Nohad Mouawad, Zeina Loutfi & Ramsay G. Najjar

What comes to mind when you hear church bells ring or the call to prayer resonate across your city? These age-old holy sounds have been echoing throughout the Arab world for centuries, and are a core part of how the region’s predominant religions connect with their followers. Most people wouldn’t think of these ancient rituals as forms of noble communication, but the way that religions reach out to their audiences is very similar to a company communicating its values.

Pious PR

This idea might seem strange at first, but if we take a closer look we might find that communication and religion do go hand-in-hand, as religions must also ensure that they are understood by the general public and that their reputation is maintained and enhanced with audiences around the world, much in the same way that companies must maintain their image and highlight what they stand for.

Yet, while we see companies pulling out all the stops to ingrain the meaning behind their brands and view their corporations positively, are religions and religious institutions doing enough to enhance or correct their image and uphold their reputation? Are they engaging people and reaching out through communication to a universal audience beyond their immediate followers?

Beginning with Islam, the true voice of Islamic values seems overshadowed. Everywhere we look, groups only pretending to be Muslim are dominating the airwaves and television screens with fundamentalist and extremist messages that have no real relation to Islam’s teachings. From the Taliban recruitment videos, to websites dedicated to promoting terrorist activities, extremists have been exploiting young Arabs by using the communication channels that target them best, preying on their impressionable nature and lack of fully-formed values and faith, by swaying them with flashy but poisoned messages. Unfortunately, the damage of this “intelligent” propaganda, much like that of the extremists’ predecessors from Goebbels to McCarthy, can only be assessed when it is too late and people, especially the youth, have already been misguided.

This propaganda has been able to thrive as the “silent majority” of Muslim faithful, from religious institutions and other walks of life, are not communicating an alternative message that reflects the true essence and practices of their religion, which is both tolerant and moderate. Until the majority invests in effective, strategic communication, the propaganda of the minority extremist groups will continue to win.

But strategic communication is not only the responsibility of religious authorities, since, if we turned on our TV sets to find a moderate Muslim cleric arguing with an extremist religious leader, we might change the channel thinking that this is only an internal schism within the religion itself. This is where the role of the entire Arab community comes in, as it is in all of society’s interest to relay the true values of Islam and ensure that extremists do not succeed in distorting the image of their faith both regionally and worldwide. By joining together the voices of non governmental and civil society organizations, academic institutions and the media, along with religious organizations and even the private sector, to face down extremism, the impact of communicating true, moderate values will be much greater.

Each of these organizations can play a role in helping achieve this through a number of initiatives, such as launching media campaigns about the core values that are at the heart of religion, holding workshops to discuss the importance of religion and religious values in everyday life, or relaying these messages through reports and media interviews.

There have been some promising attempts by community organizations to communicate religious values to the youth and general public, such as a recent campaign on Arab satellite networks, showing young people helping others and being charitable, reflecting values that are at the core of Islam, as well as another campaign stating that “Terrorism has no religion.”

These activities, although on the right track, are not enough to make a lasting impact as they remain paid advertising and are not backed up by continuous and consistent messaging using a variety of channels.

Reaching out

Religious organizations have also attempted to communicate by launching satellite TV channels dedicated to religious topics. However, the main focus of these stations is purely on prayer and discussions of religious texts, devoting the majority of their programming to roundtables with religious authorities. Limiting religion to prayer and religious study can only succeed in making it more exclusive and less accessible to a wider audience, an approach which is incompatible with the concept of mass media.

Actually, religion permeates and guides every aspect of our lives, and therefore these channels should develop more well-rounded media content that touches on all areas of life and resonates with all audiences, infusing programming such as drama series, entertainment shows, children’s shows, and even game shows with religious values.

 By communicating from this new angle, religious institutions and authorities can reach one of their most important target audiences: the youth. It can provide them with an aspirational system of values that is more in line with their lifestyle.

This new approach to communicating religious values has, in fact, proven successful in the case of a Catholic nunnery in the US that tried to change its image as obscure and completely out of touch with people’s lives. It did so by opening its doors to talk show host Oprah Winfrey’s camera crews and sending two of its 20-odd nuns to be interviewed on the show about everything from faith to romantic relationships.

Engaging communication is the only way that Muslim and Christian religious communities in the Arab world can overcome the virus of exclusivity that is plaguing them and fight misperceptions about their beliefs, helping to create more understanding and tolerant societies.

This means taking a more proactive approach in keeping the true spirit of their religion alive and upholding their core values that are universal to all humanity.

Nohad Mouawad, Zeina Loutfi and Ramsay G. Najjar S2C

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Society

Toyota’s time for reckoning

by Nathanael Massey
written by Nathanael Massey

 

What started as a crack in Toyota’s sterling reputation has widened to a gaping wound.

Billing your products as the safest cars on the road puts a lot of pressure on a company. As long as consumer reports are rosy, that pressure is not an issue. But Toyota’s recent plague of recalls have been punching holes in the Japanese giant’s public standing.

It’s true that few heads turned when, in 2005, the company recalled 75,000 of it’s eco-friendly Prius hybrid units after reports that a software issue was causing the car to stall. However, a 911 emergency call from the driver of a 2009 Lexus ES 350 with his accelerator stuck and his brakes failing sounded a much louder alarm and prompted the recall of 4.5 million units of select models in North America and Japan.

Then, in early February, it happened again — a programming glitch in the Prius, the jewel of Toyota’s crown, was found to be causing momentary braking failure. This was then followed by Toyota recalling the Corolla — the world’s best-selling car — due to possible problems with its power steering system.

It’s been a rough year for the Japanese auto-giant. The question is: can they shore up the damage and rebuild?

Preemptive mitigation

Officials from Boustany United Machineries Co. — the exclusive distributor of Toyota in Lebanon — did not respond to requests for comment about local action following the recalls in North America and Japan. However, Toyota’s distributor in the United Arab Emirates, Al-Futtaim Motors, said the two models would be recalled in the Gulf country in a service campaign similar to that which is being carried out in the US. As the situation escalates, it is possible that delayed shockwaves could reach Lebanon as well.

Rushing to mitigate further damage, Toyota has mobilized its entire organization of 172,000 North American employees and dealership personnel, as well as its full staff in Japan.

“We’re working hard to ensure that our dealers have the resources and support they need to make sure our customers get their cars fixed quickly,” Jim Lentz, president and chief operating officer for Toyota in North America, told the press last month. “Many of our dealers are working extended hours, some 24/7, and adding service technicians and other staff to complete the recall campaign as conveniently as possible.”

Stuck in park

The operations required to fix the latest batch of problems — the sticking accelerator pedal and brake failure — are relatively simple and can be completed within an hour.

Yet the damage to the company’s reputation may prove far harder to fix for two principle reasons: first, because Toyota has staked so much of its reputation on safety; and second, due to an increasingly vocal public that views the company’s responses as neither timely nor adequate.

 A report by US-based television news channel MSNBC in early February cited Toyota spokesperson Ririko Takeuchi as saying that the car maker was aware of a problem in the Prius’ braking system, and more importantly, that Toyota had begun fixing the problem in models sold since late January — indicating that the company had been aware of the problem for some time. 

“There’s a sharp contrast with previous times in terms of handling these kinds of situations,” Koji Endo, managing director of Advanced Research Japan, told reporters in February.

Part of that difference has to do with what appears to be a time lag between complaints on the part of customers and action on the part of the company. As early as last June, Toyota President Akio Toyoda promised to raise the bar on quality control, saying that the company was “facing crisis.” Yet it wasn’t until early February of this year that customers were informed of the recall, with letters from Toyota instructing buyers to bring their vehicles to dealerships for servicing going out February 5.

That gap raises a lot of questions. Did it take the company more than six months to diagnose the severity of the problem? Or worse, did they understand the problem and fail to act?

With the crisis in full swing and an angry public clamoring for explanations — The Times of London reported early in February that auto dealers were facing a barrage of customers demanding to know when the recall would begin —  top officials remained reticent for weeks. Little has come from top management by way of explanation for the Prius’ braking problem. Chief quality control overseer Shinichi Sasaki recently told the press “We don’t see [the problem] as critical because if you push on [the brake] a bit, the car will stop.”

Tarnished crown

Toyota now faces a criminal investigation in the United States, after defects were linked to at least five deaths, with a further 29 fatalities being investigated. The auto giant went up before congress in mid-February for two days of hearings during which congressional representatives accused the company of mismanaging the problem and misleading the public. In the hearing’s opening statements, Representative Henry Waxman, Democrat of California, said Toyota had “failed its customers.”During the hearing Toyoda apologized to Congress and millions of his customers over the automaker’s handling of the affair, but US lawmakers said that they were planning further hearings.

However, while Toyota estimates the recall fiasco will cost $4 billion in servicing costs and lost sales, share prices have dropped only slightly. “Investors are not worried about such one-time costs. Instead they welcome Toyota’s efforts to restore confidence in its products and its relations with the US government regardless of the costs,” Kazaka Securities analyst Yoshihiko Tabei told Reuters.

A diagram released by Toyota detailing both the problem with the defective gas pedal and their solution

In the midst of Toyota’s woes, it is perhaps the story of the Prius that has struck the deepest chord. The Prius was a landmark vehicle, not just for the company but for the automotive world as a whole. The first hybrid vehicle mass-produced across world markets, it represented a bridge between our oil-dependent past and our renewable resource future. The Prius was, in many ways, a reflection of all of Toyota’s best qualities: safety, efficiency and the cutting edge of technology.

With it’s flagship model fallen from grace and the spell of confidence bent, if not broken, Toyota will likely face an uphill struggle to save face and regain its reputation.

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Society

Facing the digital future

by Spencer Osberg
written by Spencer Osberg

The who’s who of the advertising industry from across the Middle East and North Africa and beyond were brought together last month at the MENA Cristal Festival, amid the snows of Mzaar Kfardebiane. The highlight of the event, held February 1 through 5, was unquestionably the evening awards ceremonies, where the advertising agencies with the most innovative and best executed campaigns of the year earned their recognition in the spotlight.

During the days, however, among the various conference debates, round-table talks and chats in the hotel lobby, it became apparent that all is not at ease in the advertising industry. Beyond the fact that the sector, globally, lost up to 11 percent of its revenues last year as the financial downturn squeezed clients’ budgets, there is also a new reality bearing down on the industry, changing the old paradigm within which people once worked.

“Some people still feel that digital is just another channel, but its not, that’s the whole point. `It’s not an evolution, it is definitely a revolution,” said Dimitri Metaxas, regional digital executive director for Omnicom Media Group. “It is definitely something that has moved on and changed the rules of the game.”

As Richard Pinder, chief operating officer of Publicis Worldwide and president of this year’s MENA Cristal Festival, put it: “The difference between the new world and old world is two-way versus one-way.”

The near limitless availability of information online has made consumers far savvier than previous generations, said Metaxas, which, combined with any online users’ ability to reach a global audience almost as easily as a multinational corporation, and has led to a “democratization” of the process.

“We’re now in a forum, and not a pulpit,” he remarked. “This has shifted the consumer from that lower level of happily consuming what it is we tell them [to], to now having a very active role in that communication.”

Digital’s two-way street

Metaxas illustrates what this new dynamic can mean, using the example of the United Arab Emirate telecommunications provider du, which had recognized that it had an image problem with regard to its customer service. To address this, the company first opened an account on the Twitter social networking service and incentivized people to ‘follow’ it, using contests to win an iPhone, just as du was launching its iPhone service in the United Arab Emirates.

The company then transformed the Twitter account into a customer service channel.

Metaxas said in monitoring the “buzz” in online posts and chat rooms, many complained that du’s customer service was unresponsive.

“They turned their customer service into a marketing problem, and they committed to changing and solving every person’s query or customer service issue,” he explained. “What ended up happening is all these really negative statements — literally 99 percent of them — have transformed into positives.”

People who had posted comments like “customer service — nightmare,” were now posting comments like, “du, I can’t believe you’re actually listening to me, and two, you solved my problem.” The idea that digital advertising is little more than banner ads on websites – i.e. simply a “digital version” of what would be on TV or outdoor billboards — is a concept quickly becoming antiquated; it is the ability, even necessity, to include customers in campaigns that makes digital advertising a radically more expansive concept, said Mataxas.    

“If you make [consumers] part of the process, then you create advocacy out of it, and that, I think, is a far more powerful emotion than just advertising at them,” he said.

“Advertising is fantastic at building awareness, and it can engage if it’s really good…but that’s still a one-way process, and I think that is one of the fundamental shifts we’re talking about that social media has created. People have an opinion; they want to voice that opinion. If you ignore them, then you do it at your own peril.”

Blurring the lines

The digital revolution is creating anxiety among the veterans of advertising because it breaks down the walls between what used to be clearly defined roles in the production chain.

“Media, creative, public relations, direct marketing, customer relationship management — they’re all blurred,” said Pinder.  Even while uncertainty grows about individual responsibilities within the new digital paradigm, it is ever more certain that the digitalization of advertising will only accelerate. Pinder said that two years ago Publicis Worldwide’s revenue from digital advertising was zero; today it is 20 percent of total revenue and his aim is push that to 30 percent by 2012.

“Where I had an office that didn’t have digital, they had a catastrophic 2009,” said Pinder. “I have seen offices — both mine and from other networks — that [lost] one quarter of their revenue in one year, by not having digital.”

“In one particular office, their ad agency was down 35 percent in 18 months but their digital was up 75 percent, and they ended up at minus 3 [percent],” he continued. “People who tell me digital isn’t that important or it’s just a sideshow of advertising — no way. This is going to be one third of my business in two years.”

Pinder says Publicis is in the process of rebranding all of its global digital assets under the banner of Publicis Modem, and is planning an aggressive digital expansion in the Middle East “very soon.”

Existing tomorrow

Hussein Freijeh, Yahoo’s director of advertising sales at Dubai Internet City, explained that Internet penetration across the region has been expanding at more than 50 percent per year for the last four years, allowed for by the expansion of telecommunications infrastructure. He pointed to Egypt as one market that was “massively growing,” and said that in Dubai — already the region’s advertising hub and arguably the most wired-in of the region’s cities — is so far at the crest of the digital wave.

Digitalization of the future being near predestined

It seems, however, that some of the biggest players in the advertising and business communities still have their heads stuck in the sand.

“[Last year] we saw some major brands double their spending online, but we saw other major brands not spend a penny online,” said Freijeh, who lamented that one of the biggest challenges he still faces is to shift people out of the “offline” mentality.

With the digitalization of the future being near predestined, this reticence is baffling. But then again, it is in the nature of revolutions, digital or otherwise, for there to be those who recognize the significance of developments as they are happening and adapt to excel in the new reality. And there are always others, too married to the comfort of the old ways to change, as the shifting tide washes them into irrelevance.

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