Real Estate

Tripoli’s Idle arches

by Executive Staff
written by Executive Staff

 

The Rachid Karami International Fair stands tall in the heart of Tripoli, Lebanon, and should be an iconic symbol for this aspiring city. Yet very few people seem to know much about this architectural masterpiece, designed by the world famous Brazilian architect Oscar Niemeyer.

The fair was part of an ambitious plan to modernize Lebanon at large, to focus on the areas outside of Beirut in the 1960s. The master planners nearly achieved their ambition but were foiled by the Lebanese Civil War. Fifty years later, the fair stands as a poignant reminder of what could have been and how stagnant the modernization process of Lebanon remains, with its dilapidated concrete structures holding firm but desperately in need of investment.

Brazilian curves in Tripoli

Oscar Niemeyer, who turned 102 last year, is renowned for his work in his home country Brazil and its capital city, Brasilia. Niemeyer was appointed the master architect for Brasilia — a city built from scratch in the 1950s. The architecture he created was exquisite and won accolades around the world. Dubbed the “King of Curves” for his famous domes, curves and arches, Niemeyer said his distinct style was inspired by “the body of the Brazilian woman.”

President Fouad Chehab commissioned a report from the Institut de Recherche et de Formation en Vue du Developpement (IRFED) in 1961 to appraise Lebanon’s human, economic and social needs. The report highlighted the need to create an economic center away from Beirut, which was sucking up most of Lebanon’s available capital and creating large income disparities with the rest of the country.   

Following the IRFED report, the idea arose for the Rachid Karami International Fair, to turn Tripoli into a more desirable place to live.

“The upgrading project will provide Tripoli with a trendy area filled with housing, commerce, sports, recreation and tourism,” states the profile of the project on Neimeyer’s website. “The International Fair of Lebanon is to be the central attraction in Tripoli: a center of culture, art and recreation; of major importance in its theaters, museums, local sports and entertainment.”

The project was commissioned in 1963 and work gradually commenced, but just shy of its completion in 1975, work halted with the onset of the civil war. A dilapidated structure is largely what remains today but one that still maintains a high potential for renovation.

The buildings of the International Fair are listed on the World Monument Fund Watch List. Although sections of the fair were reopened in 1995 and exhibitions are held in parts of the grounds, the vast majority of the structures have been neglected.

Since 1994 there have been various proposals to redevelop this massive site, many of which have fallen through, overcome by the fair’s expansive 1 million square meter grounds.

“There are a total of 20,000 square meters for exhibitions, of which only half are currently used,” said Antonie Abou Rida, director general of the Rachid Karami International Fair. “Further to this, there is another potential area of 40,000 square meters that could be used as exhibition space if redeveloped.”

Chinese investment

One investor interested in the International Fair is the Chinese government-owned firm Chinamex, which offers Chinese companies a platform to sell goods to retailers and suppliers.

Lebanese industrialist Jacque  Sarraf, chairman of the multifaceted Malia Group, is leading the ambitious joint project with Chinamex to redevelop the International Fair. They have already set up successful hubs around the world in Atlanta, Dubai, Amsterdam and Manchester.

“This is part of a global plan for Chinamex, they need somewhere in the Levant — everywhere else is covered,” said Abou Rida.

Both the Lebanese and the Chinese stress they are keen to protect the architectural heritage of the site. “The design has to be approved by the government and nothing will be changed,” Sarraf said. “No new construction will be added.”

 

The scale of the project is such that two phases have been laid out. “The first phase plans to bring 1,200 Chinese companies [in] and then the second phase will bring that number up to 3,000,” Sarraf told Executive. The total cost of both phases will be some $29 million. If this project goes through, Tripoli could see dramatic changes as, according to Abou Rida, the project would bring some 3,600 Chinese to Tripoli with their companies, and would provide some 3,000 jobs for locals.

However, trying to convince the Chinese government that the security conditions are good enough in Lebanon is not easy. The government has already given Chinamex an exemption on work visas and import tax. The project, planned to start in 2005, was first delayed by the 2006 war and then indefinitely after the Nahr el-Bared crisis in 2007.

“This situation was made even worse with the financial crisis. The international market is now not the same as it was in 2005,” Sarraf said. It is evident, however, that the Chinese government remains interested.

“Just last week the ambassador of China came to Tripoli to look at the site and see if the project was possible,” said Abou Rida. But Sarraf is cautious as to the prospects, “We just don’t know if it will go ahead or not.”

The IRFED legacy

The Lebanese government is keen not to give up on the project and appears to realize the continued importance of the IRFED report. Tripoli is desperately in need of major investment. There will be many skeptics regarding whether a Chinese company bringing in a significant number of its own labor is the right way to go about this investment. But the government and the Minister for Economy and Trade Mohammed Safadi, in particular, seem convinced and are actively trying to reactivate the project with the Chinese.

“The new government of (Prime Minister Saad) Hariri and (President Michel) Sleiman have a new strategy for foreign investment that should also make it easier for the Chinese to invest, and Safadi will also go to the Shanghai Fair in May,” Sarraf stated.

President Chehab left a lasting legacy that is yet to be completed, with his plans for Lebanon still relevant today. The need to develop an economic center outside Beirut is still as vital in 2010 as it was in 1961, as modernization of the country’s institutions remains as stagnant as ever.

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Finance

Shadows of foreclosure

by Emma Cosgrove
written by Emma Cosgrove

 

A Dubai court issued a precedent-setting ruling last month that may be a game changer for the emirate’s real estate market. When the housing bubble burst and Dubai’s properties lost an average of 52 percent of their value, many homeowners fled the country to escape mortgages that had become worth more than the value of their homes.

But British bank Barclays, in the court judgment on January 11, won the right to repossess these properties and auction them off in traditional foreclosure proceedings.

The ruling is the first application of Dubai’s 2008 foreclosure law, which had yet to be put to use. Until 2008, the United Arab Emirates’ legal system made foreclosure and repossession difficult if not impossible, leaving banks with the options of settling loan defaults out of court or simply waiting for the economic climate to improve so that they could begin collecting from their debtors again.

“The court’s decision in Barclays’ favor strengthens our belief that the UAE property market is evolving in line with other mature markets,” said Zeeshan Saleem, Barclays consumer banking director, in a statement. “Customers’ financial wellbeing is our key priority. We understand that the global financial situation may have impacted some of our customers and that they may face challenges in meeting their financial commitments.”

In September, the ratings agency Moody’s predicted that 12 percent of Dubai’s 27,000 mortgages would default within 12 to 18 months. According to UAE central bank statistics, bad or non-performing loans rose by 10 percent from October to November, totaling $8.7 billion.

Price protection

Under the new law, lenders must give 30 days notice before beginning foreclosure proceedings before a judge. If the claim is found to be legitimate, the property is turned over to the Dubai Land Department, which will sell foreclosed properties at auction. If the result of the sale is less than the amount owed by the debtor, the bank may collect the rest from the borrower, in accordance with the mortgage contract.

If, to the contrary, the auction price exceeds the value of the mortgage, the balance is returned to the borrower; with Dubai’s housing market still in the dumps, however, this scenario is unlikely.

According to legal experts, the whole process will take between two and four months.

Though Barclays will be foreclosing on an unnamed number of properties along with the region’s largest mortgage lender, Tamweel, which has several foreclosure proceedings in progress, industry sentiment is that this ruling will not lead to an avalanche of foreclosures before the courts.

“[I’m] not sure if [banks] will be rushing to repossess properties and then have to sell the properties into a still depressed market,” said Robert Thursfield, director of financial institutions at Fitch Ratings.

Christopher Neil, chief executive officer of real estate investment consultancy Landmark Advisory said: “Banks will go to the courts and make use of this law if there is no other way of trying to resolve the default situation, [but] they will try other means before doing so.”

“If, however, the borrower has left the country, then the bank has little choice but to go to court.”

The main worry is that flooding the market with foreclosed properties at auction will bring down prices in an already suffering market.

“The local banks in particular will not want to push prices down further and exacerbate the negative equity in their lending portfolios,” said Neil, adding that this was a common notion across the banking sector.

 “Banks will adopt a number of strategies to avoid foreclosure such as extending payment terms, agreeing to accept interest payments only, deferring interest so that installments become more manageable, or persuading borrowers to downgrade thereby releasing equity for repayment.”

“Eventually when prices rise again, they will then be able to repossess the properties and sell them to cover outstanding debts.”

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Sectarianism ends at home

by Sami Halabi
written by Sami Halabi

 

As Mediterraneans, we Lebanese like to compare ourselves to our Italian counterparts in more ways than one: our food, our way of life, our weather; the list goes on. But one, perhaps less desirable, similarity is just starting to be addressed by our Mediterranean cousins. Last month, an Italian judge ordered a father of a 32-year-old to pay his daughter’s allowance, which came to $490 per month, as well as $16,850 in arrears or risk having his assets confiscated. The ruling was slammed by Italy’s Minister for Public Administration — who described the ruling as “a slap in the face of good sense” — calling for a new law to force Italy’s bamboccionas, roughly translated as ‘big babies’, to leave home by the age of 18.

Generally speaking, laws that dictate to the public how they should conduct their lives are antithetical to free societies; but considering that more than 59 percent of Italians under the age of 34 still live at home, the proposed law could be a welcome exception. 

Looking to our own country, a similar pattern of refusing to fly the nest emerges. The lack of a census makes hard numbers impossible to come by, but the phenomena of the bambocciona in Lebanon is perhaps embodied in a well known Arabic proverb: “Those who live with their parents [can] take it easy.”

Taking it easy, however, has far-reaching economic consequences. Without incentives for progress, societies naturally become inefficient and lose economic footing. Just look at the former Soviet bloc’s economies during the Cold War or that of Cuba’s today. Conversely, societies that push their youth to “find their own path” not only encourage (or force) them to find a job, retain it, and develop their own ideas independently from their family; they also, in effect, encourage integration within society that breaks down cultural stigma and religious discrimination. 

With a little help from the Allies in World War II, the Italians managed to scrap their most deplorable political construct: fascism. Even with the horrors of a 15-year civil war, the Lebanese have still not managed to do away with their primary political ailment, sectarianism, since it reared its ugly head in the mid-1800s.

The conflation between the bambocciona and the protraction of sectarianism in society is significant in the Lebanese context since children are first and foremost susceptible to their parents’ ideologies. In a seemingly endless and vicious cycle, children raised in a sectarian household pick up the bitterness of the previous generation, add their own context to it, and inevitably hand it over to their children. What’s more, young men and women typically leave the nest only when they are married, usually to someone from the same sect and political mindset, thus compounding the problem and making any break of the cycle virtually impossible.

It is almost laughable to observe Lebanon’s political class squabbling over the establishment of a committee to merely study the abolishment of political sectarianism, let alone sectarianism in general. Firstly, those spearheading the initiative — the parliamentary opposition and more specifically the parliamentary speaker — have little political interest in implementing tenants of the Taif accord, which mandated that a non-sectarian senate be formed who’s head would rival the speaker’s for political influence. Hence, it’s quite obvious that the call is little more than a political parry to the parliamentary majority’s thrust over the issue of Hezbollah’s weapons.

For their part, the Christian parties in the parliamentary majority and opposition are up in arms and clinging to the rights accorded to them by the institution of political sectarianism. Those with the most to gain from sectarianism, the country’s religious figures, predictably balked at the mere suggestion of setting up the committee. The last time civil marriage was proposed, the Sunni mufti rejected it outright, as did the Maronite patriarch out of “solidarity” with his Muslim counterpart. To top it off, the prime minister could only muster the sentiment that any agreement should be based on a “consensus,” the Lebanese code word for indefinite delay.  

With all this bickering in the political sphere just to establish a committee, waiting for our “leaders” to resolve the issue is tantamount to “Waiting for Godot.”

While enacting policy in Lebanon to force youths out of their homes and into the real world may be a tad excessive — not least given the economic hardships Lebanon has faced since the end of the civil war — creating the societal structures to produce a healthier and more economically vibrant country has to start somewhere. It’s not going to start in the halls of government, so it might as well start at home. Babies have to stop crying sometime, no matter how big they become.  

SAMI HALABI is the deputy editor of Executive Magazine

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Tight-lipped Libya’s brazen bluff

by Paul Cochrane
written by Paul Cochrane

When sanctions against Libya were lifted in 2004, international oil companies (IOCs) viewed the former rogue state as the El Dorado of black gold, and clamored to be the first to exploit the country’s riches after a 30-year hiatus. But five years later, IOCs are reining in their enthusiasm as doubts arise over how much oil Libya really has.

As international relations thawed, Libya’s National Oil Corporation (NOC) embarked on a global campaign to attract IOCs, offering competitive bidding rounds to explore and develop the country’s energy reserves. Part of the enticement was an oft repeated statement that 70 percent of the country was yet to be explored for oil and that Libya had 39 billion barrels in proven reserves.

These ‘facts’ are still doing the rounds, with the “BP Statistical Review of World Energy 2009” and the United States’ International Energy Agency (IEA) stating Libya has 43.7 billion barrels of proven oil reserves. At face value, this would mean Libya has the fourteenth largest reserves in the world and the largest in Africa, ahead of Nigeria’s 36.2 billion barrels.

But Libya, like the majority of oil producing countries, has been playing it thick and fast with their figures. A leading petroleum geologist familiar with Libya, who asked for anonymity so he could still work in the country, told me: “[The reserve] is nothing like that, it is a third to half of that figure.”

That would mean anywhere between 14 to 21 billion barrels, placing Libya second in reserves in Africa, ahead of Algeria’s 12.2 billion barrels. And as for 70 percent of the country being unexplored, that figure is “nonsense; it is very well explored,” said the source.

The geologist added that the amount of reserves that Libya actually has are evident at the NOC’s technical conferences, where diagrams are shown that indicate less than half of the official government figure — if you know what you are looking for. When the presenters are questioned in public, “they squirm,” the source said, but when queried in private on a technical basis they agree that Libya doesn’t have the reserves it claims.

There was further indication that Libya has been inflating the figures when the NOC last year revised their production capacity target of 3 million barrels per day by 2015 down to 2.3 million barrels per day.

The exploration licenses Libya granted to IOCs are also indicative of there being less in the ground than hoped. Out of the 90 wells drilled after the country’s most recent exploration and production sharing arrangements — the EPSA-4 acreage, launched in 2004 — only five discoveries have been made. International oil and gas exploration and production company Occidental has had a zero success rate, drilling 18 dry wells.

IOCs are now banking on the Sirt, Ghadames and Kufra fields to turn up trumps, but even if there are sizable finds they are unlikely to boost the reserve’s figure to 43 billion barrels. The NOC’s current policy is to focus on developing existing fields — there are an estimated 60 to be tapped — rather than offer IOCs expensive tenders to explore territory that may well draw a blank.

So why is Libya cooking the books? One reason is that it attracts more foreign direct investment (FDI) and interest from IOCs, similar to how countries like to boast of huge FDI inflows yet fail to mention that however-many billions of dollars is over 10 years or has been ‘pledged’ in investment — very different from actual annual inflows. Secondly, it puts Libya in a better bargaining position within the Organization of Petroleum Exporting Countries (OPEC) when it comes to oil quotas.

“It isn’t acceptable within the NOC to question [the] numbers because [they are] given for political reasons, for political advantage within OPEC,” said the source.

But why would BP and the IEA back up the Libyan figures? Well, the British oil giant is operating in Libya and presumably doesn’t want to ruffle any feathers. As for the IEA, its credibility came under fire last November when a whistleblower said the agency was deliberately underplaying an impending global shortage over “fears that panic could spread on the financial markets if the figures were brought down further.”

The game that Libya is playing is dangerous and, alas, one that it is not playing alone. Saudi Arabia, the world’s largest oil producer, has never been transparent with its reserve figures, nor are the majority of OPEC producers.

If we can’t take oil reserves at face value and trust them, then how much oil is there? If you subtract 20 odd billion barrels from Libya’s ‘proven’ reserves, and so many billion barrels from, say, Saudi, Algerian and the United Arab Emirates’ reserves, among others, then the total global oil reserves would be substantially less than claimed. It’s time Libya — and everyone else — starts telling it like it really is or the financial markets could be in for yet another turbulent ride.

PAUL COCHRANE is the Middle East correspondent for the International News Services and writes for Petroleum Review

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Total tiptoes back to Iran

by Gareth Smith
written by Gareth Smith

 

President Barack Obama’s Iran policy is complicating the calculations of all parties interested in the country’s vast energy reserves. But along with the resource-hungry Asian tigers, France’s largest oil company is keeping its options open.

Total has long wrestled with the United States’ policy toward Iran, which has obstructed the implementation of its 2004 deal to develop phase 11 of the 26-phase South Pars gas field. For Total, as for energy-hungry nations like China and India, South Pars is a massive prize with 13 trillion cubic meters of gas — around 8 percent of global reserves.

To date, US-led sanctions have slowed down Iran’s exploitation of the world’s second-largest reserves in both oil and natural gas. Measures aimed at US oil companies, enacted in 1996 by President Bill Clinton, have been followed by banking sanctions drawn up under president George W. Bush by Stuart Levey, an official retained by Obama as undersecretary at the Treasury.

New moves in Washington targeting companies linked to Iran’s Islamic Revolutionary Guard Corps (IRGC) are likely to bar from the lucrative US market any company worldwide that does business with companies and individuals on a US hit list, known as Specifically Designated Nationals (SDN). With the IRGC playing a growing role in Iran’s economy, “new intelligence” promised by Levey’s department could extend the SDN well into the energy sector.

Phase 11 of South Pars is slated to produce 2 billion cubic meters per day of gas for a liquefaction plant, South Pars LNG, as well as 70,000 barrels a day of condensate. At present, despite total gas reserves of around 29.6 trillion cubic meters, Iran currently plays only a small role in the global export market, consuming nearly all current domestic production of around 116 billion cubic meters.

For Iran, the production of liquefied natural gas (LNG) is essential for efficient export as it avoids the construction costs and market inflexibility of pipelines. LNG requires a high level of expertise and experience, both of which Total possesses.

Along with Statoil Hydro of Norway, Royal Dutch Shell and Spain’s Repsol, Total long delayed decisions over its involvement in South Pars, partly due to haggling with Tehran over terms but mainly because of sanction fears.

Frustrated at the Western companies’ delay, Iran looked east, agreeing on investment deals of more than $90 billion with Chinese, Indian, Malaysian and Russian companies. Last June, Iran and the Chinese state-owned company China National Petroleum Corp (CNPC), signed a contract for the upstream task of extracting gas from phase 11, apparently replacing Total.

But these investors are relatively untested in LNG, and Iran has no liquefaction plant eight years after work first began on South Pars. Unsurprisingly perhaps, reports continued in the Iranian media throughout last year that Total was working to continue its involvement, although the French company denied it was in talks with Iran.

Then in December Christophe de Margerie, Total’s chief executive, admitted to The Wall Street Journal that the company was keeping its options open over South Pars through wider cooperation with CNPC.

His interview was published shortly after Seifollah Jashnsaz, head of the state-run National Iranian Oil Company (NIOC), told Iran’s Mehr news agency that NIOC had met Total in the second week of that month.

But it seems Total has found a way around the problem. It isn’t talking to NIOC about South Pars, but it is talking to the Chinese.

De Margerie said Total was discussing with CNPC a multibillion-dollar natural gas project in northern China, as well as deals in Iran and Venezuela’s lucrative Carabobo region. Total and CNPC, with Malaysia’s state-owned Petrona, also won the rights to the small Halfaya oil field in Iraq in December. De Margerie portrayed the cooperation as being between Total’s expertise and China’s sheer volume and market presence. And he confirmed that Total was talking to CNPC about cooperation over South Pars — presumably as CNPC benefits from Total’s expertise in liquefaction, the key challenge in the Iranian field.

Exactly what form this work could take without upsetting Washington is unclear. De Margerie insisted Total would still prefer a comprehensive deal including gas extraction, its transformation into LNG and the export of LNG — something that would be incompatible with US sanctions. But short of this, Total is surely signaling it wants to keep open its interest in Iran.

For Tehran, the stakes could barely be higher as it plans to spend $200 billion to double gas production by 2014. While Iran’s oil revenue is recovering along with the recovery of oil prices to around $80 a barrel from $40 in February 2009, developing gas reserves remains a necessity if the country is to meet an ambitious growth target of 8 percent. Improving growth from the current 2.2 percent projected for 2010 by the International Monetary Fund is an urgent necessity if the authorities are to provide employment for young people and ease political unrest. Total may still play an important role in realizing these goals.

Gareth Smyth is the former Tehran correspondent for The Financial Times

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IMF still chasing Turkey’s tail

by Peter Grimsditch
written by Peter Grimsditch

It threatens to be the longest running thriller since “The Mousetrap” opened at Saint Martin’s Theater in London more than half a century ago. Negotiations between the International Monetary Fund and Turkey over a standby loan have been on and off ever since the previous $10 billion agreement expired in May of 2008.

Bankers, analysts and journalists have been speculating for most of that time that a new deal would be struck within days, weeks or months, and the reports of the amounts being discussed have varied from $6 billion as the “minimum needed to rescue the Turkish economy,” to sums as high as $50 billion.

“Excuse our cynicism,” said Timothy Ash, head of emerging markets strategy at the Royal Bank of Scotland in London, “but we have had similar promises appearing in the media of an IMF deal being cut at the IMF autumn 2008, spring and autumn 2009 meetings, the Group of 20 summit in April 2009, then successive Barack Obama-Recep Tayyip Erdogan summits.”

Prime Minister Erdogan has been orchestrating a guessing game that rivals any Agatha Christie plot. His teasing snippets from time to time have left the press indulging in its well-practiced sport of inventing what it doesn’t know. What is certain is that, with deft sleight of hand, Erdogan is heading for a double victory in what seemed until recently a titanic domestic clash between politics and economics.

The prime minister and his closest cohorts have been talking up the Turkish economy for months, saying it survived the global financial crisis unscathed and dropping broad hints that the country didn’t really need an IMF loan anyway. His optimism seemed to fly in the face of a raft of depressing numbers — a recession that saw gross domestic product fall by nearly 6 percent in 2009, a ballooning budget deficit, an unemployment fall of 16 percent at one point, and slashed industrial output.

Certainly these numbers didn’t impress the IMF, which wanted the ruling Justice and Development Party (AKP) to cut public spending and raise taxes. For Erdogan, this was akin to inviting him to commit political hara-kiri. Raising taxes before the municipal elections of March 2009 would probably have sent his party’s popularity into a tailspin. In fact, Erdogan spent heavily to court voters in the month leading up to the poll. He also announced a $2 billion increase in retirement pension spending last month. Understandably, there was less fanfare about a vast range of tax increases revealed on December 31, 2009.

Putting up tax rates voluntarily rather than as a condition of any IMF loan probably doesn’t make too much difference to the people who have to pay them. Yet at least Erdogan can argue that he is negotiating with the IMF from a position of strength not weakness.

Petrol prices went up on January 1 to $2.64 for a liter of unleaded; cigarettes were hit, with a domestic packet now costing $2.86 instead of $2.35; most alcohol is more expensive; car taxes rose; tolls across the Bosphorus bridges went up; electricity bills will increase by 1.3 percent. Natural gas was spared — for the moment. Its cost is expected to rise by 5 percent this month in what may be the first of two increases for this year.

In effect, Erdogan has fully funded the pension increases with new taxes and even made an annual “profit” of $1.35 billion on the deal.

Even some of the prime minister’s opponents, as well as impartial sources, are beginning to share his resolute belief in the innate strength of the Turkish economy. A 30-year, $2 billion bond — the longest maturity ever issued in Turkey — was more than three-and-a-half times oversubscribed. The issue followed an upgrade in the country’s sovereign ratings to BB+ (one step below investment grade) from global rating agency Fitch Ratings.

The forecast for the economy is also on the up. A report by Turkish brokerage house Is Investment put likely growth for 2010 at 4.3 percent, increasing the figure to five percent if the elusive IMF deal comes off. In any case, IMF money is not viewed as a bailout but a measure to help Ankara roll over its foreign debt and ease the flow of loans to industry. Erdogan’s few quoted comments in January ranged from finalizing an agreement within “days or weeks,” to suggesting that a deal may not happen at all. IMF spokeswoman Caroline Atkinson provided more intrigue by saying, “We have not had a mission fielded nor requested.”

And so the plot thickens. As no one in the know is giving the IMF game away, la politesse and protocol dictates that Executive will not reveal the identity of the villain in the mousetrap either. It is enough to say that things are not always as they seem.

Peter Grimsditch is Executive’s Istanbul correspondent

 

 

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Iraq’s electoral maelstrom

by Ranj Alaaldin
written by Ranj Alaaldin

Just two months shy of Iraq’s national elections in March, an apparent bombshell of a development hit the country. The country’s Independent High Electoral Commission (IHEC), as per the requests of the Accountability and Justice Commission, decided to ban more than 500 mainly Sunni electoral candidates from contesting the elections.

Iraq’s Sunni groups have organized and galvanized themselves in an impressive manner for the elections. There are at least three formidable groups that many expect to pose a serious challenge to post-2003 Iraq’s traditional powers: the Shiites and the Kurds. The Iraqi Accord Front, the Iraqi National Movement (INM) and the Unity Alliance of Iraq comprise serious and experienced politicians that, individually at least, have already proved their worth in Iraq’s previous elections.

Out of the three, it is the INM that has hit the headlines. One of the political parties within this coalition belongs to prominent Sunni Saleh al-Mutlaq, a former Baathist the IHEC has banned for glorifying and promoting the now outlawed Baath party. Banning such a well-regarded figure has the potential for disaster. It could lead to a mirroring of the 2005 Sunni boycott of the elections, with serious repercussions for the post-election environment and, as a result, complicate the United States’ plan to withdraw troops later this year.

Despite the headlines and the hype surrounding this debacle, it is not yet the “call to return to war” that some are making it out to be. The banned candidates were given the opportunity to appeal and 59 were reinstated. Ali al-Lami, the executive director of the Accountability and Justice Commission told Asharq Al-Awsat that the reinstatement of these candidates to the electoral list “was not a result of political or marginal agreements.” Rather, it was due to a mix-up over personal details such as names and dates of birth.

More important still is the reaction from Iraq’s other major groups, which have been relatively quiet; given that prominent figures such as Sheikh Ahmed Abu Risha, former Prime Minister Ayad Allawi and his fellow INM member, the current Vice President Tariq al-Hashimi, are still expected to take part in the elections, Sunni resentment in Iraq is unlikely to be anywhere as high as it was in 2005.

Analysts have been overwhelmingly critical of the IHEC decision, calling it a disaster for Iraq and a marginalization of the Sunnis. Some have derided the fact that just as former Baathists were being brought into the democratic system they are being pushed out again, just when they, and their “Sunni” Iraqi nationalist ideology, might pose a serious political threat.

Most former Baathists have recognized the futility of violence and are largely engaging in the democratic process. However, as the famous saying goes, do not confuse kindness with weakness. There is a feeling among Iraqis that as the so-called Baathists, or former regime loyalists, are welcomed back into the political arena, once they take up their positions of power and become comfortable (and confident), then they will start to show their true colors.

Take the example of parliamentarian Zafir al-Ani who recently, in defiance of the constitution, has openly praised Saddam Hussein and his former regime and has understated its crimes. This might be no more than attention-seeking antics, but it does stoke tensions.

Even more worrying for the vast majority of Iraqis were comments made in early January by British ambassador to Iraq, John Jenkins, who told the British Iraq Inquiry that a military coup in Iraq was a real possibility. Following this, Jenkins was vehemently criticized for making a remark that, essentially, played into the hands of those still yet-to-be reconciled Baathists.

According to on-the-ground Iraqis, the response from the Sunni tribes, who would be pivotal for any successful military takeover, was that they would be ready to overthrow the government if the British were willing to support it. The reason the British might want this, they said, would be that Iran wields too strong an influence in Iraq for the West to be able to match it through other means.

Just days after Jenkins’ remark, fears of a military coup abounded as Baghdad underwent a major security lockdown. According to Arab media reports, the lockdown was enforced in response to an attempt to overthrow Iraq’s Shiite-led government. The Iraqi government was quick to allay such concerns — reassuring that they had in fact foiled an attempted mass-terrorist attack — but the reality is that Iraq is still very much a victim of its past.

RANJ ALAALDIN is a scholar on Iraq and is published regularly in The Guardian

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Obama‘s self-defeatism

by Executive Staff
written by Executive Staff

 

In his 2004 book “Colossus: The Price of America’s Empire,” the British historian Niall Ferguson offered an interesting premise for what might ultimately bring about the decline of the United States. 

Rather than being prompted by external phenomena, Ferguson wrote, decline might come from domestic financial dynamics, not least a ballooning fiscal crisis resulting from the American tendency to consume much and save little. The US, he warned, faced an impending social security crisis because Americans were living longer and the fiscal system was inadequate to pay for future generations. The self-defeating ways to deal with this reality, he continued, were to engage in massive increases in income and payroll taxes, to slash social security benefits by equally dramatic amounts, or to cut discretionary spending to zero.

Whether the massive debt incurred by the US government to absorb the repercussions of the financial shock of 2008 will accelerate this process is open to debate. But there is no doubt that the Obama administration has embraced a self-consciously skeptical worldview, with a willingness to openly admit to American limitations, financial and political. But, it’s not clear that honesty is the best policy in this case.

Take Obama’s speech last December, announcing his new Afghanistan strategy. What was to be a statement of American resolve was, in several passages, undermined. Instead of describing an America united in strength, Obama stated that “[in] the wake of an economic crisis, too many of our neighbors and friends are out of work and struggle to pay the bills. Too many Americans are worried about the future facing our children. Meanwhile, competition within the global economy has grown more fierce. So we can’t simply afford to ignore the price of these wars.”

On Afghanistan specifically, Obama stressed that Washington would not bankroll a nation-building project, because such a scheme “sets goals that are beyond what can be achieved at a reasonable cost.” How odd it was, then, that the American project as defined by Obama could only truly succeed if the administration actually does engage in nation building. In other words, the US is dangerously close to wanting to have its cake and eat it too in this period of acknowledged financial realism.

Most empires generally survive on two things: money and what we can call an ethos of domination: a sense of international entitlement and mission. In the case of the US, both have taken a beating in recent years, though American decline remains a relative concept. However, Obama, more than George W. Bush, has taken a bite out of America’s imperial ethos. From the start, as a presidential candidate, Obama highlighted American constraints, mainly to defend his idea of the country needing to seek cooperation rather than confrontation in the world. That was, perhaps, valiant, but the prospect of a weak America has great costs.

That’s because imperial powers can be instruments of stability, essential regulators of the global order. As Ferguson noted, the British Empire played an essential liberalizing role in the world economy, by being “an engine for the integration of international capital markets.” In the years “between 1865 and 1914 more than $4 billion flowed from Britain to the rest of the world, giving the country a historically unprecedented and since unequaled position as global net creditor, the ‘world’s banker’…or, to be exact, the world’s bond market.”

For the writer and academic Fouad Ajami, however, it is less the material than the psychological that preoccupies him when examining America’s, and Obama’s, newfound despondency. In a recent article in The Wall Street Journal, Ajami lamented what he called “the truth about the Obama presidency,” which he defined as “retrenchment abroad, and redistribution and the intrusive regulatory state at home.” Ajami expressed his anxiety with the administration’s essential isolationism, obscured by the “patina of cosmopolitanism” in the president.

“We’re weary, the disillusioned liberalism maintains, and we’re broke, and there are those millions of Americans aching for health care and an economic lifeline. We can’t care for both Ohio and Anbar, Peoria and Peshawar. It is either those embattled people in Iran or a rescue package for Chrysler,” Ajami wrote with barely concealed bitterness.

The desirable interplay between economic restrictions and political power is one the Obama administration has yet to properly define. In many respects power is as much about illusion as reality, even if the reality of US power still remains more compelling than the illusion. For the US to revel in its difficulties can also mean international instability. One needn’t like American power to realize that what America loses, the global political and financial system will lose too.

Michael Young

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Society

Style over substance

by Mona Alami
written by Mona Alami

 

Network companies around the globe have been reporting delays and difficulties in data transmission, due to the exponential growth of number of smartphone users. Lebanon is no stranger to the trend, in a country where outdated telecom networks have become a cause célèbre and BlackBerry users, trendsetters.

Last December, British mobile phone operator O2 apologized for service trouble as some customers were periodically unable to make and receive calls or transmit data because of pressure on the network from smartphones.

In Lebanon Ayoub Merhi, manager of the BlackBerry store in downtown Beirut, acknowledged that when BlackBerry was introduced in 2009, users had initially faced similar network problems. These problems could be partially blamed on increased use of applications by customers with smartphones, which repeatedly pull data off the Internet at short intervals.

“Network services have certainly improved since last year, as mobile phone [companies] beefed up the network by adding additional stations around Lebanon,” he said.

“MTC currently provides about 10,000 lines to BlackBerry users,” he added. “Alfa joined the market at a later stage — it had to first update its network grid to obtain the right to service BlackBerry users which, today for Alfa, amount to about 3,000 clients,” said Merhi.

However, some 2,000 to 3,000 users with prepaid cards do not have access to online applications or email services.

Imad Tarabay, chief executive officer of Mobile Broadband Wireless Internet (MOBI), said Lebanese mobile operators’ service problems were mostly the result of a deficient international network route, which has yet to be updated to accommodate the growing number of BlackBerry and other smartphone users.

“Another problem worth mentioning resides in the fact that many of the hundreds of applications available on the BlackBerry website are blocked from Lebanon for unknown reasons,” he added.

With some 30,000 Blackberry users expected in Lebanon by the end of next year (according to the BlackBerry store), telecom companies should try to learn more about smartphone applications and what their increasing popularity might entail in the long run, to try to alleviate pressure from phone networks.

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Society

The ABC of corporate crisis management

by Executive Staff
written by Executive Staff

 

May you live in interesting times.” More than ever before, this Chinese curse painfully rings true for companies treading today’s dangerous world, prone to corporate crises and scandals on a daily basis.

With the recent global economic downturn, companies worldwide have been undertaking significant cost-cutting to stay on their feet. But cutting costs means cutting corners and slacking off on quality. Last year’s melamine scandal that surfaced in China and shook the world showed us exactly what can happen when some companies are financially squeezed, when in an attempt to cut costs, dairy farmers and distributors ended up poisoning and even killing people, including infants.

The financial crisis has also contributed to a more hostile and cynical environment, with rampant mistrust that has the public ready to pounce and punish companies in the event of the slightest mishap. This is compounded by an increasingly connected public, making it much easier for scandals to break and spread, and where one frustrated customer on Twitter can cost a company millions of dollars.

In such merciless times a company mishandling its response to a crisis can mean its demise, the fittest are the ones that successfully deploy the right crisis management and communication strategy. This means following the ABCs of crisis communication, which can get a company through any ordeal with its reputation intact.

Act swiftly

Whenever there is a hint of a corporate scandal, the general inclination is to follow a “wait and see” approach, allowing the issue to unravel before deciding on the measures to be taken. Although this might seem like the reasonable thing to do, when many facts have yet to unfold and reactions have yet to emerge, a company that decides to test the waters to see how the public will react and then make a move will unmistakably be throwing itself into a blaze and is unlikely to emerge unharmed. Moving quickly is essential to mitigating the crisis, as stakeholders need to be reassured that the organization is committed to immediately investigating the issue at hand and ultimately taking the proper actions.

Johnson & Johnson’s handling of the poisonous Tylenol crisis is always used as a best practice example when it comes to acting swiftly; the company not only launched its investigations but immediately, and in parallel, sent out an instant alert about the dangers of the Tylenol product on the market at the time and recalled around 31 million bottles with a retail value of more than $100 million. Johnson & Johnson sent out a clear message that it puts customer safety first, before worrying about profit or reputation, by promptly responding to the crisis and assuming responsibility of the tampering of Tylenol although it was not directly responsible for the poisoning, and then proceeding with the complete investigation.

However, moving swiftly should certainly not imply acting brashly or responding before having reached a clear understanding of the issue, as Perrier learned the hard way. When traces of benzene were found in Source Perrier’s bottled water, the company issued a rushed explanation, which later turned out to be incorrect. This only served to undermine the company’s credibility and reputation.

Be transparent

There is no denying that transparency has become an essential value in the corporate world, with stakeholders considering it a fundamental right that companies provide them with all the information that might be of interest to them. Today, more than ever, the public holds companies accountable for their level of transparency and crises are no exception to the rule.

It is therefore imperative that, whenever a crisis emerges, the company openly acknowledges the problem, if in fact there is one, and accordingly assumes responsibility, regardless of the costs it may incur.

There have been many examples across history of companies withholding the real facts, trying to cover up the truth or spinning it in the hopes of escaping unscathed, and in almost every single case, this strategy backfired and ended up in severe and irreparable damage to their brand image, stock value and sales.

A recent example was when Coca-Cola launched Dasani water in Europe as a “pure, still” water. Soon after, the media broke the story that it was not natural spring or mineral water but purified water being sold for 3,000 times its price. Samples of the water were also found to contain a cancer-causing chemical, causing Coca-Cola to recall the product. Throughout the crisis, Coca-Cola responded to the accusations by using half-truths, issuing defensive statements denying the public concerns, and repeating its marketing messages. By spinning the truth, Coca-Cola only dragged out the crisis, made stakeholders even more wary of the company and left everyone wondering what the truth was about Dasani.

Choose the right spokesperson, message and channel

The time of a “one size fits all” approach has come and gone. This cannot be truer when it comes to crisis management. The nature of the issue, its extent and scale, who it has affected and its future repercussions, are only some elements that should imperatively determine the person who should be assigned to handle the crisis publicly. Whereas the company’s head of public relations can successfully ward off damage in a certain crisis, only the chief executive officer should address the issue in another, as the choice of spokesperson can speak volumes as to the seriousness and importance that the company is giving to the concerns of its stakeholders. In some cases, only the more knowledgeable person in the specifics of the issue should provide a direct and detailed response to the crisis.

A clear example was when the CEO of JetBlue Airways took it upon himself to address disappointed and upset customers and apologize to them, after a severe ice storm brought operations to a standstill and subjected passengers to major inconveniences. He also created a blog on the airline’s website where he personally addressed customers’ questions and interacted with them.

 

When it comes to communicating the right message, none can be more effective than a message of stalwart commitment to stakeholders and of placing their well-being and interests ahead of all other considerations. This implies adopting the right tone of sincere regret, apology and dismay in the case of harm that is caused by the company in one way or another. It also entails explaining the corrective measures to be put in place and, when warranted, the punitive actions that will be taken to hold those responsible to account.

Continuing with the JetBlue example, when their terminals buzzed with hundreds of disgruntled passengers and the airline was facing a maelstrom of criticism, the CEO adopted a suitable apologetic tone whereby he expressed the company’s true remorse for disrupting passengers’ schedules. He also explained how JetBlue was going to rectify the situation and emphasized that corrective measures were going to be taken in order to avoid such problems in the future, among which was the “JetBlue Airways Customer Bill of Rights,” the company’s commitment to its customers as to how it will handle uncontrolled operational interruptions in the future, including details of compensation.

What sets a company apart today is not whether it monitors the web and social media platforms for burgeoning crises, but whether it also successfully leverages these channels to reach, inform and reassure its stakeholders. In January 2009, the Peanut Corporation of America announced a recall of peanut butter products due to salmonella contamination.

During this crisis, a comprehensive social media campaign was rolled out, using new media channels like blogs, eCards, text messaging, podcasts, online videos, social networking sites, widgets, micro-blogs and virtual worlds such as Second Life. The crisis communication fittingly leveraged these new channels, which reached and informed consumers, successfully mitigating the crisis and eventually saving many lives.

A savvy company in today’s world is the one that not only wards off damage to its brand and reputation in the wake of a crisis but also turns it into an opportunity to strengthen bonds with stakeholders by showing deep concern and unfailing commitment to their well-being. Successfully handling a crisis takes a disciplined implementation of the basic ABC principles of crisis communication, a formula that can break the curse of our tumultuous times and turn them into fruitful ones.

Dima Itani, Zeina Loutfi & Ramsay G. Najjar S2C

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