While many Lebanese can’t afford to pay $80,000 in cash for a brand new luxury car, they will consider spending $12,000 on an initial down payment and $1,000 in monthly interest payments. But for those who dream of luxury driving but can’t afford the car, leasing is making dreams a reality in Lebanon.

Leases and common purchase loans offered by car dealerships and banks in Lebanon are two different methods of automobile financing. Leasing is like renting with the option to buy at a reduced price after the lease period ends.                       

When a client buys a vehicle with a loan, he pays for it by making a down payment and a monthly interest payment. When a client leases, his payment covers the expense of using the vehicle, along with a finance charge. At the end of the leasing period, clients can either return the car or purchase it for the price of a used car.

Leasing has now existed in Lebanon for over a decade, essentially in three forms: equipment leasing, car leasing offered by banks to rentals, and car leasing offered by car rentals to private companies.

“We have been leasing since 1995 equipment to the industrial sector, such as trucks, cars or mixers, as well as medical equipment to hospitals,” says Nadine Nehme, head of business development at the Lebanese Leasing Company, a subsidiary of Fransabank. Leasing to the industrial sector is subsidized in certain cases like agricultural or  new technology companies. The Lebanese Central Bank reimburses part of the interest, typically the portion added on top of the London Interbank Rate (LIBOR). 

“This particular type of leasing usually stretches over a five to seven year time period, after which, companies can buy the leased equipment for 1 percent of its cost,” says Nehme.

Fleet leasing

The Lebanese Leasing Company also offers this particular service for car rental companies in Lebanon.

“Our only restriction is that the minimum value of each deal should amount to $200,000,” says Nehme, who adds that the company offers only financial leases, which oblige clients to purchase the equipment or vehicles at the end of the lease period. 

“When it comes to car leasing, companies are bound by the contract to buy brand new vehicles,” she says. “They also need to disburse 20 percent of the cost of the fleet.”

Farid Homsi, general manager at Impex dealers of Chevrolet, Hummer, Cadillac and Isuzu, says that car leasing has grown significantly in recent years.

“We have noticed, however, that many rentals we work with require mostly small vehicles for their fleet,” he adds.

Rania Chamoun Kashar, sales and lease manager at Hala Rent-a-Car, explains that she provides leasing to private Lebanese companies who require large sales fleets.

“We have been providing this service since 1994, and we are currently leasing out over 600 cars to Lebanese companies. Our clients include brand names such as pharmaceutical company Sanofi-Aventis, Obegi and Benta trading,” she adds.

Vehicles are typically leased out for a period of 3 years, after which they will be returned and exchanged for a new car. The main advantage to this service is that clients do not need to worry about paying registration, insurance fees or service and maintenance. Cars are also immediately replaced in case of accident.

“This makes leasing a hassle-free experience,” points out Kashar, who adds that, nonetheless, some will perceive this service as somewhat expensive, particularly due to the fact that companies, under this contract, do not have the option to buy the vehicle at the end of the leasing period.

Monthly payments for car leasing at Hala varies between $350 to $7,000, the latter being the price paid monthly for a Bentley by one exclusive Beirut hotel.

Kashar underlines that Hala used to offer leasing to private individuals in 2002, but had to interrupt the service due to clients generally defaulting on payments after a few months. “Clients used the cars for a few months before abandoning them and we had no legal means to pursue them,” she explains.

The personal touch

But one company does risk leasiung cars to private individuals.

“We started leasing cars to VIP clients in 2004 and noticed that there was a growing demand for the product, one that was taking shape gradually,” says Nada Ayoub, head of finance, budget and treasury at Rymco, the dealers of Nissan, Infiniti, GMC and Kawasaki. 

“We have realized that awareness for car leasing is becoming more significant as more Lebanese expats, who have been familiarized with the concept in the west or the Gulf, return to Lebanon,” she says. 

Ayoub believes that more luxury cars will be bought on lease deals instead of being bought outright, partly because buyers want to experience luxury for a lesser cost, or prefer to use their spare money for other investments. Then again, luxury cars retain higher residual values, making lease arrangements an interesting option.

“Clients can sell their used car after a three-year period, usually for a higher price than the balloon payment [the payment that purchases a vehicle at the end of a lease] they end up settling for, which facilitates the reimbursement of the final payment,” she explains.

She adds that the main leasing advantages at Rymco are that the car is registered in the client’s name and comes with insurance coverage that includes the replacement of the vehicle in case of accident, as well as a maintenance contract for up to 60,000 kilometers. 

“Clients can save 50 percent on monthly payments compared to regular financing plans,” she adds. 

At Rymco, clients are selected by the company’s credit department, on a case-by-case basis. They are also given, at the end of the three year period, the choice to refinance their balloon payment for another three year period, pay the balloon payments and purchase the car, or finally return the car to Rymco with no further obligation.

In spite of widespread, frequent power cuts affecting the population, various Lebanese governments have failed to fix Lebanon’s electricity problems. 

“The main issue with the electrical sector is the lack of continuity brought by the various administrations and not corruption,” says Ziad Hayek, secretary general at the Higher Council for Privatization. 

According to an electricity expert working with the Lebanese government to improve the sector, up until 1994 ministerial decisions had to be approved not only by the minister in charge but also by the director general of the ministry.  The expert spoke anonymously because he was not authorized to comment to the media.

But, he says, starting in 1994, the power of the ministry’s directors was overturned by a decision of the Shura Council, Lebanon’s highest court. 

“This decision may have accounted for many of the problems faced today by the electricity sector,” the expert says. “Each program that was promoted by one minister was usually abandoned by the following politician, which might partially explain why Lebanon’s four main electricity plants were initially built to operate on gas, when there was no gas pipeline connecting Lebanon to a gas producing country until 2009.”

According to Lebanon’s Minister of Energy and Water, Alain Tabourian, this month one of two turbines at Lebanon’s northern Deir Ammar station will start running on gas supplied by Egypt through a pipeline. The supply from Eygpt has been delayed several times in the past year for reasons that remain unclear. 

Whatever the reasons underlying the electrical sector’s grim reality, Lebanon is constantly faced with new challenges, with the country’s electrical needs growing every year and further putting pressure on a failing network. 

Not enough charge

“Our electricity needs are increasing by 6 percent every year,” says Tabourian. “We are confronted by a growing deficit of 800 megawatts resulting from the difference between a supply of 1,500 megawatts and a demand of 2,300 megawatts. The pressure on the sector is further exacerbated by the establishment of new large industrial projects, each requiring more than 15 megawatts of electricity. Finally, our production is also losing 3 percent every year.” 

The minister attributed the state’s electrical difficulties to the aging installations.  

“Some of the plants were built over 40 years ago. Two of our plants run on heavy fuel, one on diesel and a fourth which used to be operated on diesel is now partly functioning on gas, starting at the end of August,” explains Tabourian. 

The electrical sector’s dependence on fuel has translated into a massive financial deficit for the budget of the Lebanese government. The deficit of Electricité du Liban (EDL) amounted to $1.6 billion in 2008, and $985 million in 2007, according to Marwan Mkhael, head economist at BLOM Invest Bank. 

“When we speak of a $1.7 billion deficit, we forget that the actual expenses of EDL actually exceed that figure by some $500 million dollars, representing collected bills,” Hayek points out. 

Part of the Arab pipeline that connects Egypt to Syria runs for 32 kilometers in Lebanon, stretching out from the Syrian border, but it will not impact Lebanon significantly, according to Hayek. The pipeline — which originates in the area of Arish, in Egypt, runs through the Jordanian port of Aqaba and the Al Rehab power station before ending in the Syrian city of Homs — was originally supposed to supply both turbines of Lebanon’s Deir Ammar northern plant. However, due to the recent uptick in economic activity witnessed by Egypt coupled with increased Jordanian and Israeli demand for gas, Egyptian gas production has been tightly squeezed. 

“Egypt has promised us, however, to beef up the supply by next year,” reassures Hayek.  

Tabourian explains that up until today, about 60 percent of Lebanese electricity was produced by diesel turbines, a source of energy that is more expensive than heavy fuel, hence the need for cheaper types of combustibles like gas. The heavy burden of buying expensive fuel for Lebanese plants has been aggravated in recent years by high oil prices. Last year, oil prices, at their height, reached $147 dollars per barrel.

“The deficit can’t be attributed to EDL but to the policy adopted by the various governments, which relied on heavily subsidizing the sector. This strategy is a real danger to Lebanon, if reforms fail to be institutionalized,” adds Hayek. He believes that to be efficient, subsidies need to be organized and allocated on the basis of certain considerations, such as the income level of each area, and the needs of the different economic sectors, while favoring low-income areas and specific industries.

Many EDL detractors have also mentioned the EDL labor syndicate as another obstacle on the road to revamping the sector. Hayek emphasizes, however, that syndicate members have received governmental reforms very positively. 

“Their priority is not to be left in a difficult situation, which is understandable; in any case, they do not account for more than 5 percent of the total electricity budget, which is a minor expense,” he says. 

Tabourian says that former governments have invested very little in the electricity sector in spite of the subsidies disbursed. 

“No real improvements or modernization[s] were brought to the sector. In nearly 17 years, Lebanon has only spent $750 million on improvements to the plants and $650 million on the electricity network. The fact that various governments have not made any real and tangible investments has led us to the current situation,” he says.

Another challenge faced by the sector lies in the modernization of the electrical grid. “We are also facing difficulties with the high voltage grid, which is incomplete in certain areas such as the Mansourieh region. We also need to put in place a national control center for the network,” Hayek says.

EDL also has to manage electricity theft on a daily basis, a problem played down by Tabourian. “Electricity theft is estimated at about $150 million, a minimal cost when compared to the sector’s deficit that can reach $2.5 billion when oil prices are at $140,” he says.

Average electricity tariffs in the MENA region, 2006

Hayek disagrees. 

“The value of actual electricity theft is much greater than figures provided, because it is calculated based on the official subsidized rate,” he says. The expert underscores that theft occurs all over Lebanon, mostly in areas such as the south, the southern suburbs and the north. He adds that massive electricity theft is not necessarily committed by private individuals, but by large companies, with greater electrical needs and which tend to bribe governmental employees. 

In order to supplement yearly electricity losses, Tabourian recently suggested purchasing large generators that can be ordered within a period of one year and each have a capacity of 17 to 80 megawatts. 

“We are currently trying to negotiate their purchase from the French government, but one has to keep in mind that it would only be a temporary solution. A second solution would be in equipping turbines with special kits [that would] beef up their potential by 180 megawatts in the summer time, a season during which the heat negatively affects the capacity of the turbines,” Tabourian says. 

“These solutions are temporary, but more importantly the government needs to develop long-term solutions relying on a diversification of fuel needs, something that will reduce Lebanon’s exposure to the volatility of fuel prices and its dependence on any oil producing country in particular,” Tabourian says.  

This approach seems to meet the approval of Hayek. So why the holdup? According to Tabourian, who submitted a report on the electricity sector to Prime Minister Fouad Siniora a few months ago, the study was never discussed by the Council of Ministers. But the electricity expert adds that a similar study had been submitted by the previous government, one that was later abandoned by Tabourian.  

Another point of contention between the two factions concerns the sector’s privatization. Tabourian advocates the building of new plants on the basis of a private-public partnership, an agreement between government and the private sector that would marry public policy with the managerial skills of the private sector. 

“Rather than completely transferring public assets to the private sector, as with privatization, the government will still finance the cost of the plants. This would allow the state to rein in electricity prices, which would be extremely high if the private sector had to assume the costs of building the actual power plants,” says Tabourian.

Hayek rejects this idea. 

“I doubt any company would be willing to take over a sector plagued by such a huge deficit,” he says.  “We are proposing instead to privatize certain services such as billing and collection, as well as the installation of digital meters.”

He adds that the sector should be open to private companies which would be allowed to sell electricity to complement the power supplied by the state. 

With a quarter of the world’s oil reserves, Saudi Arabia is the most influential member of the Organization of Petroleum Exporting Countries (OPEC) and able to put an extra two million barrels of oil on the international markets within days. But the kingdom is notoriously opaque about its oil policy and reserves, with decisions made at the highest level by the ruling House of Saud. The royal house is composed of a Saudi elite which even the White House appears to have minimal influence over, and one that is determined to ensure its survival in the face of growing domestic concerns and a changing geopolitical environment.

Track record

Since the oil company Saudi Aramco was fully nationalized in 1980, the kingdom’s oil policy has been relatively clear and consistent. Based on a low price band (between $18-$25 per barrel), Saudi Arabia aimed to maintain price stability through excess spare capacity, thereby avoiding price spikes and ensuring the long-term profitability of its large reserves. But since 1999, the kingdom’s oil policy changed as internal problems began to mount: rising unemployment, a population that has grown 300 percent in 30 years, and an oil-dependent economy in serious need of diversification.

To boost revenues, Riyadh, in conjunction with OPEC, reined in production to lower oil inventories. In a period of surging global demand driven by the emerging Asian economies, oil prices steadily rose and were pushed higher by speculation. The kingdom eventually accumulated some $500 billion in foreign reserves and was able to dismiss the Bush administration’s calls for heightened oil production. But the global financial crisis in late 2008 caused oil prices and demand to drop. Pressure was again put on Riyadh, this time to keep prices low to stimulate economic recovery.

“Why did the Saudis let the price of oil go up and up, when they of all people would realize there would be a correction?” said Simon Henderson, director of the Gulf and Energy Policy Program at the Washington Institute for Near East Policy. “As the swing producer it would be left to Saudi leadership to get OPEC into line afterwards which… they have managed to do to everyone’s surprise.”

In June, Saudi Aramco increased output to 12 million barrels per day (bpd) after three new projects came online at the Nuayyim, Khurais and Shaybah fields. With an estimated 4.5 million bpd in spare capacity, Saudi Arabia’s OPEC output is 8 million bpd.

The financial crisis has presented Saudi Arabia with major challenges. High oil prices are needed to fund economic diversification and infrastructure projects, while at the same time the country has a vested interest in the recovery of the global financial system. Equally, Saudi Arabia is aware of the growing importance placed on alternative energies, which could, in the long run, lessen the West’s dependence on the kingdom, changing a relationship that since 1945 has been based on security in exchange for oil.

Looking east

Given that the Saudis effectively subsidize oil sales to the US through discounted transportation costs, the Asian markets — especially India and China — are becoming increasingly attractive given their geographic proximity and willingness to pay international market prices.

“Surging demand from Asia will almost certainly divert supplies east and unless Saudi supply keeps growing, it could mean a big reduction to the US, unless we start paying a security premium, which I suspect China would top,” said Matthew Simmons, chairman of energy consultancy Simmons & Company in the US.

Saudi Arabia has worked particularly hard to foster warm relations with China, investing in refineries and the Chinese economy.

“China is a secure market for Saudi Arabia, and will be in the future, so it is very clear it’s not just exporting crude, but upstream and downstream activities are also being explored,” said Othman Cole, research associate at Cambridge University’s Centre for Energy Studies in Britain.

This shift eastwards has been observed by OPEC.

“The last full revision of the OPEC masterplan in 2003 to 2004, estimated that by 2050, they didn’t expect any Gulf OPEC member to be selling oil to the US,” said Kent Moors, an energy policy expert at Duquesne University in the US. “The entire Gulf market has been moving east for sometime.”

The current and long term significance of the Asian markets was made clear by Saudi King Abdullah’s first overseas visit since ascending the throne in 2005. It was to Beijing, notably not to Washington. Next on the monarch’s itinerary was New Delhi.

From Riyadh to Washington

“Asia is a growing market for Saudi, and how that re-balance will effect the US influence and relationship is still unclear,” said Cole.

Any change in bilateral relations has not yet been reflected in current US foreign policy towards Riyadh, demonstrated during President Barrack Obama’s visit in June.

“Relations are good between King Abdullah and Obama, that was the surprising thing, for Obama to have bonded with an Arab potentate with global views very different from European and US perspectives,” said Henderson. “Logically, Obama should have said, for God’s sake, keep oil prices down, but he gave them a pass, which I thought was a mistake.”

What is not clear is if the US and Saudi Arabia might actually be seeing eye-to-eye on the current OPEC price band of $75-$80 per barrel. Simmons said the West is tacitly supportive of higher oil prices. “Our government leaders now seem to understand that higher prices open all sorts of doors, such as creating alternate energy sources and helping create economic prosperity in the Middle East,” he said.

Saudi oil policy is decided by “an inner circle of elite decision-makers centered around the king and key princes,” says Daryl Champion, author of “The Paradoxical Kingdom: Saudi Arabia and the Momentum of Reform.”

Two camps are emerging within this elite with regard to oil reserves and what that could mean for oil prices, according to Simmons.

Aramco and petroleum ministry officials tend to think that none of Saudi’s oil fields will have problems and will last for many more decades. The other camp worries the same fields are at risk of being overproduced. “They favor a new era of field-by-field production flow transparency,” Simmons said. “If they embraced transparency, I suspect the results would send oil prices far higher, benefiting the Kingdom.”

While Petroleum Minister Ali al- Naimi represents the oil technocrats, he also addresses the interests of the king and the estimated 7,000 to 25,000 members of the House of Saud. How a change in leadership will impact policy when King Abdullah, aged 84, passes away is not evident. With Crown Prince Sultan in declining health, Interior Minister Prince Naif, 74, is considered next in line for the throne after his recent appointment to second deputy prime minister.

Currently, Riyadh appears to be hedging its bets against changes in the energy market. Naimi acknowledged the need for nuclear power and renewable energy at a Houston summit in February, adding that Saudi Arabia hopes to export the same British Thermal Unit (BTU) equivalent in electricity from solar power as present crude oil levels in the future. The kingdom is also investing in oil development and production beyond its borders.

“Saudi Arabia and Kuwait have put aside between $12 billion and $15 billion for controlling future energy from the Caspian region,” said Moors, “moving from the traditional approach of controlling the process, facilities and refineries, to being gate keepers to access and future projects. There has also been an increase of Saudi money to control tanker production facilities.”

Lebanon has long been known as the Switzerland of the Middle East for its banking sector. These days, the Levantine country is claiming another proud nickname.

“Lebanon now has the reputation as being the Brazil of the Middle East,” says Lebanese plastic surgeon Dr. Roger Khoury.

When Khoury founded the Beirut Beauty Clinic 12 years ago, he recalls that less than one percent of his patients came from abroad, compared with 15 percent today.

Other doctors in Lebanon report a similar rise in patients coming from outside the country. They attribute this to high quality healthcare and hospitals, relatively low prices, a liberal health sector free from government oversight, and of course the attraction of Lebanon as a travel destination.

Most of Lebanon’s medical tourists are Lebanese expatriates, with the most popular procedure being rhinoplasty, more commonly known as a ‘nose job’. There are also a growing number of patients who come from the Gulf for the healthcare, and then often stay on for the sun, sea and sand.

“When you come from abroad, you get the complete package — the reception at the airport, the hotel, the clinic and people to help during the recovery period. And everyone loves to visit Beirut,” says Khoury.

Depending on the procedure, a vacation along with medical treatment in Lebanon can cost less than the medical bill alone in a Western country. For example, rhinoplasty in New York City can cost $20,000, while the same procedure in Lebanon typically costs $3,000.

This fact has not been lost on Lebanon’s tourism sector and travel industry — in the Ministry of Tourism’s 2009 Yellow Pages, approximately a quarter of the book includes contact details for Lebanese medical professionals.

Dr. Marina Hajj, medical director at the American University of Beirut Medical Center says, “We have contact with all the carriers and we coordinate with them. It’s booming.”

Middle East Airlines, Lebanon’s national carrier, has a link on its web site about the benefits of medical tourism. Here it boasts that, “health tourism has endless opportunities and benefits, and it ties extremely well into Lebanon’s reputation as a rejuvenating place and a healthy state.”

Lebanon’s place as a healthcare destination dates back more than a hundred years, back when AUB’s hospital was known throughout the Middle East for its medical treatments and its faculty of medicine. The hospital gained acclaim in the mid-20th century for being the first in the region to perform a kidney transplant, as well as open heart surgery. Lebanon’s place as a regional healthcare destination continued until 1975, when the country’s 15-year civil war began. Now, Lebanon has slowly regained its place on the medical tourism map.

“After the war, it took time for us and other institutions to come back,” notes Hajj. “In the late 1990s, we again became a magnet in the region. When medical tourism here restarted, we saw some of the same patients that had been treated before 1975.”

The appeal of a Lebanese scalpel

Whether they are returning patients or longtime Lebanese doctors, many people seem to believe that there is an intrinsic understanding doctors here have with their Arab patients that sets them apart from their colleagues outside the region, be it because of their education or their bedside manners.

Nasri Holloway, a 56-year-old British-born businessman of Lebanese origin, splits his time between Lebanon and his residence in Sierra Leone. But he always returns to Lebanon for medical treatment, even though he has spent most of his life abroad. This summer, he came to the AUB hospital to get a cancerous kidney removed.

Holloway doesn’t think twice about returning to his native country for medical treatment.

“I think the doctors are better here,” he says. “In Europe, doctors tend to be much more automated. I don’t know if they’re not allowed to take risks for legal reasons. They work very much by the book. But the book isn’t always the same for two people.”

Khoury also believes that many Arab patients from abroad choose Lebanon because they feel more comfortable with doctors of the same cultural background.

He recalls one patient who requested the he make an incision for a breast augmentation on the side of her breast right below the armpit. Khoury reminded her that “we’re Mediterranean people, and we like to raise our arms when we dance.” He was able to convince her to get the incisions closer to the center of her breasts.

For other patients, an important aspect of getting a medical procedure done in Lebanon is the privacy of being treated abroad.

Noor, a Kuwaiti who wished not to give her real name, underwent breast augmentation surgery at the Beirut Beauty Clinic while on vacation in Lebanon this summer. For her, the most important issue was privacy.

“If it was in a hospital, I wouldn’t have done it,” she says. “But at the clinic, I had my own room. I’m a veiled woman from Kuwait, so I wanted my privacy.”

Ahmad Zaatari, medical director at Hamoud Hospital in Sidon, agrees that privacy is often a reason for patients getting procedures done away from home — especially when it comes to cosmetic treatment. Zaatari, a plastic surgeon, says, “Sometimes people will request to be treated on a certain floor, worried that someone they know who works at the hospital will see them.”

But as plastic surgery has become less taboo in recent years, so too has the desire for patient secrecy. Zaatari points out that it’s not uncommon to see people walking down the streets of Beirut with nose bandages during their recovery period following rhinoplasty.

“It’s become a status symbol,” he says, referring to post-plastic surgery bandages.

Free-wheeling medicine

From what Zaatari can see, a key reason many people are increasingly choosing to be treated in Lebanon — aside from doctors’ well-known medical expertise and competitive prices — is the country’s relatively liberal medical laws and an absence of a thick government bureaucracy.

For example, with a surplus of doctors, patients report a much shorter waiting period than at most hospitals abroad.

A notable example is kidney transplants. Along with India and Egypt, Lebanon has some of the most liberal laws for kidney transplants in the world. Many of the kidney transplant patients at Hamoud Hospital, one of the largest centers for such operations in Lebanon, come from Syria and Jordan.

Zaatari explains, “In most of the world, the kidney donor has to be related to the patient. Otherwise, people go on a waiting list to receive a kidney from a brain-dead patient. In Lebanon, kidney donors and recipients have to be of the same nationality.”

Still, Zaatari emphasizes that Lebanon’s rules on kidney transplants are not nearly as lax as those in India, and that there are regulations in place to prevent a black market in kidney trade.

Women’s health

Another important part of Lebanon’s liberal medical sector is that of women’s health. Of all the countries in the Middle East, Lebanon has the easiest access to abortion, emergency contraception and birth control. Like many Western countries, birth control and emergency contraception can be bought at pharmacies without a prescription.

Many women also seek gynecological surgical treatment in Lebanon, including hymoplasty, which replaces the barrier in the vagina so women can “regain” their virginity, so as to ensure bleeding on the wedding night.

“I think if Lebanon is coming back as a major tourist destination for Arabs, people say, ‘Let’s get medical services while we’re here,’” says Beirut-based gynecologist Faysal Elkak. “It’s not like anyone’s going to say, ‘I went to Lebanon to get my hymen repaired.’”

Another common request from gynecologists is the “virginity test,” an exam to determine if a woman’s hymen is in place. Elkak refuses to do such tests because, he says, “I respect women’s rights.” Instead, he hopes people will become more educated about women’s health, and learn that the absence or presence of a hymen is not always an indication of sexual activity.

Knowing that much of Lebanon’s medical tourism has to do with cosmetic procedures for women, Elkak says he hopes that the country’s increasing medical tourism market will not mean the “commoditization of healthcare in Lebanon.” He hopes Arab women won’t be pressured by society to undergo surgeries they would not have wanted otherwise — creating a demand for the appearance of Haifa Wehbe, for example. The large-breasted, pouty-lipped Lebanese pop star openly boasts of having undergone more than a dozen cosmetic procedures.

While the Ministry of Tourism is glad to promote its country’s health services, they are well aware of the responsibility of the sector.

“We have to be careful when talking about medical tourism,” says the ministry’s Director General Nada Sardouk Ghandour. “We don’t want to promote it as a product, [or] a culture. It can’t be too commercial, because it’s something delicate and fragile. If someone needs to see a doctor or wants to have plastic surgery, our main concern is the patient’s privacy.”

As for the need to organize Lebanon’s ever-growing medical tourism industry, Ghandour says she hopes the Lebanese government, including the tourism ministry, can work with foreign governments to facilitate their visa and medical requirements.

At the moment, such steps would seem premature, as most of the country’s medical tourists are Lebanese expatriates.

“Hopefully one day there will be real medical tourism — people who come here for healthcare who have nothing to do with Lebanon,” Zaatari says.

The Arab League boycott of Israel began in 1951 with the goal of supporting the Palestinians by prohibiting trade and economic relations with the Jewish state, and to penalize countries and companies that do business with Israel.

Although the boycott was enforced for several decades, it has unraveled in recent years due in part to the normalization of relations between Israel, Jordan and Egypt, and the establishment of trade offices in Morocco and Qatar (which were closed during the Gaza conflict of January 2009). The realities of globalization and international trade, and the inability of Arab countries to produce some products like microprocessors and military equipment, have also weakened the Arabs only economic weapon against Israel. As a result, Arab markets are penetrated daily by Israeli products and investments in a variety of legal and illegal ways.

“Obviously we are suffering from the leaking of Israeli products to the Arab world,” said Haisam Bawab, head of Lebanon’s Israeli boycott office at the Ministry of Economics and Trade. “We know it happens and this is why we are trying to increase the supervision [of] such [products].”

How much is unsure

The estimated amount of direct illegal trade in products between Israel and its Arab neighbors is uncertain and varies. Forbes magazine put the figure at $500 million in 1984, equal to $1.3 billion in today’s dollars. In 2004, the Manufacturers Association of Israel estimated Israeli exports to Arab nations and entities amounted to around $192 million. A year later, Infoprod, an Israeli research firm that specializes in regional trade, estimated that the figure amounted to $400 million, around two and a half times Israel’s trade with its official Arab trading partners that year.

Speaking to an American journalist in New York, Doron Peskin, head of research at Infoprod, estimated that total Arab-Israeli trade averaged $780 million per year in 2007 and 2008, including trade with Jordan and Egypt.

Ibrahim Saif, resident scholar and specialist on the political economy of the Middle East at the Carnegie Middle East Center said direct trade “is not that significant.” He estimates this kind of trade amounts to under $100 million a year.

No matter what the amount of illicit trade, not to mention investment from Israel to the Arab world, the fact is that this type of trade does exist and is funneled to the Arab world through a variety of methods. The main passageway for Israeli products to enter Arab markets is through front companies established in countries that have bilateral relations with both Arab nations and Israel, or through Jordan and Egypt which have signed peace deals with Israel. Israeli products are shipped to third parties in these countries, who then remove any markings which would identify the products as being made in Israel and forward the products onto Arab markets.

According to Bawab, the head of the Israeli boycott office, companies set up in Jordan, Egypt, Cyprus and even China are the main culprits of this sort of practice.

“Many Israeli companies have offices abroad and use them for trade with the Arab world,” said Peskin. “I remember, from earlier this year, the big news in Yemen [was] that its Liquid Natural Gas company [Yemen LNG] used software developed by an Israeli firm based in Tel Aviv. This company used its Hong Kong office for trade with Yemen and other Gulf countries.”

Many experts have also identified Turkey as another routing point for Israeli products entering Arab markets.

In order to curb this type of activity, Arab countries rely on “certificate of origin” documents presented to customs officials at trading ports. But, like any official document, these can be fabricated. The fact that international product sourcing regulations vary from country to country makes it difficult to identify component parts of finished products.

“In agricultural produce, for instance, Israel exports to Jordan and there the documents are changed and the products transported to the Gulf markets as Jordanian produce,” said Peskin. “What is the effect of the Arab boycott in this case?”

Last year, the Arabic language newspaper Al Quds Al Arabi reported that it had discovered Israeli investors using Palestinian agents in the occupied West Bank to repackage Israeli potatoes with false certificates of origin in order to sell them as Palestinian produce to Qatar via Jordan. The paper also claimed that a Palestinian investor, who the paper did not name but identified as a minister in a previous government, was offered 25 percent of the profits to re-export Israeli products as Palestinian to the Arab world.

Even with the increased costs of using third parties, the allure of penetrating Arab markets seems natural given the types of products Israel excels at manufacturing.

“From irrigation to security systems, Israel is very well suited to working in the Arab world,” said Hady Amr, director of the Brookings Doha Center, a regional think tank that specializes in socio-economic and geopolitical issues in the Middle East.

Due to the fact that the boycott has substantially weakened over the years, the need for Israel to covertly trade with its Arab neighbors, however, becomes less salient because in many instances Israel can already sell their products in Arab markets.

The levels of boycott

The original text of the Arab League boycott stipulates that member states adhere to a primary boycott (products that originate in Israel), secondary boycott (businesses that operate and manufacture in Israel) and tertiary boycott (a boycott of businesses that have relationships with other businesses trading in Israel). The tertiary boycott has been abandoned — that’s why Pepsi, Coke, Starbucks and other international brands can operate in both Israel and the Arab world — and today only Lebanon and Syria uphold some of the principles of the secondary boycott.

“If you want to impose all the principles of the boycott you wouldn’t have one American or European company in Lebanon or in the Arab countries,” said the Lebanon Boycott Office’s Bawab. “We adhere to the spirit and the principles of the boycott.”

When the secondary boycott is applied, there are still “strategic companies” that each country has the right to exempt if they are seen as necessary to their economies. A premier example is Intel, the global microprocessor manufacturer, who has maintained design and manufacturing plants in Israel since 1974. “All the most important Intel products have a bit of Israel inside,” said Ron Friedman, vice-president and general manager of Intel’s mobile microprocessors group at a press conference in Israel last February.

Intel currently employs more than 5,000 Israelis, and exports from Israel by the company peaked at $2 billion in 2000. Last year the company exported $1.39 billion, down 10 percent from the previous year as a result of the global downturn.

“What we do is we try to convince companies to close their factories in Israel and come to us in the Arab world and we support it,” said Bawab. “But this needs oversight and frankly there is no oversight… from the government[s].”

Many Israeli companies also sell their wares through distributors in the Middle East and simply re-route their products through another office setup in a third country. Orad, an Israeli-based company that manufactures newsroom and broadcasting products, blatantly lists its distributor in Abu Dhabi, Tek Signals, on the company’s website. When Executive called to enquire about the companies products, a Tek Signal’s company representative said: “Orad’s head office is in Israel but another main office is in the United Kingdom.” The representative confirmed that even though the products might be manufactured in Israel “all the shipments come from the UK.” As a result, they said, there wouldn’t be any problem with boycott issues.

Lebanon boycott office head Bawab lamented that there are many instances like this across the region. “There are things we can discover, and when we do we stop them,” Bawab said. “There are some things we cannot discover.”

“The products of Israel’s advanced hi-tech industry are targeting the gulf markets”

In February, the US publication Defense News reported that Abu Dhabi is in talks with a company called ImageSat International, incorporated firm in the Dutch Antilles, to use the company’s EROS B satellite and its high-resolution imagery. According to the article, the emirate already receives images from the satellite’s precursor, EROS A, and both satellites were built by Israel Aerospace Industries (IAI), Israel’s largest defense firm with a controlling interest in Tel Aviv-based ImageSat.

“Of course, the products of Israel’s advanced hi-tech industry are targeting the Gulf markets,” said Peskin.

Regional mail forwarding services have also come under fire for facilitating the shipment of products through third countries. A 2006 article in the right-wing Israeli newspaper The Jerusalem Post claimed that Aramex, a regional delivery service, was facilitating this type of trade through their mail forwarding service.

 An Aramex customer service representative said that there was “logically no handicap” to mail being forwarded from a third country but said she had never come across Israeli products being shipped in this manner. Asma Zein, Aramex’s country director in Lebanon, later contacted Executive to clarify that the service did not allow for products to be shipped from third countries, citing that it is against US law to change the labeling on packages. “We don’t have time… to change any labels in New York. We don’t even check what is written on the box,” said Zein. “As Aramex we [don’t] serve Israel and [Aramex] doesn’t get [products] from Israel, definitely not.” She added that Aramex intends to get the Israeli publication to retract its statement regarding the company’s shipping practices.

Saudi arabia, which joined the World Trade Organization in 2006, said it “would treat all member states equally”

The lists

In order to track companies that are subject to the boycott, the Arab League runs a list that identifies companies as being Israeli, manufacturing in Israel or having “Zionist funds.” One popular way around this is to list an Israeli company on an international stock exchange or to take control of public companies operating in the Arab world.

“If you are talking about public companies then you don’t know who the owners are. You cannot know,” said Bawab.

Trade agreement trouble

One of the biggest blows to the effectiveness of the boycott is the decision by many countries in the region to sign onto international trade agreements. Countries that join the World Trade Organization, for instance, are required to drop barriers to trade, as are those that sign free trade agreements with the US. Saudi Arabia, which joined the World Trade Organization in 2006, said it “would treat all member states equally.”

Even though Israel is a full member of the WTO, Saif explained that the Saudis “don’t have to implement [dropping the boycott] because they don’t have a peace treaty [with Israel].”

Asked whether Saudi Arabia still adheres to the boycott Bawab said they do not. Do they still show up to the meetings? “This question I am asking and I am not finding an answer to. It is something political and I don’t have anything to do with it.”

Saudi Arabia has also spearheaded the Arab Peace Plan in 2002 which offers to lift the Arab League boycott of Israel.

Upon signing a free trade agreement with the US, Bahrain also completely dropped the boycott and no longer attends the bi-annual meetings. Tunis and Qatar even allowed Israeli commercial interest offices to open in their countries, only to close them during second the intifada and the Gaza conflict, respectively.

Defense News reported the Israelis operated an “informal and extremely discreet interest office in Abu Dhabi for several years,” but the publication also reported the two countries “chances of developing more open relations are slim to nil.”

The Palestinian Authority ended the boyott after signing the Oslo accords. Mohamad Bbousalaa, director general of the  Central Boycott Office in Damascus, said that only “14 to 15 states” of the 22 member Arab League have attended the bi-annual meetings “for the past 4 years.”

Who cares enough to adhere?

When it comes to figuring out how much each country adheres to the boycott, one of the only ways to ascertain the seriousness of boycott adherence is to look at the correspondence between respective countries’ boycott offices. According to Bawab, each country is supposed to identify potential Israeli companies that apply for trade certificates or patents, as well as boats or planes (which have specific rules that apply to them) that land in the respective country’s ports. Each Arab nation will then cross-check the blacklist with the CBO to see if the company, boat or plane is present on the list and relay that information to all other boycott offices.

“I am not seeing anything [correspondence] from Libya, Morocco, Tunis, Algeria, Iraq [or] the Gulf. I get a few from Syria,” said Bawab.

However, Bbousalaa, disagrees. He said that boycott offices are only required to correspond with the central office, and only if it is a “big issue” does the central office forward the correspondence to other offices. Bbousalaa declined requests to provide a copy of any recent correspondences.

The adherence to the boycott is not binding for the members of the Arab League and enforcement is the onus of each member state.

The effectiveness of the boycott also received a battering from the policies of Israel’s, as well as many Arab states’, allies that do not allow their companies to adhere to it. In 1977, the US Congress and President Jimmy Carter, who today calls Israel an apartheid state, made it illegal for US companies to comply with the Arab League boycott of Israel. US companies are obliged to report any requests by Arab nations to adhere to the boycott of Israel to the US Department of Commerce’s Office of Anti-boycott Compliance. The penalties for a failure to do so range from a fine of up to $50,000 per violation or five times the value of the exports in question (whichever is greater), to imprisonment of up to five years, or both.

“The law, which is exceptionally complicated, is the product of strong US-Israeli relations,” said Farhad Alavi, a senior counsel at the Washington-based law offices of RA Kerr and specialist in international trade law. “The US does not want its residents, as well as US citizens outside the US, and companies… to be used as tools to further the anti-Israeli policies of certain countries.”

What ultimately attracts Israeli companies to Arab markets does not seems to be actual trade in products with Arab nations but the investment potential of the Arab states, even despite the effects of the global downturn. “They [Israel] want to invest and they want to have presence,” said Carnegie’s Saif.

But if an Israeli company is not too ambitious, they can invest in Arab markets as long as they do not acquire a majority share. “We consider that if a company has 51 percent Israeli ownership of shares or Zionist funds, it is blacklisted,” said Bawab. He agreed that anything below was not covered by the boycott.

“The Arab Boycott’s practical outcome today is negligible,” claimed Peskin. “It is mainly effective in countries like Syria, Libya and Lebanon, while I think most of the Israeli exporters are targeting the markets of the oil-rich Gulf states.”

But even in countries where the boycott is applied, like Syria, measures have been adopted that remove some of the trade barriers that had been erected since the early 1950s. For instance in June, Syria scrapped the requirement for first-time patent applicants to submit a declaration of compliance with the boycott of Israel.

Boycott requests received by US companies in fiscal year 2007

Instrument of peace

Now that there is a new push for peace in the region, the boycott is again being highlighted by none other than the proponents of this new peace initiative, as an instrument rather than a weapon.

“What I’d like to see is indicators that they [Arab nations] are willing, if Israel makes tough commitments, to also make some hard choices that will allow for an opening of commerce [and] diplomatic exchanges between Israel and its neighbors,” said US President Barack Obama earlier this year. Last month, more than two-thirds of the US Senate signed a letter, endorsed by the American-Israeli Public Affairs Committee, the most powerful pro-Israeli lobbying group in the US, supporting “efforts to encourage Arab states to normalize relations with Israel.

Obama’s administration has also suggested that Arab states allow El Al, Israeli’s national carrier, to use Arab airspace.  Saudi Arabia, one of the US’s strongest allies in the region, has opposed such a plan until the Arab Peace Plan is adopted by Israel.

The concept of dismantling the boycott has also been proposed by Israel’s right-wing Prime Minister Benjamin Netanyahu. He supports the notion of an “economic peace” as a forbearer to political peace despite the fact that he has been reluctant to make “tough commitments,” like freezing settlements or accepting the concept of the Palestinian right of return.

It’s little wonder why Netanyahu, the former chief marketing officer of the Boston Consulting Group, wants to embrace “economic peace.” According to research conducted by the Strategic Foresight Group, a global research and policy advisory group, Israel would have almost doubled its per capita income ($23,000 to $44,000) from 1991 to 2010 and would not have lost $15 billion in tourism revenue from 2000 to 2006 if there had been a resolution to the conflict.

The onus is on Israel

For now the boycott stays in place, despite its numerous holes, and looks set to remain until there is a resolution to the Arab Israeli conflict, and more specifically, a just solution offered to the Palestinians both inside Palstine and in the region.

“If there is progress on the peace process, this is something that definitely will be dropped,” said Carnegie’s Saif. “It has not taken a front seat but if there is progress [on the peace process], you will see that this point will become very significant.”

For there to be any official changes made regarding the boycott, however, there will most likely need to be movement on the Israeli policy front, as opposed to an Arab decision.

“The easy thing for the Arab world to do will be to stay on the course that it has been on, which is to continue to relax the Arab boycott in practice while supporting it in name as long as certain countries can,” said Amr. “The question really is going to be whether Israel is willing to make the compromises it needs to make.”