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Resolved to no resolution

by Nicholas Blanford
written by Nicholas Blanford

The series of subterranean explosions that shook Khirbet Selim in mid-July merely seemed to confirm what everyone knew but preferred to ignore — that Hezbollah has amassed arms and munitions in the border district patrolled by the United Nations Interm Force In Lebanon, despite UN Security Council Resolution 1701.

There had been past hints. In May 2008, an armored patrol of Italian peacekeepers came across a tractor and trailer driving between the villages of Jabal Butom and Siddiqine in the south in the middle of the night. When the patrol turned around to follow the truck, two Mercedes overtook the UN vehicles and stopped between them and the fleeing tractor, blocking the road. A tense stand-off ensued until the Lebanese army arrived on the scene, by which time the mysterious tractor had disappeared.

The Khirbet Selim explosions apparently emanated from an underground Hezbollah bunker stuffed with weapons and ammunition. Hezbollah said the blasts were from old Israeli munitions dumped inside the building, although no explanation was given why the arms were being stored in the first place rather than destroyed by the Lebanese army. What triggered the blast is unknown, but it is not the first time that a suspected Hezbollah arms dump has accidentally exploded. One blew up in a garage outside a village near Tyre in 2004, apparently caused by a short circuit in the building’s electrical wiring. A year earlier, a huge explosion rocked the eastern Bekaa when a suspected arms cache exploded. Hezbollah said that it was a controlled blast of old Israeli land mines collected from the south.

The Israelis, predictably, seized upon the Khirbet Selim explosions to demand a tightening of Resolution 1701 to grant UNIFIL authorization to search at will buildings suspected of containing weapons. Presently, UNIFIL’s principal mandate is to support the Lebanese state in implementing Resolution 1701, rather than acting unilaterally. Although the resolution leaves some wiggle room for UNIFIL to undertake some independent action, the tone of the document calls for the peacekeepers to assist the Lebanese army in fulfilling the provisions of 1701. And that is how it has been interpreted by UNIFIL itself.

“We are here to help the Lebanese army implement Resolution 1701, for the interest of the southerners,” UNIFIL spokesperson Yasmina Bouziane told Al Balad newspaper.
The Khirbet Selim incident doubtless will feature in the UN secretary general’s next report on the implementation of Resolution 1701, but the Israelis will not get their way.

There are two reasons for this. First, UNIFIL, frankly, does not want the headache that comes with the authority to search houses in its area of operations. Such a step will bring it into direct confrontation with Hezbollah and the local people of the south. The throwing of stones at French peacekeepers who attempted to search the facility that blew up in Khirbet Selim is just a small taste of what UNIFIL could expect if its mandate was strengthened. UNIFIL is able to operate in south Lebanon because of the goodwill of local residents. That has been the case since the UN mission arrived in Lebanon back in 1978. If UNIFIL loses the support of the local population, it might as well pack up its bags and go home. It does not mean that UNIFIL has to compromise to the extent that it overlooks the obligations of 1701, but it does require a healthy dose of realism when it comes to finding the best means of fulfilling its mandate.

Secondly, it is hard to take seriously Israeli grievances with Hezbollah’s alleged violations of 1701 when Israel continues to flout the resolution on a near daily basis with its overflights in Lebanese airspace and its continued reluctance to withdraw from the northern end of Ghajar, the border village split by the Blue Line.

The bottom line, which Hezbollah and the Israelis tacitly recognize in each other despite the accusatory rhetoric, is that neither side is going to allow a UN resolution to impede preparations for what both believe will be an inevitable future conflict. That’s why the Israelis still fly drones and jets over Lebanon, cling to northern Ghajar and ignore advice to pull out of the Shebaa Farms.

After all, Hezbollah can argue — with some justification — that it was not Resolution 425 of 1978 that finally forced the Israelis to leave south Lebanon, but the actions of the resistance. Similarly, Resolution 1701 will not prevent a fresh war from erupting if such circumstances arise.
Any preparations Hezbollah is undertaking, both south and north of the Litani, are in line with its conviction that another war with Israel is inevitable, if not imminent.
“As an Islamic Resistance, we underline the importance of preparedness due to our belief that Israel is treacherous and always plans wars when it has the opportunity,” Sheikh Naim Qassem, Hezbollah’s deputy leader, told me in a recent interview.

The Israelis have learned the lessons from the 2006 war and are finding new means of dealing with the threats posed by Hezbollah. Hezbollah, too, has undergone a post-action assessment and drawn up new battle plans which it hopes will keep it one step ahead of its Israeli foe.
“Hezbollah has been absorbing the lessons of the July [2006] war,” Qassem said. “We have developed the positive aspects [of the military performance in 2006] and dealt with its negative aspects. I can say that the preparations of Hezbollah today, at all levels, are much better than they were before and during the July aggression.”

Nicholas Blanford is the Beirut-based correspondent for The Christian Science Monitor and The Times of London

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Lebanon

Prostitution – The business of sex

by Ben Gilbert
written by Ben Gilbert

 

Lebanon’s beaches, nightclubs and hotels are packed this summer with visitors spending cash and enjoying all the country has to offer, including the sexual services of women.
One of the main outlets for such activity is the ubiquitous super nightclub business. There are around 130 licensed super nightclubs in Lebanon, where women from the Ukraine, Russia, Morocco and the Dominican Republic work as “artists.” Lebanese women are prohibited from working in these establishments, and “families” are not allowed to enter — meaning Lebanese women cannot enter, even as customers, although foreign women can.

The nightclubs’ owners characterize their sector as a legitimate and legal business model that presents entertainment and brings women and men together. The super nightclub business is regulated by the government, with permits given by the Ministry of Tourism and oversight by General Security. The super nightclub owners are represented by a lobbying group that includes other, more benign sectors of the tourism industry: the Syndicate of Restaurants, Cafes and Pastry Shop Owners.

But super nightclubs also serve as a platform for prostitution outside the venue’s walls — sometimes only as far away as an adjacent hotel. The club may or may not take a direct role in arranging and profiting from their female employees’ illegal activity.

How it works

In mid-July, a 21-year-old prostitute from the Dominican Republic danced onstage at a super nightclub in the Maamaltein district of Jounieh. She wore white denim-shorts cut just below the crotch, stiletto heels and a tight t-shirt that stopped just above her navel. She also wore braces on her teeth. Let’s call her Julia.

Men are not allowed to speak with artists like Julia at super nightclubs unless they pay for it. Customers pick the woman they want to talk to by walking through the club or seeing the woman dance or perform on stage. Many clubs offer a “cabaret” beginning at midnight, where women perform dance routines to European and Arabic music and swing on polls dressed in a variety of tight, low-cut and short-skirted costumes.

In order to speak with one of the female artists, a customer must order “champagne” or “picolot,” and select the woman he wants to sit at his table. The champagne has nothing to do with a bottle of alcohol: the term is merely super nightclub-speak for having one of the artists sit at a customer’s table for exactly an hour and a half. A “picolot” is similar “code” for having a woman sit with a customer for a half hour. Champagne usually costs around $60 to $80, and a picolot around $30 to $35.

A customer may negotiate one or two drinks to be included in the cost of the champagne. A picolot usually includes one drink. The super nightclubs are not cheap places to grab a drink without sitting with a woman: an Almaza beer costs $11.

Once the women are ordered, they arrive at the customer’s table, sit down and strike up conversation. A waiter brings drinks. Few of the women speak English, but as one of the female “artists” at a super nightclub said, “many Lebanese speak Russian.”

Often the women immediately initiate physical contact with a customer by putting a hand or arm on the man’s leg. Kissing is permitted in super nightclubs, as is light petting, but anything beyond that is strictly prohibited by most clubs, since it could get them in trouble with General Security.

But with the purchase of “champagne,” a customer also purchases the right to make a “date” with the woman, supposedly with her consent, within a week of the purchase.
The date is often code for sex. When an Executive staff member visited a super nightclub posing as a customer, Julia, the Dominican artist, made it very clear what services she could provide beyond dancing and sitting with customers.

“Sex costs $100 for three hours,” she announced bluntly. “Talk to the manager if you want to set a date.” When asked if it was possible to set a date that night, she said no, customers have to wait until the next day.

General Security regulates super nightclubs and, according to owners, no sex is permitted in the club. It’s also risky to allow a woman to leave with a customer at night. Lebanese government regulations require that Julia, like other artists in Lebanon, be in their workplace — the super nightclub — from 8pm to 5am. General Security and police can enter at any time and demand to see any of the artists.

At 5am, the artists must return to their hotel, where they are not allowed to leave until their “free time,” which is 1pm to 8pm daily. This free period is when the women can meet up with their customers from the night before. General Security requires the “telephone number and the car’s registration card of the person accompanying” the woman be noted at the hotel’s front desk, but beyond that, the woman and man are not monitored.

By law, Julia and her colleagues can only be taken out on “dates” during their free hours. But she hinted that perhaps other arrangements could be made. “Are you staying at the hotel?” Julia asked, referring to the same hotel, just above the super nightclub, where she and her colleagues live.

The business

Super nightclubs come under a variety of different regulations and legal authorities, including the Ministry of Tourism, General Security and the Internal Security Forces. According to Toros Siranossian, who represents the super nightclub owners in the syndicate of restaurants, nightclubs are licensed by the tourism ministry depending on their purpose: there are legitimate discos and nightclubs with a DJ, bars and super nightclubs that only feature a band, singers and a show, where women don’t sit with customers (the “family is allowed to enter these,” says Siranossian), and super nightclubs where the artists sit with the customer.

The vast majority of super nightclubs are of the latter category.

Customers rarely arrive to the super nightclubs in the Maamaltein district of Jounieh before midnight. Before that, artists like Julia sit around in groups, sipping drinks and eying the men who walk through the door. But by 3:00 a.m., the parking lot is full, and the men keep coming. License plates from Syria and the Gulf stand out in a parking lot filled largely with vehicles bearing Lebanese plates.

A super nightclub owner, who spoke to Executive on condition his real name not be used — let’s call him “George” — said his club usually has between 15 and 25 women per night. On average, 10 to 30 customers come in every evening. They mostly order women for champagne.

“I usually make $10,000 to $12,000 a month in profit,” said George. But in the summer, with Lebanese expatriates back home along with thousands of tourists, he says he usually makes more, ranging from $15,000 to $20,000 a month.

With 130 clubs in Lebanon, that is equal to around $23 million in profit for the minute sector per year — and that’s only the legitimate revenue.

A permit for a super nightclub is a one-time cost of $1,000. Nightclubs pay the women anywhere from $800 to $1,200 per month, depending on their ability to dance and perform. A woman also receives $5 for every “champagne” she is hired for, and $3 for every “picolot” sold to her customer. They can make up to $400 or $500 a month extra from the ‘bottles’ they sell, according to the nightclub owner.

Owners must deposit around $650 at General Security for each woman. Clubs must also pay around $2,500 per month for the hotel where the women live.

There are “two to four women per room, each one gets a bed, and some hotels have seven different clubs renting out the hotel rooms,” said a Lebanese man who will be called “Charbel” for the purposes of concealing his identity. Charbel is intimately familiar with the business because his family owns a super nightclub. Like many involved in the super nightclub business, he is also a frequent customer of many different clubs.

Charbel says other costs associated with running a super nightclub include bartenders, waiters, bouncers, drivers and managers for the hotel.

“We work in two shifts,” said George. “The first shift is at the club. The second shift is at the hotel.”

All these expenses cost him around $40,000 per month, including the hotel, the registration for the artists, electricity and insurance.

The nightclub owner says most of his customers are Lebanese (they like blonde women, he says), and older: He estimates 80 percent of his clients are between 50 and 60 years old.

“They like the company,” said George. “It refreshes their memory. Some are married. Some are divorced. Some don’t have partners. Some are shy. Some are lonely, and they come because don’t know how to build relations.”

Few struggling college students or construction workers can afford to be a regular customer at a super nightclub. Just talking to a woman and getting the right to take her out, costs between $60 to $80. Add onto that food and gas for a date the next day. If the man wants to have sex, he needs to rent a hotel room, and to fork out $100 to $200 to the woman.

The biggest competition between the clubs is for beautiful women. “I don’t care if you have a laser show, or how nice your chairs are,” the owner said. “The customers are coming for the ladies.”

To guard their investment, super nightclub owners keep a tight leash on their “product.” Club owners take their female employees’ passports. It’s regular practice for owners to lock the doors of the hotel between 5am and 1pm. Charbel says the women working for his family aren’t allowed out of the hotel for more than 30 minutes during their 1pm to 8pm “free time,” unless they have a date. Charbel says the restriction on the women’s movement is necessary.

“We are restricting movement for our own benefit,” he said. “Maybe she has a boyfriend and he doesn’t have the money to go out. He’ll come and pick her up and we won’t get our $66 for champagne.”

“If you don’t control everything, you will lose money. When dealing with women you have to control them. If you let them do what they want, you will end up with nothing.”

When asked if he’s essentially a pimp, George said absolutely not. He said he has no control over agreements and arrangements between customers and the women at his club. He sees his club as the facilitator, “like the computer linking two people together on Internet chat rooms,” he said.

Both Charbel and George said it’s not unusual for a client to fall in love with one of the nightclub’s employees. George boasts that 70 of his customers have married women from his club alone.

Eastern Europe to Lebanon

Club owners find women from around the globe through the use of what are called “impresarios.” These are the middlemen, the agents who find women in their home countries and arrange for them to come to Lebanon. George says he pays an agency based in Eastern Europe between $200 and $400 a month to find artists.

“There are thousands of agencies,” he said. “They send us photos and a CV by email, saying where the girl worked, what kind of dance she can do.”
Charbel says an owner has to be careful.

Lebanon trafficking in persons report 2009 – from the United States Department of State
Lebanon, Publication Date 16 June 2009

“The General Security reported 47 complaints of physical abuse, rape, and withheld earnings of foreign women working in adult clubs in 2008 – complaints that may have involved conditions of involuntary servitude. Most were settled out of court and the victims deported. These cases were hampered by a lack of resources; court backlogs; corruption; cultural biases, particularly against foreign women; bureaucratic indifference and inefficiency; difficulty proving cases of reported abuse; and victims’ lack of knowledge of their rights. Given the significant hurdles to pursuing criminal complaints in the Lebanese court system, and in the absence of alternate legal recourse, many foreign victims opted for quick administrative settlements followed by mandatory repatriation.” 

“Moreover, the government pursued policies and practices that significantly harmed foreign victims of trafficking. For example, authorities required that women recruited for prostitution under its “artist” work permit program be confined in hotels for most of the day and summarily deported them if they complained of mistreatment.”

“They’ll tell you the picture was taken one week or three months ago, when in reality it’s three years. The best way to bring nice women is to send someone to find them. But you will accept the pictures if you’re in need of women.”

Charbel says the women pay for their own plane ticket, which from Moscow costs between $600 and $1,000. The super nightclub pays the visas (between $200 and $350) and medical costs, which include a periodic mandatory pregnancy and sexually transmitted disease test. The cost of the medical test is around $250.

Artists’ visas are granted by General Security for up to six months. When she completes her contract, the artist is required to stay outside the country for the same period she was in Lebanon. Most club owners prefer the women stay up to three months, then return in three months, so they can create return customers.

Charbel says there are currently more women willing to come to Lebanon to be artists because of the financial crisis. But an increase in the number of willing artists has not brought wages down.

 

Prostitution or entertainment 

George and Charbel both say women in their clubs are never forced to go out with men, or to have sex for money.

“We don’t force women to make relations [have sex], that’s dirty,” the owner said. “It’s an agreement between you and the woman. We are providing a show, a drink and we are not pushing them to do anything.”

“In prostitution — you pay and you [have sex],” he said. “In our system, this woman signs a contract, it’s her own will. It’s forbidden for us to sell her — what she does is an agreement between a couple.”

There have been reports that women who have arrived in Lebanon from Morocco and Eastern Europe to work at super nightclubs are surprised to find out the business is a cover for prostitution. But Charbel says that in the past this used to happen, but not now.

“They know why they’re here,” he said. “People know what coming to Lebanon means. The women lie to their parents about which country they’re coming to. A woman I know tells her family she is in Hong Kong.”

Charbel says women will not have sex with a customer for under $100. “At the good super nightclubs woman will take $200 for sex.”
Super nightclub owners are quick to point out that although the women may be selling themselves, they’re making good money. If they spend two hours with three customers during their free time, and charge $100 per customer, they’re making $300 a day on top of their salary.

Charbel acknowledges the women who come to Lebanon to sell their bodies must have come from terribly desperate conditions in their home countries, but he says business is business.

“I feel sorry for them. They have good hearts,” he said. “But it’s like a circle. The woman brings the customers, we get the champagne money and they get their money.”

Betraying some of the national stereotypes super nightclub owners associate with their employees, Charbel adds that Eastern European women “love sex. They were born with a hunger for sex.”

“The first reason they come to Lebanon is for the money, the second reason for the sex. They enjoy it,” he said, adding that he has sex regularly with several women from super nightclubs.

Illegal but condoned

It is not widely known that prostitution is actually legal in Lebanon (see Lebanese Law of 2/6/1931), but the government has not issued a license for a legal “brothel” since the beginning of the civil war in 1975. At that time, all licensed brothels were located in downtown Beirut, near Martyrs’ Square in the Zeitoun district, famously featured in the film “West Beirut.” All the brothels were destroyed during the fighting.

Super nightclubs have filled the void left by the brothels, to a degree. According to Siranossian, who represents nightclubs to the syndicate, the super nightclubs were once legitimate establishments during Lebanon’s “golden” years of tourism in the 1960s. Back then, cabarets and super nightclubs featured real performers and artists: belly dancers, singers and musicians.

“But the war came and they all closed,” Siranossian said. “When the war finished in 1992, [the super nightclubs] wanted to reopen. But there was no business. So they couldn’t open in a clean way and bring artists without [the artists sitting at the table with customers], because they will lose money. So they were obliged to open [in their current form].”

Street level sex industry

Despite its seediness, the world of super nightclubs does appear to be a clean, transparent and well regulated industry compared to the plight of street-level and red light bar prostitutes. These women sell their bodies for anywhere from $2 to $30 dollars for sex. The red light bars mainly operate in Hamra. They are also licensed in a similarly complicated fashion as the super nightclubs, but basically “bar” means brothel, in the traditional sense of the word. News reports have documented how the system works, with a “Mom” running a number of women in the “bar” who service men on a walk-in basis.

“They have small secret rooms in the back,” said a source who works with prostitutes, and didn’t want their name used in this story. “So when the customer likes one of them, it’s very easy to take them to this room.”

An award-winning investigative report in An Nahar newspaper on November 27, 2008, said the women are mostly Egyptians, Syrians and Sudanese nationals. The bars are able to operate because the bar owners pay police to overlook the real nature of the establishments, according to those familiar with the business.

Then there are Lebanese women who sell sex on the streets, or out of a hotel or rented apartment, with or without the guidance of a pimp. One former Lebanese prostitute who spoke with Executive said she started selling her body on the streets of the Maamaltein district after she ran away from home at the age of 18. She ran away because her father used to rape and beat her. As a prostitute, she charged $20 to $30 for one or two hours of sex. She got out of prostitution thanks to Dar Al Amal, one of the few organizations in Lebanon working with prostitutes. Dar Al Amal works with around 60 women from three different centers around Lebanon. They also have a presence in all the women’s prisons.

“We are working with the poorest of the poor,” said the Hoda Kara, director of Dar Al Amal. “We are working with women from dislocated families, who were in orphanages, or [worked as] domestic laborers in houses. They have been abused, exploited, mistreated and violated.”

It’s a similar situation in the Palestinian camps. A report in Al Akhbar said women in the Sabra camp charge between $6 to $20 for sex while fellatio costs as little as 3,000 Lebanese lira, about $2. Dar Al Amal’s Kara also says the law is unfair to Lebanese women caught working in prostitution. If a foreign prostitute is caught in Lebanon, she will be deported. If a Lebanese woman is caught with a client in Lebanon, she will be arrested and put in jail. The man will be released, she says. Kara says that especially at this time, prostitution at all levels of society is a “very big business” in Lebanon.

“Because of the tourism here… there is demand,” she said. “And when there is demand, there is supply, for these women who are very poor, who need money, who are not supported [and] because they don’t have any other solution.”

Licenses for super nightclubs existed before and during the war, but the last ones were issued between 1993 and 1997, says the nightclub owner. Prior to his establishment becoming a super nightclub, he says it was a high-end dinner club, which he renovated for $1 million in the 1990s. But business dropped off and he needed money, so he rented the space to a man who wanted to open a super nightclub.

Although prostitution is illegal without a license, General Security gives “implicit consent” to unlicensed prostitution, according to the United States Department of State’s 2007 Trafficking in Persons Report.

The trafficking report says that in 2006 the number of visas issued by the Lebanese government to “mostly eastern European women to work in adult clubs as artists,” numbered 4,210. The trafficking report is the only concrete figure for the number of artists’ visas issued in recent years found for this article. Executive asked General Security to confirm this number, and to provide the number of artists visas granted in 2008 and so far in 2009, but officers were unable to provide the statistics by the time the magazine went to print.

Lebanese General Security commits a significant amount of manpower to regulating the industry. The General Security headquarters contains an entire artists “section.” The guidelines for “artists” in Lebanon can be read in English and Arabic on General Security’s website.

The artists are handed a booklet upon arrival at General Security, outlining their rights and responsibilities. General Security declined to provide a copy of the booklet to executive’s staff.

But according to news reports and people familiar with the booklet and the regulations, the booklet details the rules an artist must follow while in Lebanon. The booklet also contains an emergency phone number to call if the women are physically attacked, raped, held against their will or forced to do anything they don’t want to do.

A necessary state of seediness?

Given Lebanon’s other overriding problems, it’s not surprising there would be loopholes and problems with the regulatory system of super nightclubs. The 2009 US Trafficking in Person’s report said General Security reported “47 complaints of physical abuse, rape, and withheld earnings of foreign women working in adult clubs in 2008.” Those were complaints that “may have involved conditions of involuntary servitude.” Most of the cases, the report says, “were settled out of court and the victims deported.”

The report said if women complain about their conditions, they are “summarily deported.”

General Security and the Ministry of Justice were unable to provide the number of complaints by artists in 2007 and 2008, and did not respond to requests for information or an interview about the subject.

Super nightclub owners say the accusations of human trafficking are unfounded. Even the US State Department acknowledged that few women arriving in Lebanon to work in super nightclubs are unaware of what the job involves.

“Most of the women entered the country knowing that they would be working in adult clubs,” the 2009 trafficking report said.

Although Siranossian says he dislikes the super nightclub business that focuses on hooking men up with women, he justifies Lebanon’s super nightclub system by comparing it to the rest of the Arab world, where prostitution has no oversight.

“Here in Lebanon we closed the brothels, so now customers go to super nightclub[s] where they can take a woman out the next afternoon,” he said. “This is nothing. The most important thing is that the owner of the super nightclub doesn’t sell the woman.”

Siranossian calls the super nightclubs a “fantastic” solution to the problem of prostitution, because it allows the government to regulate and oversee the industry, somewhat akin to the way escort services operate in the US or Europe.

Charbel verifies this, noting that police usually stop in three or four times a week. “They’re checking to see if the woman is in the club, and hasn’t gone out with a customer,” he said.

Even then, it appears that circumventing the law is relatively easy. Police corruption in Lebanon is nothing new, and several people acquainted with the industry said that in the past, law enforcement has often looked the other way if enough money is offered.

“The law was permitting us,” he said. “When the police come, we’d pay a lot of money, and they’d forget everything for one week, two weeks,” he said. “But they’re putting too much pressure now. They refuse to take the money.”

Customers pay much more than usual if the woman goes out with them during nightclub hours, Charbel says. The average price would be $300 for the woman, paid directly to the super nightclub. She charges her own amount on the side. It’s a practice some owners say they are disgusted by.

“Some places are like a bordello, some are like pizza delivery,” George said. “They give super nightclubs a bad reputation.”

But it’s a risky business to break the law. If the police won’t take bribes and the nightclub owner gets caught with women outside the club during working hours, the club can be closed down for a month. The women can be deported.

Still, the employee and others familiar with the business say bribes, and connections to powerful politicians, make laws that regulate the super nightclubs hard to enforce all the time.

“Anyone who opens a super nightclub, for sure if he doesn’t have support at a high level, it’s not easy for him,” said one person familiar with the business, who did not want to be named. “If the [super nightclub] took this permission and they pay money, they can do what they want to do.”

But the nightclubs do appear to get into a lot of trouble with the police. Siranossian has represented the nightclub owners for years in the syndicate, and has sometimes been the industry’s envoy to General Security.

“There are many problems,” he said. “If the woman comes back late to the hotel, or if the owner sells the woman from the club… there are so many problems.”

Siranossian says if the syndicate just took care of super nightclub problems, he would be at the General Security every day, all day. The high maintenance nature of the sector appears to be a source of friction between the syndicate and the super nightclub owners; Siranossian says only 10 of the clubs pay their dues to the syndicate. He also says that due to the changing nature of Lebanon’s tourism industry, he expects clubs to close down, or switch to more legitimate nightclubs in the next few years.

Charbel on the other hand says he’s actually looking to open his own super nightclub somewhere north of Beirut. He says it’s “easy money” but it goes too quickly. “There are too many expenses.”

With the global recession continuing, it seems likely the wages required to bring young women to Lebanon will remain steady. However, the industry depends on cheap labor. The minute the price goes up, or better forms of employment can be found in other parts of Eastern Europe, super nightclubs will have a harder time surviving.

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Kurds and the oil curse

by Ranj Alaaldin
written by Ranj Alaaldin

Sitting on one of the world’s biggest reserves of oil, Iraq continues to be presented with a still difficult-to-answer question — are its vast hydrocarbon reserves an asset or a curse? The country has the third largest proven oil reserves in the world, with an estimated 112 billion barrels. But while Iraq’s oil is relatively easy and cheap to extract, tapping into these reserves is being impeded by political, technological and financial constraints.

In June, eight oil fields were made available in a televised auction, the first major tender since the 2003 US-led invasion. This, however, proved to be a rather embarrassing event as some 41 oil companies that had been invited to bid backed out, including ExxonMobil and other major players. Just one contract was allocated, a 20-year contract to BP and China’s National Petroleum Corporation to develop the 17 billion barrel Rumaila field.
The principal reason for this disappointing result could be put down to the current climate of uncertainty in Iraq amid security and political problems. But in reality, international oil companies were unwilling to bid due to the terms Baghdad offered and the lack of regulatory clarity.

The federal government in Baghdad and the Kurdistan Regional Government (KRG) are still, for example, yet to pass an oil law that provides for revenue sharing, production and exploration of Iraq’s oil. The stalled law is being opposed by the KRG because it gives too much control to Baghdad, contrary to the intentions of the Iraqi constitution. Concerns stem from more than 70 years of financial dependence on Baghdad, tainted by deprivation of both people and land in the Kurdish areas.

The KRG, during the two-year impasse over the proposed law, has enacted its own oil law, developed Kurdistan’s resources (Kurdistan holds an estimated 45 billion barrels of oil reserves), and independently signed more than 20 exploration and development deals. The federal government deems these illegal and void since, it argues, all contracts must be submitted to Baghdad. But the failure to pass the hydrocarbons law has hindered foreign participation in the energy sector and therefore development of Iraq’s dilapidated oil infrastructure.

There is also a level of intricacy surrounding it all. The oil ministry offers international investors a service contract whereby companies receive a fee for the oil that is produced as opposed to a share of the oil itself. In contrast to the terms offered in other parts of the region, oil companies that invest in Iraq will have to be content with a lack of ownership over the oil they produce and an inability to benefit from fluctuations in oil prices.
Then there is uncertainty over the regulatory environment, given the lack of transparency as to whether any deals will be ratified and implemented.

The KRG, however, does provide ownership over physical barrels of oil. Baghdad rejects this model, rendering illegal any contracts concluded pursuant to this format, and blacklists any companies that do so. The tussle is also a legal and constitutional one. Looking at the constitution, Article 111 states that “oil and gas are owned by all the people of Iraq in all the regions and provinces.” Oil and gas ownership, however, is not within the exclusive powers of Baghdad. Articles 115 and 121(2) give regions like Kurdistan legal supremacy on matters outside the exclusive powers of Baghdad. In the absence of any provision explicitly suggesting otherwise, Article 111, or federal government control over oil, is therefore subject to the laws of the Kurdistan region.

In any case, economic realities may force Baghdad’s hand. For example, in May the federal government allowed the export of oil extracted from the Tawke and TaqTaq oil fields, despite oil being extracted from those fields by the KRG in accordance with the production-sharing contracts it prefers. A production of 40,000 barrels per day (bpd) from Tawke and 40,000 bpd from TaqTaq promises to provide a potential $5 million per day (at $50 per barrel).

More than 90 percent of Iraq’s development is dependent on oil revenues. Iraqi Oil Minister Hussain al-Shahristani has been lambasted by the parliament for his ministry’s failings and languishing production, currently 2.4 million bpd and lower than pre-war levels. The country has a dilapidated oil infrastructure in desperate need of rapid reconstruction; its state-owned oil companies are also in need of increased investment and trained staff. Some experts have suggested that more than $40 billion is needed to put oil infrastructure back on track. Pragmatism should therefore pave the way for increased investment.

Strategic nous dictates that international investors make it to Iraq before others, so all eyes will be on the next tender when more than 13 yet-to-invest companies will be invited to re-submit bids for the seven remaining contracts. Investors will also be closely watching the ongoing wrestling match between the KRG and Baghdad.

Ranj Alaaldin is a Ph.D. candidate at the London School of Economics focusing on post-invasion Iraq

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Lebanon

Real Estate – Demolishing heritage

by Executive Staff
written by Executive Staff

During Lebanon’s civil war, bombs and rockets wiped out a substantial portion of the country’s architectural heritage. The war ended and the shooting has stopped, but the destruction of historic buildings has not. Every day, demolition teams tear down old houses and bulldoze hundred-year-old gardens. Tall concrete towers replace the houses, overshadowing the few historical neighborhoods Beirut has left.

Heritage activists are trying their best to preserve the few old ‘Lebanese houses’ still standing in Beirut. But their efforts are largely in vain, as there is no law to protect old homes and preservation is low on the list of priorities for the country’s politicians.

“We have failed,” says Fadlallah Dagher, an architect and a member of the Association for Protecting Natural Sites and Old Buildings in Lebanon (APSAD).
 
Too few on the list
Activists have lobbied the government to enact a heritage law, but so far they have not succeeded. The only law issued dates back to 1933, when Lebanon was under the French Mandate, and protects buildings constructed before 1700. Activists say this law is better than nothing, but does not protect the majority of Beirut’s old buildings.

“This law is very old and outdated, buildings [built before 1700] are very few,” Dagher says. “We do not have any legal support, the only thing we have is the famous list of buildings that should not be demolished.”

In 1999, the government issued a directive listing 220 historic buildings protected from demolition — unless the minister of culture says otherwise. Kahtib & Alami, an architectural and engineering consulting company, created the list, which groups historical building into five categories: A,B,C, D and E. “A” refers to buildings in very good condition, and “E” is the classification for those buildings needing significant work. Buildings classified as A, B or C are protected, while D and E can be torn down freely.

In 2007, parliamentarians drafted a law to reinforce the 1999 directive. It passed through the council of ministers and then disappeared, and is now assumed to be gathering dust on parliamentary shelves.

Mona Hallak, an architect and a member of APSAD, says the 1999 listing is the “worst thing that ever happened” to protecting old buildings, because the study classifies many buildings as D and E, although they are still in good condition. She also says the study concentrates on individual buildings, rather than whole clusters and neighborhoods, which are more important to preserve.

Demolishing an A, B or C building requires the approval of the minister of culture, and it would appear some ministers have been happy to grant permission. Hallak says that when Mohammed Youssef Baydoun was the minister, developers tore down around 22 of the B and C buildings. Since then, Hallak says no one has removed any buildings from the list. The Directorate General of Antiquities (DGA), a division of the ministry of culture, holds the protected buildings list. The DGA declined to comment for this story, saying the issue is “hard and complicated for us.”

Political pressure plays a major role in determining whether a developer can demolish a heritage building. Whenever a historical site is torn down, whether it is on the list or not, activists begin to send letters to different government officials at the Beirut municipality and the prime minister’s office, in order for the work to stop. But they seldom reply, and the demolition normally continues regardless.

 “Without the law, it is just a bit of pressure here and there,” says Hallak.
While A, B and C buildings are somehow protected, heritage activists are trying to fight for the remaining — those listed as D and E and those which are not listed at all. Activists are also trying to safeguard the historical image of some neighborhoods like Gemmayze, which is slowly being torn down, and soon will only host contemporary towers and buildings.

“In 50 years there will be nothing but tall buildings,” says Hallak.

Gemmayze losing identity
The Gemmayze area is one of the few neighborhoods in Beirut where the architectural history of the city is still preserved en masse, and its residents, with the help of some architects, are trying to keep it that way. However, the neighborhood faces a dilemma found in much of Beirut: developers tear down heritage buildings only to replace them with high-rise towers, which activists say destroys the area’s historical image.

Among the most recently demolished historical structures is the Medawar Khan, an Ottoman era roadside inn built from stone blocks and snuggled into the hillside at the bottom of Gemmayze near Beirut’s port. The khan, the last one in Lebanon, at one time hosted merchants and traders after long days of traveling to Beirut. In July, the DGA found out about the destruction of the khan. It sent two formal requests to the Beirut municipality and to the administrative governor of Beirut — one on July 2 and the other on July 7 — asking for the demolition to be stopped immediately.

But it was too late. The structure was not on the government’s list, the DGA could not act by itself since it does not have its own heritage police staff, and the municipality did not reply in time. By mid-July the khan was gone. Lot 146 (where the khan was) is owned by a Lebanese company called Consilium for Investment and Real Estate Development, which is foreign-owned.

Other historical buildings are also being torn down. For example, Makram Zeeny, president of the Gemmayze Development Committee, says the building were he lives on Nahr Ibrahim street in Gemmayze is being evacuated. The developer who bought it will tear it down. Zeeny says the building was constructed in 1927 and might be listed as a D-building so that it can be demolished later, even if it is still in good condition. Two other buildings on the small Gemmayze street are already empty and will also be torn down. A local said that the works started on July 21.

Since these buildings are not listed, or listed as D and E, there is nothing activists can do in order to stop their demolition. Even the DGA has no power to stop their destruction. Thus with no law, heritage activists can only sit and watch large parts of Beirut’s history being turned into dust.

“There are so many beautiful D and E buildings that are being torn down,” says Hallak.
“Slowly, we are losing everything we have.”

Neighborhood growing tall
Architects say it is more important to preserve a cluster than it is to safeguard one building.

“Tearing down a building is terrible… but what is worse is what is going to be built instead of it or beside it,” says Hallak.

For that reason, the APSAD is lobbying for a law that sets construction standards for historical neighborhoods.

“We were demanding a new construction law… but no one wants to review it because it is hard and complicated, especially in Beirut,” says Dagher from APSAD.

In 2006, the Director General of Urbanization (DGU) — the government body in the Ministry of Public Works and Transportation responsible for urban planning — issued a directive to set the construction standards for Gemmayze, so new construction would blend with the neighborhood’s traditional image. To the surprise of all the activists and Gemmayze’s residents, tower permits given before the directive was issued were exempted — although that was the reason why the area was put under study in the first place. Residents submitted a petition to outgoing Prime Minister Fouad Saniora and the former Minister of Public Works and Transportation, Mohammed Safadi, requesting a reversal of the decision. But construction permits were given, and the towers were built.

In a 2006 statement, Joseph Raidy, the president of the Gemmayze Development Association (ADG) said that issuing a directive that applies only to certain segments while exempting the others only happens in a “Banana Republic.”

The government also commissioned a study of the St. Nicolas Stairs in Gemmayze in 2001. But according to Georges Abi Khalil, head of management and coordination at the ADG, no one is abiding by the directive. Many developers are building more stories than is allowed, then going to the municipality to compensate for the ‘mistake’ by paying money.
“The building beside us [on the St Nicolas Stairs] is listed, but they built two more floors, which is illegal,” he says.

Khalil also says archeological remains were found below a new building that hosts a restaurant on the stairs, but the developer ignored them.

“We filed many lawsuits… we stopped their work for six months… but nothing happened,” he says. “There was also a small road between the two buildings, which was there for 70 years, and they closed it.”
 
Paving over history
Back in the 1960s and 1970s, the Lebanese authorities planned two new roads in Ashrafiyeh; one in the Sodeco area, and the other in the Hekmeh area — both areas rich with historical buildings and beautiful gardens. The decree for the road in Hekmeh was signed again in 2008 by the caretaker Minister of Interior Ziad Baroud, outgoing Prime Minister Fouad Saniora, Lebanese President Michel Sleiman and other concerned parties.

However, according to Shafik Milan, the head of the general planning committee at the Beirut municipality, there is nothing new happening with this project. He thinks that it is very hard for this road to be built because of its very high cost, and the many buildings and gardens that would need to be destroyed.

“The road should be done before buildings come up, and not after,” he says. That is good news to the APSAD, who launched a campaign on March 20 against the road in the Sodeco area, which passes through Tabet street and would demolish seven heritage buildings.

Jack Tabet, the owner of the Tabet Palace, says unfortunately there is nothing he can do if the government decides to build the road. A third of his garden would be destroyed, and the foundation of his 13th century property will be damaged.

APSAD is trying to propose an alternative to this plan by shifting the road so that it includes the large parking area on the other side of the street, thus sparing historical buildings.

Dagher says that since the buildings included in this plan were frozen because the Lebanese government acquired them, Lebanese citizens should take the opportunity to safeguard the cluster and replace the road plan with an alternative. It is yet to be known whether the plans will go through.

Economic repercussions
Historic buildings not only hold sentimental value, they are also economically viable. Nada Sardouk, director general of the ministry of tourism, says the loss of Beirut’s history is having a negative effect on tourism. She also says that whole clusters should be preserved, and not only individual buildings.

“If I was the head of the Beirut municipality, I would have asked the government, the municipality and the ministry of finance to give municipalities incentives and say: ‘go ahead and buy these houses or go and be sponsored by a bank.’”

As a next step for heritage activists, they say they will wait for the new cabinet to be assigned, and will then push the parliament to pass the law to protect buildings of historic value. Even though the law took 10 years to be drafted, hopefully it will not take as long to be approved.

“If they will approve it, it will be great,” Hallak says. “If not, we will keep up the pressure.”

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Iran rifts in a dangerous time

by Gareth Smith
written by Gareth Smith

Ironically, Iran’s reformists have long feared a scenario in which a conservative government would first crush them and then reach an agreement with the United States and reap the domestic political benefits.

Could an agreement with the US, defusing tension over Tehran’s nuclear program, result from June’s presidential election awarded to Mahmoud Ahmadinejad with 63 percent of the vote? Could a deal be delivered by a single-minded, unified right wing in control of Iran’s organs of state?

In theory, yes. In practice, it is hard to see Iranian politics being so malleable, even if Ayatollah Ali Khamenei, the supreme leader, has emerged from the post-election protests still in charge.
While much of the American media has detected a military coup in the election and its aftermath, the claim is unsubstantiated. Even if Iran’s Revolutionary Guards Corps has increased its influence in recent years, overall control of the state lies with a group of clerics and non-clerics, civilian and military, who are subject to factional pressures and various vested interests. Iran is not North Korea.

But it is equally hard to believe the push and pull of factions will ease the chances for engagement with the US, even as the threat of an Israeli military attack increases.
On July 17, Ali Akbar Rafsanjani, veteran of the 1979 revolution, gave a sermon at Friday prayers in Tehran calling for unity, the release of detainees and the easing of restrictions recently imposed on the media. He echoed the argument from reformists and senior ayatollahs that complaints about the election should be addressed more thoroughly than the perfunctory official enquiry.

Rafsanjani is no liberal. Rather he has long been concerned by the international challenges facing Iran, and now believes its ability to resist them is weakened by internal strife.
Many others within the elite are just as restive. Ali Larijani, parliamentary speaker, was one of the first conservatives to question the conduct of the election. The conservative-controlled parliament can be expected to resist at least some of Ahmadinejad’s nominations for ministers after his inauguration this month for a second term.

None of this offers a propitious backdrop for talks with Washington. The shift to the right has over several years increased the influence of those most skeptical of engagement and removed those best placed to conduct it.
Many of Iran’s best diplomats — whether professionals or those more or less allied to Rafsanjani — were removed by Ahmadinejad in his first term. The team that conducted the 2003 to 2005 talks with the European Union, during which Iran suspended uranium enrichment as a “goodwill gesture,” has long been out of favor with those who are now in power.

During the presidential campaign, Ahmadinejad attacked those talks, even though they were endorsed by Ayatollah Khamenei. Conservative newspapers, including the state-owned Kayhan, have long argued against negotiations with the US, even though Ayatollah Khamenei in March accepted the possibility if Washington should “change its behavior.”
In seeking an interlocutor in Tehran, the US has long known it must talk to Ayatollah Khamenei, but President Barack Obama can hardly relish dealing with an Iranian leader facing an internal power struggle.

At the same time, the US president faces an American right and Israeli lobby energized by the well-publicized crackdown in Iran, which they say proves the Iranian regime is dangerous. Twitter-armed liberals and feminists in the Democratic party are just as outraged.
American law-makers are discussing an autumn deadline for tougher sanctions if Iran does not agree to talks, and public opinion is far more likely now to accept Israeli strikes.

None of this means successful engagement is impossible. Both Obama and Secretary of State Hillary Clinton have calmly insisted that nuclear talks between the leading UN powers and Iran should continue.
In a rare positive sign, the new head of Iran’s Atomic Energy Organization (AEO), appointed in mid-July, is Ali Akbar Salehi, an American-educated nuclear physicist. The vacancy arose after the resignation of Gholamreza Aghazadeh, reportedly disgruntled with the election.

Salehi, who holds a doctorate from the Massachusetts Institute of Technology, was the Iranian representative to the International Atomic Energy Agency (IAEA) between 1999 and 2004, including the period of the talks with Europe decried by Ahmadinejad. In 2003 Salehi signed, on Iran’s behalf, the additional protocol allowing snap IAEA inspections. His appointment to head the AEO will have been approved by Ayatollah Khamenei and seems unlikely to have been the president’s initiative.

But since Salehi left the IAEA five years ago, Iran has installed in its Natanz plant around 7,000 centrifuges, the devices used for enriching uranium, while the UN Security Council has passed four resolutions demanding Tehran halt enrichment.

The planned expansion of the program will widen the gap between Iran and the US. And the further each must go to compromise, the harder it will be to manage the process domestically. With recent events, Ayatollah Khamenei leans more than ever on those who believe Iran can and should confront the ‘Great Satan’ in Washington.

Gareth Smyth is the former Financial Times correspondent in Tehran

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Money Matters

IPO Watch – Still out to lunch

by Executive Staff
written by Executive Staff

One can hardly describe the recent pick up in initial public offerings in the Middle East and North Africa region as a recovery. As of July 22, the number of IPOs in 2009 stood at 11, down 75 percent year-on-year, while the total value of offerings fell to $1.9 billion, a fraction of the $12.5 billion raised over the same period in 2008.

Indeed, the MENA IPO market has become more talk and less do, pending clearer signs of a banking and real estate sector recovery, in addition to a turnaround in general economic activity, expected to take hold in early 2010. 

The average size of offerings has also dropped by 39 percent to $172 million, reflecting the cautiousness of companies in their efforts to raise capital. Even average oversubscription multiples have fallen off a cliff from 17.17 times in 2008 through July 22, to only 3.61 times over the same period in 2009.

Nevertheless, some signs of a recovery have emerged on the back of the three month global equity rally that started in March. Second quarter IPO activity accelerated to reach seven IPOs that raised $1.13 billion compared to just two IPOs raising $84 million in the first quarter of the year.

Following the weak upward trend, July saw the opening of two IPOs worth $676 million, up from only one worth $106.81 million in June. National Petrochemical Company’s $639.95 million share offering as well as Qatar National Bank – Syria’s $34 million IPO were the talk of the month as Saudi Arabia and Syria have recently become the bearers of the last IPO flames in the MENA region.

Both IPOs have attracted strong demand from investors, as Saudi Petrochem’s IPO was 52 percent covered on July 18, the first day it opened, while QNB – Syria’s IPO is reportedly seeing “surprisingly strong interest” in its first few days of a month-long offering. 

Saudi Steel Pipe Company’s IPO, which closed on July 3, was oversubscribed by 344 percent. The company offered 31.4 percent of its shares to the public, raising $106.81 million in just one week.

The lagging number of public offerings and the retreating equity markets have not limited some companies from planning future IPOs. Dubai-based and government-owned Aswaaq plans to offer 55 percent of its shares to the public during the first quarter of 2010. “We believe the economy will start rebounding in the fourth quarter of the year. When it does, we expect it to be at a slower pace and that is OK,” said CEO, Abdul Baset Al Janahi.

The Saudi government also said it may sell part of the $13.4 million shares of Tabadul, the Saudi state-run information exchange company, in an IPO in the future. Also in Saudi Arabia, the Shura Council recommended the sale of Saudi Arabian Airlines in an IPO instead of privatizing the company. Later reports citing Abdullah al-Ajhar, assistant general manager for public relations, said only part of the shares will be sold through an IPO.

To list is good
Listing has been a good move for investors and companies in July. Vodafone Qatar and Al Rajhi Company for Cooperative Insurance were the only two companies to list their shares on an exchange in July, and both rose 14 percent and 670 percent, respectively, on their first trading day, reflecting the positive sentiment surrounding new IPOs and listings in the region.

The Vodafone IPO in April in fact contributed to tripling the number of share issuances to three in the telecom sector, making it the only sector to experience a year-on-year increase in IPO activity. Issuances in the financial services, real estate and construction sectors in 2009 through July 22 stood at only six, down from 24 in 2008.

On a national basis, the number of MENA stock exchanges to have a share issuance has dropped from 11 to only the Saudi Stock Exchange (7), Damascus Stock Exchange (2), Qatar SE (1), and Tunis Stock Exchange (1) in 2009, through July 22. Amman Stock Exchange is the most notable absentee from the IPO market, after seeing the issuance of shares for 11 different companies during the review period. Amman’s missing IPOs appear to be for good reason: in early July, Al Tajamouat for Tourism Projects, an affiliate of Bahrain’s Unicorn Investment Bank, said its rights offering, which closed on June 21, was only 76 percent covered, raising only $21.4 million instead of the targeted $28.1 million.

The IPO market in the MENA region was hardly alone in its downturn, but is slowly losing out to foreign markets. Unlike the MENA region, global IPO activity appears to be returning with vigor following the announcement on July 22 that China State Construction Engineering Corporation received approval to raise over $7 billion in capital.

In June, China officially removed a ban enacted in September 2008 on new offerings, paving the road for massive IPOs on the Shanghai Stock Exchange. The State Construction IPO will be the world’s biggest since Visa’s $19.7 billion IPO in March 2008 and the country’s largest since PetroChina in October 2007. 

US investment firms, including Apollo and Alliance Bernstein, have recently created Real Estate Investment Trusts (REITs) that would raise almost $4 billion in capital through IPOs to invest in commercial real estate.

Going forward, despite the full-pipeline that is driving a medium-term positive outlook, IPO activity may slow further as market participants, especially in the Gulf, leave for vacation during the hot summer season and Ramadan.

Regional Press Network

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A divided Cyprus remembers

by Claude Salhani
written by Claude Salhani

Cyprus is part of the European Union but its problems are very much tied to the Middle East. July 20 marked 35 years since the Turkish invasion, the result of which was the division of Cyprus between the Greek Christian south and the Turkish controlled, and largely Muslim, north. Cyprus remains the only country in the EU to be divided and occupied by foreign forces.

The Turks call it an “intervention.” The government of then Prime Minister Bulent Ecevit felt the Turkish population of the island was threatened by a coup mounted a few days earlier by a group of Greek Cypriots favoring “Enosis,” or uniting the island with Greece.
The war that followed tore the island apart and produced staggering results.

Nearly 5,000 people were killed from a population of some 775,000. Almost 200,000 were displaced and 37 percent of the country was occupied by the Turks. If the numbers of internal refugees seems dwarfed when compared to other refugee crises, in relative terms, that would be the equivalent of 100 million Americans becoming refugees.

The conflict traces its roots to the back pages of history books. But let’s start just a few days before the war began, when the coup led by Nicos Sampson overthrew the Cypriot president, Archbishop Makarios. Sampson was a member of EOKA, the National Organization for the Cyprus Struggle, a far-right group founded in the early 1950s with the aim of uniting the island with Greece.

Sampson had been urged on by the junta of Greek colonels ruling Athens at the time to depose Makarios, thereby opening the way to Enosis, much to the concern of the island’s Turkish community. When Makarios escaped to one of the island’s British military bases, and from there to Britain, Sampson declared himself president.

Ecevit ordered the Turkish army to invade when Ankara’s demands that Sampson be dismissed fell on deaf ears. The invasion began at dawn on July 20, 1974 with a simultaneous assault by about 1,000 paratroopers on the capital Nicosia and an amphibious landing further north in Kyrenia.

I had arrived in Nicosia two days earlier to cover the coup and from my hotel room I had a front-line view of the war, literally. Pulling back the drapes in the early hours of July 20, I saw the sky filled with Turkish paratroopers. With that came the sound of gunfire as Greek Cypriot forces began fighting back. The Greek Cypriots were no match for the better trained and armed mainland Turks. The Greek Cypriots were inadequately armed and suffered from poor leadership. One thing they did have was courage and persistence.

From my perch in the Ledra Palace, a four-star hotel situated smack on the Green Line separating Greek from Turkish Nicosia, I saw Greek Cypriot soldiers, equipped with what appeared to be World War II vintage rifles, seeking shelter behind amplifiers and drums abandoned by the hotel’s band to exchange fire with the Turks around the clock.

Tales of atrocities going back more than a century, combined with those of the more recent 1963 civil war suddenly resurfaced, reviving hatred and fears that never really dissipated.
When revolts erupted all over the Greek-speaking provinces of the Ottoman Empire in 1821, the Turkish governor of Cyprus received permission to crack down on the rebels. The Greek archbishop and other prominent Greek leaders were arrested and hanged. The suppression of the revolt dissipated the Greek Cypriot’s hopes of joining the wider Greek rebellion. But it had a more nefarious, long-lasting effect; that of instilling a deep-rooted loathing of the Ottomans in the Greek Cypriot community. This is where the desire for Enosis was first born.

Britain took control of Cyprus in 1878 (with permission from the Ottomans), but with the outbreak of World War I, Britain annexed the island, turning it into a British Crown colony in 1925. Meanwhile the Turkish and Greek communities never learned to trust one another, and civil strife erupted in 1963, pitting the two communities against each other. The 1963 clashes brought United Nations troops to separate the two sides. UN troops were still deployed when Turkey invaded in 1974, and they remain there to this day.

Now, 35 years later, tourists have been flocking back to the island where Greek mythology says Aphrodite waded ashore. But if the goddess of love were to return, she would find some 43,000 Turkish troops still “intervening” on the island.

Andreas Kakuris, the Cypriot ambassador, pointed out to this reporter that if the United States had 120,000 troops in Iraq at the height of the fighting, why does Turkey need 43,000 when Cyprus does not represent a threat and there has not been a shot fired in 35 years? A good question.

Where does this leave Cyprus today? Talks between the two communities continue. The Republic of Cyprus holds a major trump card given that it is a member of the EU, and as such, has the power to veto Turkey’s accession into the EU — assuming that Turkey would eventually be allowed in.

Claude Salhani is editor of the Middle East Times and was in Cyprus when the Turkish Army invaded.

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GCC

Cityscape in Jeddah

by Executive Staff
written by Executive Staff

Saudi Arabia, the largest and the fastest growing real estate market in the Middle East, hosted the kingdom’s first ever “Cityscape Saudi Arabia” at the Jeddah Center for Forums and Events between the June 14 and 16. Although the event came amidst the most severe global recession in recent years, Cityscape was a success. More than 100 companies and organizations exhibited and there were an estimated 5,000 visitors.

“I didn’t expect such a big success in June,” said Ahmad Al Hatti, chairman of Cayan Investment and Development, the main developer of Jeddah’s $600 million Lamar Towers.

Exhibitors believe that the show was more a business-to-business event rather than a business-to-consumer event. The event allowed company representatives to meet with their existing contacts and establish new business partnerships. For example, Yasser Abu Ateek, general manager at Dar Al Tamleek, said one indication of the nature of the event was that there were no products for sale.

“There are no products, and when there are no products there is no retail,” he said.

Abu Ateek said he expected Cityscape to be bigger, but he still found it to be well organized and a big success considering it was the event’s first showing in the kingdom.

The Gulf’s powerhouse

The real estate market in Saudi Arabia is still growing fast, and continues to be ‘the Gulf’s Powerhouse,’ as stated in a 2008 report by global real estate services firm Jones Lang Lasalle. This growth is fueled by the increase in its population and the massive investments by government. According to a construction report released by market research firm Proleads, the number of real estate projects in the kingdom is 812 and are valued at $543 billion. A total of 460 projects valued at $289 billion are under construction, 30 projects are canceled (1 percent), 23 are on hold (3 percent), and the rest are in the design or planning process.

“In Saudi Arabia there is a slight slowdown in the real estate activity, but there are not fluctuations, at least not to the extent we are seeing in the United Arab Emirates,” said Al Hatti.

The real estate industry is expected to grow by around 6.7 percent over the next five years, according to a Saudi Chamber of Commerce 2008 report. Its share of gross domestic product is also expected to grow as the country continues to diversify its economy away from oil related activities — which account for some 35 to 40 percent of GDP.

Large developers absent

Despite the steady growth in Saudi’s real estate market, the global recession could be felt at Cityscape. Although more than 100 developers exhibited, some big names in the Saudi market were absent from the scene. Dar Al Arkan did not exhibit, neither did Arriyad Development company, Jabal Omar Development nor other important developers.

John Harris, head of KSA Jones Lang Lasalle, said that this first Cityscape was a trial for the Saudi market, and the developers were testing the waters to see if they should participate next year.

“Cityscape is relatively new [in Saudi Arabia] so there is a wait-and-see approach from the big players who were absent this year. They want to see and observe what could be achieved from Cityscape to decide if they are going to be in next year or not,” Harris said.

Amro Nahas, acting chief executive officer of Al Oula International, said starting slow is normal.

“I didn’t find any big names at Cityscape, but even in Dubai, it wasn’t better when they started,” Nahas said. “Yet people showed much interest for the first time and the footfall was quite respectable.”

Top 10 Saudi civil projects under construction or in design

Source: Proleads

Cityscape Awards

On June 14, Cityscape Saudi Arabia Real Estate awards were held and five prizes awarded to the most innovative and sustainable projects.

“Across all the awards..all we wanted [was] to recognize projects that had innovative and sustainable design, functionality with efficiency and we wanted to reward designs that showed cultural as well as environmental sustainability,” said Deep Marwaha, exhibition director at Cityscape Saudi Arabia, according to the exhibitor’s press release.

Emaar the Economic City seized two of these awards, the first being “Best Future Waterfront Development” for its project Waterfront Village at Baylasun. The second award for “Best Future Residential Development” was for the Hawadi project.

“Best Built Commercial / Retail Development” was awarded to Alandalus Property Company and Mohammed Ahabib Real Estate Company for their Al-Andalus Mall project.

The fourth award was for “Best future commercial / retail development” and was won by RA-YEK Real Estate for their project Al Ajlan Tower. The fifth and last award was for “Best Urban Design and Master Planning,” given to the developer Davis Brody Bond Aedas for the project The New Jeddah Master Plan.

Affordable housing needed

The issues Saudi real estate stakeholders stressed the most at Cityscape were the need for affordable housing and the new mortgage law in the kingdom. The Saudi population is expected to increase 32 percent and reach 33 million in the next 10 years, according to the Department of Economy. With no attention given by developers to the middle income segment — which constitutes the biggest chunk of the market — the housing shortage is increasing significantly.

According to the Saudi Arabia Investment Fund (SAIF), the housing sector accounts for more than 75 percent of the real estate activity in the kingdom, and 2.5 million housing units have to be delivered by 2020 to meet the demand. In value, SAIF says that $20 billion will be needed yearly to bridge the shortage gap.

“Saudi Arabia needs to consider the right balance between the development of high-end, medium and low-end,” said from Al Oula’s Nahas. “Municipalities have to play a role in planning and providing the right information for developers. Definitely the residential mid-market needs special attention.”

Currently, real estate developers are offering properties too expensive for the middle income segment. On the other hand, the low-income  market does not have that problem because it can benefit from government support through the Real Estate Development Fund, the King Abdullah Housing Program and other means.

“The government has to find a solution [for the middle income segment]” said Abu Ateek.

The awaited mortgage law

The lack of affordable housing is not the only reason Saudis cannot buy a home. The shortage is also caused by the absence of a mortgage law, which makes long-term loans very hard to obtain. Until now, buyers had to either pay cash for their homes or take personal short-term loans to be able to pay. Sky high property prices and the lack of a mortgage law helps contribute to the fact that 60 percent of Saudis still do not own a house, according to the National Society of Human Rights in Saudi Arabia.

The country expects to implement a mortgage law by the end of the year, much to the delight of developers, banks, buyers and real estate agents.

 “With the regulations, banks will be more comfortable in securing and guaranteeing financing for buyers,” said Al Hatti from Cayan Investment and Development.

The mortgage law is not the only initiative that the government has undertaken to protect the kingdom from the effect of the crisis. An Escrow law was also issued in February this year which prohibits the sale of off-plan properties without approval from the Real Estate Commission.

“The Escrow 2009 plan is not applied yet but it will guarantee for all parties, customers, financiers, developers and others a lot of work and that real estate will play a bigger role in the kingdom’s GDP,” Abou Ateek said.

“The good steps will pay back…and hopefully in the next six months we will see the fruits of all efforts made,” said Nahas.

Despite the crisis spreading its effect on the regional real estate market, Cityscape remains one of the most important property shows where real estate players gather and interact. And even though Cityscape in Saudi Arabia was not as vital as it possibly could have been, it is considered a good start, given the conditions.

“Taking the crisis into consideration, it was a fair turnout and a respectable success,” said Nahas.

Al Hatti added that “It feels like the end of the crisis and it is a positive feeling.”

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Levant

Stitching the economy

by Peter Grimsditch
written by Peter Grimsditch

Last month Turkish Prime Minister Recep Tayyip Erdogan announced economic stimulus measures designed to put the nation back to work and the economy on the path to recovery. Tax cuts, exemption from social security payments, relocation expenses and subsidies for intern on-the-job training were part of what Erdogan described as turning a “crisis into an opportunity.” On paper, the plan looks sound.

For investment purposes the country has been carved into four zones, from the least developed east to the most developed north-west. As an incentive for new investors to  set up shop in eastern Turkey, start-up businesses will see corporate tax rates cut from 20 percent to 2 percent, social security contributions exempted for seven years, and a subsidy of 5 percentage points on the interest rate for Turkish lira loans for business start-ups, to a maximum of TL500,000 ($325,000). Smaller versions of the same formula will apply to the other three regions.

Sweetening the pie

The textile industry, a chunk of which has been exported to Egypt, is among several areas singled out for special treatment. Any company owner willing to transfer their operations, lock, stock and barrel from either of the two richer zones to either of the two poorer zones will have the corporate tax rate slashed from 20 percent to 5 percent, all relocation expenses paid and be exempted from social security payments for five years.

There are, inevitably, some conditions. The move has to be made before the end of next year and the company has to employ at least 50 people. The name of Erdogan’s game here is to spread the productive economy more evenly around the country. With the state subsidies and lower salaries paid in eastern Turkey, overhead operating costs would be cheaper for those who take the plunge. What they also face in parts of the region is a transport infrastructure in need of a vast overhaul and a local labor pool drawn from the least educated slice of the Turkish population. In any case, no one has explained how creating jobs in one area by making people redundant in another can be counted as a net gain.

Indeed, the unemployment rate has reached a worrisome 15 percent. For that reason, the prime minister included in his announcement an employment package that will pay 200,000 people $9.70 a day to join on-the-job training program, while providing jobs for another 120,000 others in school and health center maintenance, tree planting, erosion control and caring for parks.

“The government is determined to turn around the economy whatever the costs,” Erdogan said.

Perhaps mindful of continuing talks with the International Monetary Fund on a new standby agreement and differences between the two sides on tax and spending policies, he added that none of the measures would involve the “slightest concession to fiscal discipline.”

The IMF appears unconvinced. Later in June, director of the IMF’s European Department, Marek Belka, said Turkey may need to cut its spending levels to achieve financial sustainability. Speaking in Washington, Belka was quoted by the Reuters news agency, saying, “No matter if there is an IMF program or no program, the Turks themselves have to make the necessary adjustments, fiscal cuts if necessary or longer-term reforms both on the expenditure and tax side, so that we can both agree that the fiscal situation is under control in the longer term.” The last agreement expired in May 2008.

Hope makes for happy markets

Belka’s remarks came the day after IMF First Deputy Managing Director John Lipsky held talks with Turkish authorities in Ankara. The agenda was ostensibly preparations for the annual meetings of the World Bank and IMF governors to be held in Turkey in October. Although there were no substantive talks on a new loan agreement, both the Istanbul Stock Exchange and the currency improved simply on the possibility of a deal.

The current talk in Ankara — that an agreement could be signed by August — is reminiscent of the political gossip put out every month since last October. This alternates with suggestions that the Turkish economy is sound enough to survive without an IMF loan anyway. Certainly, the Turkish government appears in no mood to don an IMF straitjacket and abandon its current policies.

Peter Grimsditch is Executive’s correspondent in Istanbul

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Levant

Water from a desert well

by Executive Staff
written by Executive Staff

Jordan is to construct a $1 billion pipeline to transport drinking water from the Disi valley in southern Jordan to thirsty Amman in the north. Most experts welcome the project, yet wonder what will happen to agriculture in Disi, which has depleted its aquifer by almost one third. And, even if agriculture is halted, will there be enough water to make the costly pipeline worthwhile?

First initiated in the late 1990s, the Disi Water Conveyance Project (DWCP) aims to supply Amman with 110 million cubic meters (MCM) of water annually. The project was long regarded as too costly, yet the Jordanian government in 2007 contracted Turkish construction firm GAMA to implement it. Construction will commence in early July 2009 and is due to be completed by 2013.

“The project costs close to $1 billion,” said DWCP manager Othman al-Kurdi at the Ministry of Water and Irrigation in Amman. “It includes drilling some 55 additional wells in the Disi area and the construction of a 325 kilometer long pipeline to Amman, as well as two pumping stations and water reservoirs near Amman.”

The project is funded by low interest loans from Europe and the United States, and some $300 million from the Jordan treasury. Upon completion of the DWCP infrastructure, GAMA is entitled to exploit the system by collecting water tax revenues for some 21 years, after which the government will take over.

“I can say with a high level of confidence that Disi will supply us with 110 MCM of water annually for some 50 years,” said Al-Kurdi. “If all circumstances work in our favor, it may even supply us with water for an additional 10 to 15 years.”

Asked what will happen to the use of Disi water for agriculture, he replied sharply: “No politics. I told you before: no politics. All I can say is that our priority is drinking water.”

Disi’s aquifer

On the main road through Disi, the significance of water in the desert valley becomes clear.  While land on one side of the road is blessed with melons, grapes, olive trees and cypresses, the other side is a barren sandy plain that seems to have fallen straight off the moon.

The striking difference between the two sides of the road is due to irrigation. In the 1960s, a fresh water aquifer with a depth of up to 1,000 meters was found in Disi. The  mixed layer of sand and water measures some 360 square kilometers and stretches well into Saudi Arabia. Since the 1980s, both Jordan and its bigger neighbor have increasingly used the water for agriculture.

“I’ve been growing olives, grapes and potatoes for about 30 years,” said Abu Mohamed, a wrinkled 50-something-year-old with hands the size of spades. “Our products are first sent to Amman and then to markets in Jordan and abroad, mainly Europe and Iraq.”

Not all agriculture is in the hands of local Bedouins. All along the road, signs indicate the presence of the “Rum Agricultural Company.” According to Abu Mohamed, Rum and other firms are owned by people from Amman and Aqaba. “They mainly grow fruits like apples and apricots further inside the valley,” he said.

Deeper inside the valley one also finds the hilltop palace owned by the ruler of Dubai, Sheikh Mohamed bin Rashid al Maktoum, and his wife Princess Haya of Jordan. To liven up the view from the palace, Maktoum created an artificial lake in the valley below, which every winter attracts flocks of migratory birds. The Dubai billionaire has left his mark on Disi in more than one way, as he revived the ancient tradition of camel racing. Every Friday, animals, jockeys and spectators gather on a dirt track outside Disi village.

Next to the race track, surrounded by a layer of red mud, one of the valley’s 55 wells is under repair.

“There is a lot of sand in the water, which harms the pumping installation,” one worker explained, adding that he had heard about the upcoming pipeline to Amman. “We’ve seen the pipes along the road, but so far we have not been told anything.”

One of some 55 water pumping stations scattered around the Disi valley

In 1946, every Jordanian had access to some 3,600 cubic meters of drinking water per year. Today that amount has dropped to 160

More people with less to drink

Water is a scarce commodity in Jordan and, consequently, a highly political one. Not only is Jordan one of the world’s poorest countries in terms of water resources, it also has one of the world’s highest population growth rates. What’s more, throughout its history, the kingdom has had to absorb wave after wave of refugees. While in 1946 every Jordanian had access to some 3,600 cubic meters of water per year, today the water per capita ratio has decreased to a meager 160 cubic meters per year.

Due to the presence of illegal wells, exact figures are hard to come by. It is estimated however, that current demand is some 1,350 MCM per year, while annual water supply amounts to but 1,000 MCM per year. An estimated half of Jordan’s supply stems from groundwater extraction, which takes place at twice the rate of what is regarded as ecologically sustainable. At least 65 percent of Jordan’s water goes to agriculture, while the remainder is used for drinking water, industry and tourism.

“Disi water is good quality water from a non-renewable source and therefore should be used as wisely as possible,” said Elias Salameh, professor of hydrogeology and hydrochemistry at the University of Jordan, who has long been a vocal critic of agricultural practices in Disi and welcomes the pipeline to Amman.

“The wisest way is to first use it as drinking water and then collect and treat the wastewater to reuse it for agriculture and industry. Of every 100 MCM some 80 MCM can be used again.”

A quarter century drained away

According to Salameh, the past 25 years have been extremely wasteful. The Disi aquifer contains an estimated 7 billion cubic meters (BCM), up to a third of which has so far been used for agriculture. The problem with growing crops in Disi, where summer temperatures may soar well above 40 degrees, is that the evaporation rate in southern Jordan is twice as high as in north Jordan. In addition, most agricultural products are exported, which means Jordan is virtually exporting water. 

Currently, some 80 MCM of Disi water a year is used for agriculture, while some 16 MCM is used as drinking water in the rapidly growing city of Aqaba. The government has pledged to get rid of agriculture in Disi, yet that may be easier said than done. Certainly the local Bedouins will not want to give up their new-found agricultural wealth, for Disi does not exactly offer a wide range of alternative sources of income.

According to Salameh however, most agricultural production in Disi is in the hands of four agricultural firms owned by a group of very influential Jordanians, among them one of the richest businessmen in the kingdom and a former prime minister.

“Their agricultural licenses have a validity of 25 years and are set to expire in 2010 or 2011,” Salameh said. “Let’s see if the government will keep its promise.”

If it can keep its promise, Salameh said, the Disi project will help to temporarily fill the gap between water demand and supply, and relieve the immense pressure on Jordan’s northern aquifers, which all suffer from over-extraction. However, seeing that Jordan’s current population of some 6 million is set to double by 2025, the Disi pipeline is no long-term solution.

According to Salameh, there is only one long-term solution for Jordan: the Red Dead Canal. “A desalination plant combined with a canal from the Red to the Dead Sea is the only way to save the Dead Sea, and provide Jordan with drinking water.”

Mainly due to the overexploitation of the Jordan River by both Israel and Jordan, the Dead Sea evaporates quicker than it is replenished. As a consequence, the Dead Sea’s water line is receding by an average of one meter per year.

Although Salameh welcomes the construction of the pipeline, given that agriculture in the desert is halted, he still wonders if Jordan’s water and money could not have been spent in an even wiser way.

“I am no urban planner, but sometimes I ask myself: instead of bringing water to the people, why not bring the people to the water?” he said. “With the money spent on the pipeline, we could build a city and industrial zone near Disi and Aqaba, which would relieve the immense urban pressure on Amman.”

With Jordan’s population of 6 million set to double by 2025, the Disi pipeline is no long term solution

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