Executive Magazine

High time to set to sea

by Executive Staff July 10, 2009

written by Executive Staff

It hasn’t been smooth sailing for the region’s luxury yachting industry for some time now. Even before the global financial fiasco in the Middle East, shipyards had to contend with the exorbitant cost of oil that makes up most of the resin-based raw material costs of the industry.

“A lot of companies had to adjust their prices according to how much sellers were selling raw materials, and the price of a lot of boats soared,” said Camille Chamoun, chairman and chief executive officer at Lenco Marine, a Lebanon-based boat manufacturer. “You just had to adjust, you couldn’t do anything else.”

Nonetheless, the consumer appetite that was driving oil prices higher and filling up the coffers of regional governments kept the industry afloat. In turn, manufacturers continued to maintain high levels of supply to the market that ultimately proved to be unrealistic.

“The brands that built many boats and accumulated excess stock have really been hit hard,” said Alain Maaraoui, chairman and chief executive officer of Sea Pros Yachts, a yacht service and sales company with outlets in Lebanon, Kuwait, Egypt and the Emirates.

“Boats that were being produced for clients who had financial problems and had to cancel their order. The companies [producing the boats] are now contacting us to try to sell some of their boats.”

The cloud’s silver lining

That push, coupled with the plummeting price of oil and, by extension, raw materials for yacht makers, translated into a window of opportunity for anyone who loves the smell of the sea, and had a few million dollars to spare. But initially, it did not seem like the fish were biting. Even Saddam Hussein’s former luxury yacht, which includes a submarine, a helicopter landing pad and golden bathroom faucets, failed to entice yacht buyers when it was put on sale back in January, according to an Iraqi government spokesperson.

There are signs, however, that demand may be returning. The downturn resulted in boat valuations hitting all time lows as the rules of oversupply have pushed prices down, all but quashing the margins of boat-makers. Manufacturers are now looking to get rid of their excess stock and reposition themselves for better times.

“After the downturn you found a lot of beautiful yachts that were selling at half price,” said Chamoun. “A lot of boats were being sold at cost price.”

Many in the yacht industry agree that the time to make a buy is now, but it won’t last forever. The coming summer season means high-season for yachting and vacationing in the region. That will inevitably have a positive effect on sales in a region where boat shows still feature the latest, newest and glitziest products, albeit with a few less exhibitors. For instance, this year’s Dubai International Boat Show, the biggest annual boat show in the Middle East and one of the top five in the world, attracted 721 exhibitors from 50 countries at the Dubai International Marine Club. The event suffered only an 11 percent decrease in the number of exhibitors from the year before.

Fewer and fatter

The industry itself also looks to be consolidating as companies attempt to make themselves less vulnerable to the ongoing downturn.

“All the companies are restructuring, and there have been several mergers abroad, which means they have lowered production costs because of economies of scale,” Chamoun said.

The regional industry focus also seems to be shifting away from traditional markets, such as the Emirates, toward more liquid areas in the region.

“Abu Dhabi, Dubai and Kuwait have been hit hard but Lebanon has not been affected at all and there is a lot of demand, especially after the elections,” Maaraoui said.

The region’s largest economy, Saudi Arabia, also looks well positioned to harbor much of the excess supply being placed on markets, because the effects of the crisis there have been “marginal,” Chamoun said. “They are booming and building lots of marinas because there is a lot of cash flow out there.”

Today the chance to get a good deal still persists as excess stocks have not yet been depleted.

“The production that was available will be done in a month or two after the summer is over,” Maaraoui said. “There is a gap until the end of the summer at the most, so today there is an opportunity to buy.”

July 10, 2009 0 comments

Wings clipped but still flying

by Executive Staff July 10, 2009

written by Executive Staff

The Middle East has been one of the world’s fastest growing regions for luxury goods. From yachts to private planes, cars to clothes, the last decade saw the region’s luxury sales skyrocket as much as 20 percent per year. But now that consumers have tightened their purse strings, demand has fallen, and luxury market sales in such high-profile shopping destinations as Dubai have dropped as much as 45 percent. Some retailers estimate the region will rebound more quickly than others, due to the rising price of oil. But how are those tasked with making and selling luxury goods dealing with the downturn in the meantime? Some are focusing on long term customers, others on consumers looking for quality instead of flash. In this special summer section, Executive profiles the purveyors of premium goods and services in the Arab world to find out how they’re faring and strategizing in these challenging times.

There is little doubt that the region’s jet-setting executives have been humbled by the global economic downturn. As a consequence, the slump has left the high-flying Middle Eastern private jet industry feeling the turbulence of the downturn’s headwinds.

“Today, the rates we are offering are 20 to 25 percent below what they were before the crisis,” said Abed el-Jaouni, chairman of Imperial Jet, a multi-national aviation services group based in Lebanon, Saudi Arabia and the United Arab Emirates.

The global airline industry is set to lose $9 billion in 2009, according to the International Air Transport Association, and the business jet industry is by no means bucking the trend. Bombardier, the Montreal-based transport behemoth and the largest manufacturer of business jets globally, recently announced that it expects new orders to slow to 375 aircraft this year and not to return to last year’s level of 1,400 aircraft until 2013. The company also announced that it will lay off more than 4,000 employees and lower production due to the slump in demand.

Western woes

Most of the damage that has been done occurred in western markets where jets are produced. But if one compares the region to other more developed markets, the Middle East seems to have been spared the brunt of the downturn.

“The market in Europe is dead and it will continue to be a medium to bad year [for them],” said Jaouni. “But here in the Middle East it is picking up.”

Nicholas Meszaros, general manager of the Beirut-based Executive Aircraft Services, agrees.

“Manufacturers are looking more to the Middle East because there are still some deals to be done here, as opposed to the States or Europe,” he said.

It would be fallacious, however, to say that the entire region has flown right through the storm. Those who splurged during the upturn now seem to be in a tailspin.

“Most of the operators in Dubai had to take some dramatic decisions,” Meszaros said. “They have reduced their pilots, cutting down on routes and stops, and have cancelled a lot of aircraft they were waiting to get on management certificates.”

But those companies in the region that did not over-extend have done moderately well considering the economic turmoil afflicting the world today.

“The two biggest markets we have in the region are Saudi and Egypt,” Imperial Jet’s Jaouni said.

Other markets such as Qatar and Kuwait are expected to continue to do relatively well in the months to come, according to most observers.

The good news for the region’s executive jet industry is that the negative effects of the downturn on western manufacturers has led to bargains for the Middle East’s aviation service operators and jet enthusiasts.

“Manufacturers have stopped production on certain things and what has happened is that people have forfeited their down payment so the manufacturers are saying ‘take it for cheaper,’” Jaouni said. “I see the bottom and the right time to buy planes. [An] aircraft that was valued only eight months ago at $38 million is being offered to us today at $22 million.”

Landing in reality

With less disposable income and a risk-averse approach, manufacturers are less keen to build large, expensive aircraft. Operators are shying away from large aircraft as well, having less money for purchases, operations and maintenance.

“More people are looking at the smaller airplane, because when you are looking at 10 or more seats, you are looking at long-range expensive aircraft, and the demand has been less in this area,” said Meszaros.

While the skies over the Middle Eastern jet market may still be cloudy, aircraft services executives say the region’s market is already looking brighter.

“It is better today, it will get better come the beginning of next year and it will be much better towards the end of next year,” Jaouni said.

July 10, 2009 0 comments

North Africa

Tops in technology

by Executive Staff July 10, 2009

written by Executive Staff

Tunisia’s investment in information and communication technology (ICT) has begun to pay off. A flurry of recent reports has ranked the sector among the top in the region, highlighting its potential as a destination for the offshore operations of European companies. While such reports can only provide a rough comparison and rely on subjective factors, rankings from such diverse sources as the World Economic Forum, the World Bank, AT Kearney and the Commonwealth Business Council nonetheless underscore Tunisia’s advantages, including a proximity to key markets, a multilingual population, low costs and a competitive ICT and business environment. As European companies look to reduce expenses, the North African country could become a popular site for new developments.

Tunisia has benefitted from European corporations’ increasing tendency to locate ICT operations offshore. While Southeast Asia has emerged as a popular offshore destination, European firms have looked closer to home, relocating operations to Eastern Europe, the Middle East and North Africa. With English less of a priority, Tunisia’s location, which offers travel times of less than two hours to many European capitals and sits in the same time zone, has attracted many firms. Although North American firms still account for nearly 70 percent of offshore spending, according to a recent report by US-based consulting firm AT Kearney, European companies are catching up quickly. As European demand increases, so too will the flow of business to North Africa.

The entire region will likely benefit from this shift, but Tunisia stands out among its neighbors. For the third year in a row, the World Economic Forum’s report on ICT ranked Tunisia first in North Africa. Rated 38th of the 134 countries ranked in the report, Tunisia came in well ahead of its closest competitors (Jordan, 44 and Egypt, 76), and scored well on individual criteria, including political and economic environment and degree of ICT utilization.

Tunis hardwires ICT

This acknowledgement can largely be attributed to the government’s strong support of the ICT sector. In a bid to improve Tunisia’s knowledge economy, the government has funnelled money to training and education programs, as well as into ICT infrastructure, while new legislative incentives have also been unveiled to encourage offshoring. Tunisia’s 11th development plan (2007-11) calls for an investment of $1.91 billion into the local ICT sector, with a major focus on training and increasing employment. Although Tunisia’s population is relatively small, it is well-educated and multilingual — something the government hopes to take advantage of in the coming years, with a target of an additional 10,000 ICT jobs per year. Currently, 10 percent of university students are pursuing ICT studies, which bodes well for the future of the industry.

Given the pressures of the global economic downturn, Tunisia’s competitive labor costs and developed infrastructure are also attractive. These market advantages are bolstered by an encouraging legislative framework which has, amongst other things, paved the way for a series of IT industry zones. El Gazala, the nation’s flagship technology and communications center located just outside Tunis, is an example of the policy’s success. Open since 1999 and home to about 80 companies, including Ericsson, Alcatel-Lucent and Microsoft, demand at El Gazala has been so high that it is adding 36 hectares to its existing 65 hectares. Two other parks, at Sousse and Sfax, are also expanding, adding a total of 100,000 square meters.

The government has also worked to streamline bureaucracy in the ICT sector’s regulatory agencies in an effort to attract new companies. A one-stop shop to simplify administrative and legal procedures and to facilitate import and customs procedures for ICT was established in 2008. The process consolidates the activities of a number of oversight bodies and allows companies to complete most procedures online.

“Previously, customs procedures could take a week or longer. This speeds up the process,” said Jawher Ferjaoui, the general director of the digital economy section at the Ministry of Communications and Technology.

Tunisia’s “government readiness” rank, according to the World Economic Forum, is even higher than its overall rank (27th compared to 38th), and it ranks 8th for government prioritization of ICT. The state aims to increase ICT’s contribution to the economy to 13.5 percent by 2012, up 3.5 percent from the current level, which will bolster the sector’s position in the increasingly competitive market for offshore ICT services.

July 10, 2009 0 comments

North Africa

Development’s new digs

by Executive Staff July 10, 2009

written by Executive Staff

Private developers are moving to establish a permanent foothold in Algeria’s largely untapped real estate market, with a number of sizeable projects due to break ground in the coming year.

Following nearly a decade of strict financial restrictions and political instability, the recent glut of petro-dollars has helped fuel a massive increase in the construction and real estate sectors, drawing in foreign investors and nurturing domestic developers.

Gulf investors have flocked to Algeria to develop its 1,200 kilometer coastline. Some of the Gulf’s more prominent property investors — including Emaar, Gulf Finance House and Al Qudra — have unveiled billion-dollar plans for commercial, residential, tourist and mixed-use projects in and around Algiers.

Among the more prominent developments is the new megaproject by Emirates International Investment Company (EIIC), the $4.8 billion Dounya Parc, a nearly 7 million square meter greenbelt around Algiers. The company also has unveiled plans for the $322 million beachfront Ain Chorb tourism village, which the group is developing with the Kuwaiti Investment Group. Projects of this size represent a massive step forward for the Algerian market, although the lack of precedent means that such developments often face a lengthy land acquisition process requiring coordination with both ministries and local authorities. However Camille Nassar, CEO of EIIC Algeria, said the country’s enormous commercial potential was a crucial incentive.

Europe and China look to the Maghreb

Gulf investors are not alone in looking to enter the Algerian market. Swiss-based Société des Centres Commerciaux d’Algérie (SCCA) is overseeing the construction of Algeria’s largest commercial center, the $73 million Bab Ezzouar complex, which will include some 31,000 square meters of retail space. The China State Construction Engineering Corporation (CSCEC) has also expressed interest in expanding its Algerian operations by developing real estate.

Domestic investors have also joined in the headline grabbing events. Dahli Group’s $3.4 billion Alger Medina development in downtown Algiers issued a bond that was marketed directly to the public — an audacious move and the first of its kind for the country’s fledgling capital markets. The bond raised 30 percent of the cost of the project, which will provide some 1 million square meters of office space.

Following the completion of its ambitious low-cost housing program, the Ministry of Housing and Urban Planning will dedicate an additional $19.4 billion to building one million more homes. As one of the primary pillars of President Abdelaziz Bouteflika’s election campaign, the new residential space will be marketed through a network of more than 450 private and state-owned real estate agencies offering subsidized schemes.

With one of the highest per-unit occupancy rates in the world, according to the United Nations Development Program, Algeria has also tried to mitigate urban migration by launching a program to improve existing housing structures around the country. Nacer Djama, president of the Caisse National du Logement, said there is enormous opportunity for companies specializing in the construction of social housing in the coming years. With only 15,000 to 20,000 mortgages given out last year, Djama said the banking sector needs to catch up with demand for housing finance.

While Algeria’s real estate market offers a tantalizing target for companies that are increasingly squeezed by the global economic downturn, developers — and foreign companies in particular — still face a number of obstacles. The prime minister recently issued a decree on foreign investment, mandating that any project that benefits from government incentives must have a local majority shareholder.

Still, Algeria is a promising place for the committed long-term investor. The trials and tribulations of the market as it adjusts to these multibillion dollar projects will also help prepare the authorities to deal with the needs of the country’s increasingly dynamic real estate sector.

Sam Inglis is Executive’s Mediterranean correspondent, based in Istanbul

July 10, 2009 0 comments

North Africa

Invested in tourism

by Executive Staff July 10, 2009

written by Executive Staff

Like many of its neighbors, Morocco has a long-term tourism development strategy and has recently highlighted its flexibility by introducing a new program to follow its current tourism plan, called “Vision 2010.” That plan, kicked off in 2001 to chart development over 10 years, has been largely successful, but is nearing its conclusion. Now, the government has launched “Cap 2009” to retool the sector’s objectives and pump cash into the market in preparation for the upcoming launch of the “Vision 2020” development program.

Taken together, the two plans aim to boost arrival numbers, upgrade infrastructure and increase the quality of human resources. While Vision 2010 may fall short of its initial target of 10 million tourists by 2010, particularly given current economic conditions, the number of tourists rose 69 percent between 2001 and 2007, and another 7 percent from 2007 to 2008, bringing the total arrivals to almost 8 million. Hotel construction has been keeping pace with the increase and total bed capacity has risen more than 47 percent since the start of the plan.

Given that tourism attracts more investment than any other sector in Morocco and contributes around 6 percent to the economy annually, the government is taking proactive measures to ensure the momentum continues, even during the downturn. With tourist receipts decreasing 3.5 percent, from $7.4 billion in 2007 to $7.1 billion in 2008, Cap 2009 will seek to use Internet marketing to expand the arrivals base beyond the traditional European markets. The program will receive a budget increase of 10 percent ($6.2 million) in 2009 to facilitate expansion into Eastern Europe, Russia, the Gulf and China, among other markets.

Building from the top down

Domestically, Cap 2009 identifies Marrakech, Fez, Casablanca and Agadir as priority regions, which is consistent with the Kingdom’s promotion of high-end cultural and beach tourism. Efforts to target these areas are already included in Vision 2010. The components — Plan Azur, Plan Biladi and Plan Madain — aim to develop resorts, bolster domestic tourism and showcase cultural destinations.

Plan Azur is expected to be the linchpin of the three, as Morocco looks to capture some of the lucrative regional resort market. The plan outlines six new integrated resorts that will require investment of $5.7 billion and will result in the creation of 110,000 beds and 400,000 direct and indirect jobs. While the sun-and-sea model is relatively low-earning and faces serious competition, the government hopes that increased numbers of visitors will compensate for smaller margins of revenue.

Adding infrastructure is the primary goal of Vision 2010, with Vision 2020 expected to focus on human resources and build upon the expanded offerings. When the government launches the program next year, it will be geared towards bringing service quality up to the standard that many international consumers expect. Vision 2020 will also take into consideration requirements for sustainable and responsible tourism, as well as the protection of natural and cultural resources.

To accommodate the continued rise in arrivals, Morocco is working to upgrade its airports. Abdelhanine Benallou, the CEO of the Moroccan National Airports Authority (ONDA) said the objective is to reach a capacity of 32 million passengers by 2012, with current capacity at 23 million. In mid-April, the African Development Bank granted the Kingdom a loan of $334 million to enhance facilities at the Casablanca, Fez, Agadir, Marrakech and Rabat airports, which handle the bulk of the country’s air traffic. The loan will cover about 75 percent of the $445 million project, with the ONDA covering the remainder of the cost. ONDA is also working with the Moroccan National Tourism Office to reduce bureaucracy and has announced adjustments to airport taxes on chartered flights.

The government’s willingness to make adjustments across the tourism sector underlines the country’s adaptability, particularly during these difficult times. Cap 2009 will expand Morocco’s presence in emerging markets, which should help make up for a decline in arrivals from Western Europe. Meanwhile, targeted Internet marketing and increased bed capacity will develop a solid foundation that will help temper the effects of the recession in the short term, and provide the necessary framework for future growth under Vision 2020.

Morocco seeks to upgrade its airport capacity to 32 million passengers per year

July 10, 2009 0 comments

GCC

Going once, going twice

by Executive Staff July 10, 2009

written by Executive Staff

If you can’t sell it, auction it. That seems to be the mantra many in the United Arab Emirates’ troubled real estate market have adopted as they try to offload properties.

On May 19, Madania real estate company took the lead by auctioning four properties. Sherwoods, a real estate consulting firm, followed suit and auctioned 21 lots on June 4. Coldwell Banker also received a permit from the Dubai Land Department (DLD) and is planning to conduct an auction this summer.

But the auctions have run into some problems. Despite more than 100 people showing up at the Sherwoods auction, not one property was sold out of 24 on offer.

“There’s so much bad news, everyone’s scared and is holding on to their money… If I had access to the sort of money being asked for, I would buy,” Anwer Moola, a Dubai property owner, told The National newspaper. “A five-bedroom villa, for example, can still be rented for [$50,000 or $55,000] a year.”

But experts believe that the auctions are the best way to get an accurate price for properties in a market where buyers and sellers have vastly different ideas of a “fair price.”

“The auction removes the price and puts the product out in the market, and it allows people to look at it and make their opinion on what the property is worth,” says Raymond Kuceli, chief executive officer of Madania Real Estate. “The price that is generated gives an indicator to the seller on where exactly their property sits in the marketplace.”

Executives at Sherwoods say the properties auctioned so far have not been distressed assets, but units that have been put on the market with no interested buyers.

“None of the properties were taken from lending institutions, but we certainly have people who agreed to sell below the original price that they paid,” says Jeremy Mayhew-Sanders, head of investment & developments at Sherwoods Independent Property Consultants.

Still, both Kuceli and Mayhew-Sanders agree that there is a possibility for distressed properties to also be included in future auctions.

On the auction block

Property auctions are still new in Dubai and come at a time when the market is in its worst downturn, so the results were not surprising — both auctions bids failed to attain the lowest price set by sellers.

“We knew we would struggle to sell anything on the night of the auction, and if we did it would have been a great bonus,” says Mayhew-Sanders.

Kuceli says the outcome of the auction was satisfying, since some properties achieved competitive bidding and bidders showed interest after the auction was over.

“For us we had a good turnout, we had some bids. And we had negotiations afterwards, too,” says Kuceli of Madania’s auction, where two of the four properties on offer received bids.

At the Sherwoods auction, 17 bidders were present in the room and at least seven lots received bids. Bidders also showed interest after the auction, where a deal for a $1.6 million penthouse in the Emirates Crown closed.

“We are working on land deals which may or may not close, but I hope they will,” says Mayhew-Sanders.

Land department

Any company that wants to hold a public auction has to get an auction license from Dubai’s Department of Economic Development and an auction permit from the Land Department.

Companies can auction as many properties as they want, but should submit details for every property in order to receive approval. If all the information is submitted at once, the process might only take a couple of days, says Kuceli. The fee for obtaining an auction permit from the Land department is $545.

The Dubai Land Department also charges 2 percent of the sales price of the property. The system is for completed properties, and dealings with foreclosures and inherited properties have yet to be specified.

Planning ahead

The first two auctions might not have been very successful, but that will not keep companies like Sherwoods and Madania from planning future auctions in the hopes that they can build on the level of interest and success.

Sherwoods is planning another auction in November. Mayhew-Sanders says he is not sure how many plots the auction will include, but it will be easier than the first one.

“Our next auction will be very focused on dealing with stock that we feel confident we can sell,” he says.

As for Madania Real Estate, Kuceli says “we were looking… at the second week of July because we want to get more properties online.”

With eight properties confirmed and aiming for 15, Madania’s Kuceli believes more investors will show up, having familiarized themselves with the auction process.

July 10, 2009 0 comments

Comment

Iraq’s vertigo

by Ranj Alaaldin July 1, 2009

written by Ranj Alaaldin

Amidst the ongoing tumultuous events in the Middle East, Iraq has recently attracted little coverage within the international news media and, save for some macabre event like a mass casualty suicide bomber attack or the capture and murder of foreign hostages, rarely features on our television screens.

Yet, a recent surge in terrorist attacks manifestly suggests that taking Iraq off the radar may turn out to be a reckless and complacent endeavor. The bomb in Baghdad’s Sadr City at the end of June which killed more than 70 people exemplifies the threat. Therefore, a number of key areas must therefore be re-visited and assessed to determine where Iraq’s future lies.

The so far intermittent, but increasingly frequent attacks, should serve to provide a stark warning that leaving Iraq’s still nascent security and democratic institutions to fend for themselves in the drawdown of foreign troops could prove to have unexpected consequences. A surge in attacks could prolong the presence of foreign troops, preserving a status quo of violence and uncertainty, with serious ramifications for foreign powers with vested stakes in the country, and in an increasingly volatile region as well.

But the drawdown of British and American troops suggests Iraqis are capable of governing independently. Despite the aforementioned security threats, Iraqi security forces have proved their merits on previous occasions and, critically, have the respect of the population. Operation Charge of Knights in 2008 rid resource-rich Basra of Shia militias operating under the direction of radical cleric Moqtada al-Sadr, while elections went ahead in January without disruption and, more importantly, under the supervision of the Iraqi army, rather than American forces. Moreover, civilian casualties are down in Iraq by more than 70 percent in comparison with previous years.

Improving security becomes futile, however, in the absence of political reconciliation between Iraq’s myriad of ethnic and sectarian groups.
Of pressing concern are relations between the Kurds in the north and the federal government in Baghdad. Both continue to stand eyeball to eyeball over unresolved matters that have left the country in a state of paralysis. Iraq has yet to pass the hydrocarbons law as a result of disputes between the Kurdistan Regional Government (KRG) and Baghdad over who has the right to control and manage the country’s array of resources. As a result, huge reserves of gas and oil — Iraq has a 119 billion-barrel oil reserve, making it the third largest in the world — remain unexploited and deprived of the foreign investment needed to repair and upgrade a decaying oil infrastructure.

In addition, observers are concerned about a looming power struggle. For example, along with the Kurds, the Sunni political parties are becoming increasingly wary of a more powerful Shia-dominated Baghdad government, which they fear will serve to their disadvantage should American troops leave the country completely. Prime Minister Maliki recently added to such worries when he suggested that political consensus should be sacrificed for majority rule.

While disputes have for the best part been restricted to political exchanges, uncertainty and tension are being markedly transformed into violent confrontation. The disputed territories of Mosul and Diyala, for example, still exist as terrorist hot-spots, where the last remnants of Al Qaeda in Iraq and the Iraqi insurgencies, both Sunni and Shia, remain concentrated. Continued turmoil in these provinces is already forcing American commanders to reconsider the forthcoming troop pullout from Iraq’s cities, towns and villages by June 30 to their bases, and the complete withdrawal of troops from the country by December 31, 2011.

In Kirkuk, the oil rich disputed territory, Article 140 of the Iraqi constitution, which determines the status of the province — that is, whether it should be administered by the KRG or Baghdad — is yet to be implemented. The United Nations recently submitted a yet-to-be-made-public proposal to Baghdad and the KRG which outlined suggestions for remedying the problem. But continued intransigence is costing Iraqi lives, as portrayed by a recent attack which killed 73 civilians in Kirkuk.

Economic realities may, however, inject some hope. Iraq suffers from a budget deficit, and low oil prices have required the Iraqi government to slash its budget three times this year already — Iraq also depends on oil revenues to fund 90 percent of its reconstruction. Partly in response to this, the Baghdad government recently allowed Kurdish oil exports from fields administered by the KRG, suggesting that pragmatism can dictate policy more than ideology, and help pave the way toward reconciliation.

Where does Iraq stand? And where next for this country of painful paradoxes? The unavoidable reality is that the three pillars of a stable and prosperous Iraq are security, political reconciliation and the economy; still yet to be appreciated, however, is that these cannot operate independently of each other and unless equally respected and addressed, the US will find its presence prolonged and Iraq will head back to its previous state of bloody and costly degeneration.

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

July 1, 2009 0 comments

Comment

Peace at a crossroads

by Claude Salhani July 1, 2009

written by Claude Salhani

Propelled by United States President Barack Obama, the Middle East peace process is at an important and decisive crossroad. The next few months could see the greatest advances in the Arab-Israeli dispute since the conflict began 61 years ago. If successful, the outcome of Obama’s initiative could lead to a peaceful and permanent resolution of the Middle East crisis with the Palestinians finally having a homeland. The four thorny dossiers that have been holding up the process — the issue of final borders, the question of the Palestinian refugees’ right of return, the status of Jerusalem as capital of Israel and a future Palestinian state, as well as the security of Israel — could all be solved. That is the optimistic view.

Pulling in favor of the optimists is the gargantuan public relations campaign that was Obama’s speech to the Arab and Muslim world delivered in Cairo last month. The one important point to underscore is the announcement by the American president that solving the Middle East dispute is first and foremost in the national interest of the US. Also pulling for the optimists’ camp is George Mitchell, the US special envoy to the Middle East, who stopped in Lebanon and Syria on his recent tour of the region, where he is quietly working to move the peace process ahead. Also trying to push things forward is John Kerry who visited Syria once more.

And depending on where you stand, Jimmy Carter calling for Hamas to be recognized as a legitimate political party and removed from the State Department’s list of terror organizations, could be seen as either good or bad.
The reverse side of the coin, the pessimistic view, is that if this round of talks fails, then it could go the other way. If history is anything to go by, then there is little doubt that the next round of violence could be more explosive and more extreme. A brief scan through the history books of the last 60 odd years will back up that statement. What began as a dispute over real estate has now turned into a war of religion and some believe into a clash of civilizations. And what initially was a regional conflict has now spilled over the borders of the Middle East and onto the streets of America and Europe.

Fodder for pessimists is Israeli Prime Minister Benjamin Netanyahu’s reaction to Obama’s speech, and Netanyahu’s support for policies that advocate expansion of the settlements in the West Bank, which is a non-starter for resumption of the peace process.

In between the optimists and the pessimists lies much uncertainty. Yet what is clear is that the future of the Middle East is in the hands of the region’s leaders now more than it has ever been. History will remember the legacy these leaders leave behind and it will not be kind to those who miss this opportunity. The Palestinian cause has for much too long been used and abused to justify the continued status quo in parts of the Middle East, with the aim of keeping the current regimes in power. History, however, will reserve a special place for those who will ultimately bring peace and prosperity and democracy to the people of the Middle East.

It is time for the leadership in the region to realize the precariousness in which the region finds itself today, not only when it comes to the question of war and peace, but in regards to where the region stands in education, cultural development, scientific advances, social welfare and the rights of individuals.
President Obama understands the urgency of the situation and the importance of bringing peace to the Middle East. But the task is not going to be an easy one with all sides strongly entrenched in their respective positions. The fundamental reason for the difficulty in moving ahead is due to a lack of trust that permeates both sides of the conflict. Building that trust will prove to be one of the hardest steps in bringing peace to the region. Sixty-one years of hatred will require time and effort to overcome.

Arabs and Israelis are destined to live as neighbors on the same small piece of real estate. And as neighbors they have to coexist or risk perpetuating more violence in the Levant, and guaranteeing a turbulent future for their children and grandchildren. Is that the legacy by which they want to be remembered?
The two sides have no choice but to continue to live, if not with each other, at least next to each other. One does not necessarily have to love his neighbor, but one has to learn to live with his neighbor. One important caveat: all the pushing and prodding, arm-twisting and threatening, cajoling and guarantees of the United States to bring about a settlement in the region will be impossible to achieve unless there is a strong desire amongst those concerned to solve the crisis.

Claude Salhani is the editor of the Middle East Times in Washington, DC

July 1, 2009 0 comments

Comment

Slavery to emancipation

by Paul Cochrane July 1, 2009

written by Paul Cochrane

Expatriate labor rights and living conditions in the Gulf have become hot, contentious topics once again. The BBC was the latest media player to throw mud at the Gulf’s glitzy image when a reporter snuck into a labor camp in Dubai and secretly filmed living conditions, exposing the gritty, sewage swamped underbelly.

Dubai took badly to the coverage, as it has been prone to do whenever the international media sticks its nose in places it’s told not to, and the company involved has been at pains to show it was an unusual case. But what has driven the issue further into international prominence was Bahrain’s decision in early May to end the sponsorship system, the first Gulf Cooperation Council country to do so.

Manama decided to annul the longstanding requirement that all expatriate workers have to be sponsored by a Bahraini citizen. To be put into effect August 1, the government will be responsible for issuing work permits, which can be renewed every two years and will allow expat workers to change jobs without having to seek a sponsor’s permission. This is a significant step, ending a system known as “kafala” that effectively shackled workers to their employer, whether a construction worker or a general manager. For example, in Saudi Arabia, foreign workers cannot travel from one city to another without stamped official authorization from an employer, let alone hop on an airplane.
Bahrain’s bold move has garnered praise from human rights groups and international labor organizations around the world. The word now is that other GCC countries should do the same. Momentum is certainly picking up, with Qatar saying it is studying Bahrain’s move and wants to adopt the same policies, while the United Arab Emirates has signed an agreement with India and the Philippines to launch a project to improve contract workers’ conditions.

But as always with radical shifts in policy, Bahrain’s move is causing a great deal of controversy, foremost in its own parliament and among the local business community. One party, Al Wefaq, came under fire for failing to use its influence — it has 17 of the 40 seats in the lower house — to block a clause in the law that would require foreigners to have a minimum one-year contract. Businessmen say the ruling will be detrimental to the economy by putting the country at a competitive disadvantage, while businesses will be left to foot the bill for implementation costs.

That will clearly be the case, and Bahrain would stand to lose somewhat unless other Gulf countries do the same. On the other hand, Bahrain will become a more attractive place to work for expats, and the government won’t have to worry about embarrassing stories that scream of slavery and abuse; or face worker strikes, like the two that happened within the space of a week in Bahrain in early June. A headache in the short term is better than a migraine in the long term.

The GCC is of course easily singled out globally, given its exposure to the West and its estimated 13-15 million foreign workers, predominantly from Asia. But while the West chastises the GCC on labor rights, millions of Asians, South Americans and Africans continue to toil away in sweat shops to make cheap consumer goods for the West. Millions of migrant laborers also work illegally and often in poor conditions in the West itself.

But where the GCC is strikingly different is in the sponsorship law, and that it was foreign labor that physically built and manned the transformation of the Gulf we see today, constructing the tallest tower, one of the largest malls, artificial islands and seemingly endless real estate projects. The Gulf’s ‘unsung heroes’ have long been under-respected and underappreciated. It is also worth recalling the region’s own indentured past.

In Oman earlier this year I was reading the late British explorer Wilfred Thesiger’s book “Arabian Sands,” about crossing the Empty Quarter in 1950. He arrives at an oil prospecting camp outside of ‘Dibai’ with his two Bedouin guides, but while Thesiger is allowed to bunk down in the ‘European lines,’ his companions have to sleep in the ‘native lines.’ This disparity was further emphasized in Abdul Rahman Munif’s trilogy “Cities of Salt,” where the local Gulf Arab laborers that built the oil infrastructure slept under hot tin roofs and earned a pittance, while the Americans chilled out in air-conditioned compounds.

That period is still in living memory, as is Saudi Arabia only ending slavery in 1962. While that might be a difficult past to talk about, so is the present sponsorship system. The move by Bahrain to end it, and the discussion it has provoked in Qatar and the UAE, shows that workers rights do matter. It should also prove economically advantageous in the long run, given that old adage of “happy workers make productive workers.”

PAUL COCHRANE is the Middle East correspondent for International News Services

July 1, 2009 0 comments

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Pirated intellect bedevils WTO

by Riad Al-Khouri July 1, 2009

written by Riad Al-Khouri

Lebanon first applied to join the World Trade Organization in 1999, but now, a decade later, the country’s accession is still not a done deal — a time lag far longer than with most other past or current applicants.

At WTO meetings on Lebanon’s accession, an often raised issue is the state of intellectual property rights (IPR) in the country. Respect for IPR is a key condition of WTO accession.

The United States Trade Representative (USTR) placed Lebanon on a “watch list” in 1999 and then downgraded Beirut to the critical “Priority Watch List” in 2001 where it remained until 2007. It then upgraded Lebanon back to the watch list in 2008, and in its 2009 annual review, the USTR maintained Lebanon on the watch list.

Other Arab countries on the 2009 watch list include Egypt, Kuwait and Saudi Arabia. Though piracy-related losses incurred in Lebanon by copyright-based industries are estimated to have risen last year, Beirut nevertheless made progress in 2008. For example, concerning the problem of cable piracy, about 80 percent of the approximately 700 pirate operators last year signed up to become legitimate providers.

Yet, as a cursory look around Beirut and the rest of the country will show, there is rampant piracy of books, music, films and software in Lebanon, as well as a growing problem of counterfeit pharmaceutical products on the local market. Though Lebanon was one of the first countries in the region to have IPR laws, many of which have also been updated and improved over the past decade, a main obstacle is that such measures are not properly enforced. Lebanon is a signatory to several international agreements relating to IPR, but is unable to properly implement basic anti-piracy measures.

In 2000, the Lebanese government issued a customs law that prohibits the export, import, and stocking of goods infringing copyright. Punishment imposed by the country’s IPR law includes confiscation of illegal products and closure of stores in violation, but such measures are not taken often enough. Even when they are taken, they do not exact an appropriately tough punishment. For example, it is illogical to impose a $700 penalty on a shop owner who has been caught stocking thousands of illegal copies of dvds worth many times such a derisory amount. This leniency does not deter pirates.

Lebanon’s reputation as a haven for piracy is also partly due to a lack of awareness. The state has a role to play in enforcing intellectual property rights by creating awareness among the Lebanese people on the importance of such measures. It is insufficient to simply enforce the law; people should also be informed about the issues involved. Experts (mainly from Western countries and companies) come to Beirut to address businesses, the general public, the media and information technology companies on the need to respect IPR. Promoting the benefits of using legal software and other IPR goods focuses on awareness and education more than on enforcement; yet, the going is tough in an atmosphere of economic difficulty and lack of respect for authority.

Respecting IPR is a basic condition for joining the WTO. Lebanon acquired observer status at the WTO shortly after passage of the 1999 Copyright Law, but even if WTO admission was not on the table, IPR enforcement in the country would be a boon to the country’s many artists and other innovators. Sectors dependent on intellectual innovation are crucial to the Lebanese economy. Lebanon is among the top Arab countries when it comes to intellectual innovation. Copyright industries in Lebanon account for 4.5 percent of the country’s employment, generating more than half a billion dollars annually from sectors including publishing, music, theater, video, radio, television and software. A proper IPR culture would be good for all of these — as well as help in getting Lebanon admitted to the WTO.

Riad Al Khouri is senior associate consultant at the William Davidson Institute of the University of Michigan in Ann Arbor

July 1, 2009 0 comments