Executive Insights

Lebanon‘s election campaigns brash but empty of content

by Mark Helou & Ramsay G. Najjar
written by Mark Helou & Ramsay G. Najjar

The authors of Executive Insights have been invited by this magazine to offer their professional opinions and analysis to you, the reader. Executive magazine does not endorse the analysis of Insight authors, nor should the Insights be interpreted as reflecting the views or opinions of Executive or its editorial staff.

Never in Lebanon’s election history have the eyes and ears of citizens been saturated — some would even say jammed — with such an overwhelming quantity of colors, pictures, slogans and counter-slogans. Billboards, TV ads, YouTube clips and Facebook pages were ruthlessly employed to target the highest possible number of potential voters which, more often than not, ended up completely confused by the communication blitz. Now that the party’s over, many questions inevitably come to mind. What exactly led to this frenzy in political messaging, and to this particular type and style of communication? Was this an expression of a healthy democratic political scene or the symptom of an underlying fundamental dysfunction? What positive or negative impact did it ultimately have on Lebanese citizens in the context of the electoral process? And, most importantly, to what extent was electoral political communication reflective of the principle of accountability, which is a pillar of sound democratic practice?

It is no secret that the Lebanese political scene has been characterized lately by intensely polarized opinions, with a high proportion of citizens having already “made up their minds” concerning their vote. However, the existence of neutral or undecided voters coupled with reports that the election outcome would be fateful for Lebanon’s future and ultimately decided by a very narrow margin, kick-started an aggressive all-out campaign. Campaigns aimed to glean the crucial undecided swing votes and galvanize partisan voters, with each camp asking the citizen to “buy its products,” i.e., to vote for its candidates.

Though this analogy between a politician and a product might seem alluring at first, it is ultimately misleading. For although electoral campaigns were characterized by loud and incisive calls for action similar to the ones used to sell consumer goods, the campaigns (voluntarily or involuntarily) overlooked an essential difference between voting and shopping; shopping for a product could be a one-time purchase if you are unhappy with what you have chosen, while the act of voting could shape your life and that of your country for years. The hard-sell style that characterized pre-electoral communication resulted in the drastic downplaying of vital political content and substance which should normally translate into consistent electoral programs, clear political visions and concrete roadmaps. A glimpse at the pre-elections communication landscape indeed reveals the distressing scarcity of such elements.

Loud yet lacking

This void in ideas had a direct negative impact on all pre-electoral communication. An ancient physicist’s idiom tells us that “nature abhors a vacuum.” Unfortunately, nature does not always fill this vacuum in a good way, as the campaign has left us with the unpleasant aftertaste of a void filled by creative yet unsubstantiated slogans and counterproductive polemics. In other words, communication during the elections became an end in itself.

This does not mean, of course, that campaigns were lacking creativity, wit or humor. On the contrary, the ad professionals behind these initiatives demonstrated all these traits in sometimes amazing ways. Unfortunately, the excitement and buzz created by the creative campaigns resulted in the audience losing track of what is truly important, which is the need for consistent political content that has a strong message behind it. The slogans being plastered across Lebanon have thus become the trees that prevent us from seeing the forest.

Ad busting, which was often conducted with virtuosity by all political camps, gives another striking example of this lack of content. The “slogan wars” on billboards and on the Internet became a self fulfilling purpose, and had more similarities with a Byzantine quarrel than with a rational confrontation between ideas and programs which could fuel a healthy debate. Ironically, while the opponents were busy passing the hot potato to one another, they ultimately forgot about the “beef” of their communication and instead tried to compensate for this missing element by over-packaging their messages.

The reasons behind this anemic political substance are many. Without judging whether the political entities involved did or didn’t have any real content to deliver, one can try to explain this deficiency from a pure communication perspective. The first reason can be found in the absence of a communication vision emanating from consistent content which extends in time beyond particular events such as elections. Communicating such content and substance entails the deployment of constant and proactive communication initiatives (interactive websites, university conferences and publications) through which various stakeholders are targeted by consistent and regular messages. The strategy should also account for the existence of two-way communication channels (blogs, YouTube channels, Q&A sessions and town hall meetings) that will ensure that audiences’ concerns and ideas are heard and addressed through continuous dialogue and feedback.

Regular communication efforts would ultimately result in clearly conveying the position of the politician or party, the system of values they espouse and what their future candidates stand for. In the long term, this strategy would gradually build the party or candidate’s image and equity, and result in constant two-way liaising with stakeholders and audiences, ultimately entrenching positive perceptions while clarifying any possible misperceptions that stakeholders might have of the political group or politicians in question.

Masking the empty message

The absence of actual “beef” in their communication strategies has led political parties to entirely rely on advertising agencies in a bid to fill this strategic gap under the pressure of elections. Advertising agencies, in turn, have unleashed their creativity to successfully grab audiences’ attention. However, it is clear that this has generated scattered and ad hoc efforts that ultimately appealed to the voter’s primary reflexes — their ‘instinct’ — as opposed to their ‘mind.’ The lack of proactive and sustained communication has also forced parties to condense their ideas into the forms and channels that best met their tight time constraints, thus overly relying on catchy slogans and noisy billboards that did not express any political depth and, most importantly, did not showcase any realistic promise. Even the now famous “Sois belle et vote” campaign, which represented a much needed attempt to touch on the issue of women’s rights, was limited to a call for action that raised a prejudice and fell short of empowering Lebanese women.

This emotional and instinct-based approach to communication has obviously worked quite well, judging from the high voter turnout. Nevertheless, it remains short-sighted, as its impact is bound to be ephemeral and last only as long as the campaign itself. Moreover, this approach did not uphold a basic democratic principle underlying the concept of elections, which is the voter’s right to hold their politicians accountable for a specific program or vision. As a pillar of the democratic practice, the accountability principle should ideally be reflected in electoral political communication; it should inform citizens and empower them to hold a politician accountable based on his or her implementation of their program rather than on personal considerations, pure instincts and impulses or the politician’s ability to play on people’s insecurities and fears. By instituting a culture whereby politics is driven by programs and visions rather than tactical self-promoting considerations, short-lived alliances and even fear mongering, we would edge closer to a state-of-affairs in which representatives are held liable for their agenda and are voted-in on their ability to fulfill their set promises.

While political communication can become a precious tool in consolidating genuine democracy by promoting accountability, crude calls-for-action can have the exact opposite effect by transforming the democratic voting process into an empty shell and reducing the citizen to a mere ballot with no aspirations or rights. After all that is said and done, only when we elevate the democratic practice above the fray of political infighting and move toward a new social contract based on rights and responsibilities can we prove Oscar Wilde wrong when he said: “Democracy is the oppression of the people, by the people, for the people.”

With the June 7 election behind us, and despite its many imperfections, Lebanon should be proud of the feat it accomplished as it proved to be a role model for free elections when compared to neighboring countries. Lebanon has the potential to mature more and, as such, will remain an example to follow and an authentic and aspiring Arab democracy.

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Banking & Finance

GCC – A currency shortchanged

by Executive Staff
written by Executive Staff

Political infighting has dogged attempts by Gulf Cooperation Council states to integrate their economies. Most recently the factious nature of GCC relations has been agitated by the planned monetary union.

With the United Arab Emirates decision in May to pull out, only four GCC members were left to sign the pact on a common currency — pegged to the dollar or a basket of currencies — when they met in Riyadh on June 7. The four members who signed-on were Saudi Arabia, Kuwait, Bahrain and Qatar; notably absent from the signing ceremony was the second largest economy in the GCC — the UAE.

Analysts say the UAE declined to participate due to the May 5 decision by the four other states to locate the headquarters for the prospective monetary union’s Gulf Central Bank in Riyadh. As the second largest economy in the Gulf region, the UAE’s move has created significant controversy and tension between itself and the rest of the GCC states, especially Saudi Arabia.

Pure politics

Eckart Woertz, program manager of economics at the Gulf Research Center in Dubai, believes this quarrel has nothing to do with monetary policies. “It’s a pure political issue,” he said. “Obviously, there is a hurt ego on part of the UAE, [as it] was expecting [to host] the GCC Central Bank and they didn’t get it.”
After the UAE confirmed its plans to stay out of the proposed regional monetary bloc, Saudi Finance Minister Ibrahim al-Assaf said that the location of the GCC Central Bank was non-negotiable.
Meanwhile, UAE Central Bank Governor Sultan Nasser bin al-Suwaidi said, “We are out [of the GCC monetary union] for the moment.”

A week later, UAE foreign minister Sheikh Abdullah bin Zayed al- Nahyan further hinted at the possibility of the UAE rejoining the monetary bloc at a later stage, saying the Emirates would ‘consider’ returning to the union if the terms are altered and other GCC members authorize a joint central bank to be based in the UAE. Such suggestions came as Saudi Arabia made clear that no terms will be amended regarding the central bank’s location.
“There are certainly behind closed door negotiations going on,” said Woertz. “It’s difficult for both sides to compromise without losing face.”

No matter what, Woertz said the UAE cannot declare their return to the union and then expect Saudi Arabia to welcome them with open arms.
“Maybe they’ll find a compromise; perhaps an Emirati heading the GCC Central Bank, but the bank being in Riyadh, for example.”
For now, it seems Bahrain, Kuwait, Saudi and Qatar are not worried about having to cut any sort of deals with the UAE.

Moving forward

But would a monetary union without the Gulf’s second biggest economy — the UAE — or Oman, make any sense? Woertz says the GCC monetary union without the UAE may never materialize.
“Oman’s withdrawal was manageable. But now, with the UAE withdrawing, there is considerable damage,” he said.
Tristan Cooper, a sovereign analyst at Moody’s Investors Service in Dubai, has doubts about the fate of the monetary bloc.

“I am not sure whether it is going to survive [the] setback [of the UAE withdrawing] and I am rather skeptical about when and whether the project will be achieved.”
But the union could go ahead, and set up a situation similar to that of the United Kingdom and the Eurozone in the late 1990s. When the UK decided not to partake in the EU’s single currency, the UK did not become politically isolated from the rest of Europe, as many had feared.
Giyas Gökkent, chief economist at the National Bank of Abu Dhabi, said that like the UK and the Eurozone, economic and political ties will move forward eventually.
The UAE’s decision to stay out of the monetary union is “really not a show-stopper,” he said. 

At the end of the day, the Gulf states still have the common market, which was launched on January 1, 2008. This common market grants national treatment to all GCC companies and citizens in every Gulf state. By doing so, all possible technical hurdles are removed between cross-country investments and service trades between Gulf countries.

Pros and cons

There are benefits and drawbacks for all countries, whether they sign onto the monetary union or not. A single currency allows members to bask in improved efficiency levels of resource allocation and increased access to markets — all of which facilitate investment. Also, being part of a monetary bloc lets members benefit from lower cross border transaction costs; but in the GCC, this gain is limited, as intra-GCC trade is quite minimal. But, without the UAE, the prospects won’t be as rewarding as they could be.
“The UAE’s absence means that the gains to be realized from the currency union will be lower for the bloc as a whole, because the UAE is the second largest economy in the GCC and has the largest banking system,” said Gökkent.

On the other hand, Woertz said by basing the GCC Central Bank in the region’s largest economy, the rest of the union members will be gaining. SAMA — Saudi Arabia’s central bank — is “the most experienced central bank in the GCC,” said Woertz.
In the particular scenario of the Gulf, any disadvantages of a possible monetary bloc seem to be balanced out by the benefits. Moody’s recently reported the union would be adversely affected by the UAE’s absence, but few other factors.

“[M]any of the common advantages of a currency union… are muted in the case of the GCC,” the report said. “At the same time, the disadvantages of a currency union — such as members’ loss of independent monetary and exchange rate policies — are also less applicable, given that the GCC already have fixed exchange rate pegs.”  
However Gökkent is a harsher critic of the monetary union.

“When you undertake a currency union you forgo independence on monetary policy,” Gökkent said. “If the UAE were to go into the GCC monetary union, then they would abandon that policy flexibility and they would give it to this GCC wide body. Policy-making would [thus] be subject to GCC input rather than being made from a UAE-focus.”
Dr. Abdul Rahman al-Sultan, an economics professor at the Islamic Imam Mohammed bin Saud University in Riyadh, kicked up a controversy when he said the GCC monetary bloc is more detrimental than beneficial.  

“The plan to issue a common currency in this scheme is quite different from previous economic integration moves, as its costs largely surpass its gains considering the fact that the GCC countries do not represent an ideal currency zone, nor do they meet any of its criteria,” Sultan said at a conference held by the Saudi Economists Association in the kingdom’s capital in late May. “Instead of wasting their efforts on issuing a common currency in a zone that lacks the minimum currency criteria, the GCC countries should concentrate on completing previous integration stages.”

In the end, the UK has retained its monetary independence while also maintaining political ties with its neighbors, and analysts predict the same of Oman and the UAE if the monetary union becomes reality. The underlying issue seems to be how these events will affect the long-term political relationship between the UAE and Saudi Arabia.

“The move is a blow to GCC unity more generally and could be interpreted as a sign of how the balance of power between Saudi Arabia and the smaller GCC states have shifted over time,” Moody’s Cooper said. “It remains to be seen what the ramifications of the UAE’s action will be for the UAE’s bilateral relations with Saudi Arabia, but clearly it is not positive.”

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Executive Insights

The oath of leadership

by Tommy Weir
written by Tommy Weir

The authors of Executive Insights have been invited by this magazine to offer their professional opinions and analysis to you, the reader. Executive magazine does not endorse the analysis of Insight authors, nor should the Insights be interpreted as reflecting the views or opinions of Executive or its editorial staff.

A few months back I was sitting in the audience at the Global Competiveness Forum in Riyadh when Angel Cabrera, dean of the Thunderbird School of Management, one of the top 100 international management schools in the world, walked up to the podium.
“I owe you an apology,” he said. This caught my attention as I wondered why in the world this man from Arizona would need to apologize to global heads of states and executives from top corporations.

“I, actually myself and the deans of the top business programs, owe the world an apology for the financial crisis,” he said. Cabrera pointed out that many of the corporate leaders that got us into this mess are graduates of schools like his and other top tier institutions. His lecture went on to point out the flaws in the curriculum that could lead to this type of self-centered and short-term thinking.

As I sat there stunned and admiring his humility it occurred to me to look at the book that is touted as one of the top business texts to see if it was right. My conclusion is that the title of “Good to Great” by Jim Collins should be changed to “Good to Great to GRAVE.”

The companies that are profiled in “Good to Great” and Collins’ other book, “Built to Last,” are held up as examples of success, and we are told to emulate them. But will we? They are leading the way in layoffs, lining up for government bailouts and their stock prices have plummeted. Many of the companies recently went into bankruptcy, were taken over by the government or simply turned off their lights and locked the doors for good. Are these the companies to look at as role models of success? They were. But what went wrong? Dean Cabrera says they all have one element in common: lack of responsibility.

These companies had mastered the game of business, which is putting out quarterly targets and beating them, thus they became the darlings of Wall Street. But in the midst of this they lost sight of society and a larger responsibility than just to their shareholders.
Something different needs to happen and it is not more government oversight. It is clearly time for a new approach that includes reforming management education and creating leaders who are responsible for the actions and impact of their organizations, not just the financial results to shareholders.

In light of questionable corporate practices and the global crisis, it is time for leaders to pledge to be responsible for the life of their organizations and society at large. Borrowing from the ancient practice of the Hippocratic Oath, perhaps all leaders should take an Oath of Leadership:

• I will be competent in my skills and actions while continually striving to improve my leadership.
• I will maintain and strengthen the vision of my organization and strive to create sustainable prosperity in a way that is respectful of the environment and contributes to social growth.
• I will respect the rights and dignity of all people; I will hold accountable those employees whom I have entrusted with leadership responsibility. And I will provide opportunities for their growth.
• I will conduct myself with the highest level of integrity and take responsibility for my actions while laboring for the good of my organization, keeping myself and my leadership far from all intentional ill-doing, especially from damaging the economy, society and environment. And I will oppose all forms of corruption and exploitation.
Being a leader is honorable and requires hard work, skill, rightful behavior, accountability and responsibility. By taking this oath, you are declaring to the world that you will act as a responsible and accountable leader. By putting the oath into practice, you will be respected and make a positive contribution to your employees, shareholders and society.
I make this oath freely and upon my honor. Will you?

Tommy Weir is managing director of Kenexa Leadership Solutions. His latest publication is “The CEO Shift”

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Companies & Strategies

Real estate – The Deyaar survival course

by Executive Staff
written by Executive Staff

With property prices falling, investors shying away, and lending scarcer than ever, real estate companies and developers are fighting to survive. Deyaar, one of the biggest real estate companies in Dubai, is managing the crisis with a highly refined five-step strategy, says Markus Giebel, the company’s chief executive officer. The most important tenet of the plan is to reduce loan default rates, which have been high — up to 50 percent — since the market slowdown began.

“With this strategy, most developers can safeguard themselves throughout the crisis,” says Giebel. 

Easy payment plan

Deyaar offered its customers the Deyaar Easy Payment Plan (DEPP) which gives them greater flexibility in meeting payment obligations, however, “anybody who says easy payment plans solved the problem is wrong. It has just delayed it. The crisis is way too deep,” says Giebel.

Price reduction

After having eased payment plans, it is time to reduce prices.
“We had a couple of projects that were priced a little bit on the high-side [given] the crisis,” says Giebel. The decrease in construction costs has helped ease Deyaar’s expenses and allowed for lower property prices. For example, the company implemented a 30 percent price reduction on Bristol Office Tower, 25 percent on Bristol Residential Tower, 30 percent on Oxford Tower, and 25 percent on Fairview Residency, all located within Business Bay.

Customer consolidation

If a buyer bought too many units and was not able to handle payments due to the ongoing crisis, Deyaar will buy back some of these units, leaving the buyer able to pay for the remaining units.

Project consolidation

The projects up for consolidation are the ones yet to be built or in their early stages of construction, and constitute 25 percent of the company’s portfolio. These projects are the Deyaar Park, Mirar Residences and Deyaar Enclave.
“We have a couple of projects that we haven’t started [building] yet, but were 100 percent sold. They are in the middle of nowhere in the desert. They will not come up because they will not be as rich as we believed,” says Giebel. Deyaar is offering customers who bought into these projects the option to transfer their ownership to another project or get a refund.

Handling defaults

After implementing all the previous steps, “there will still be 10 to 20 percent of buyers who will default,” says Giebel. For that purpose, Deyaar, along with Dubai Islamic Bank, created a fund which will be between 500 million AED ($136 million) and 1 billion AED ($272 million) for acquiring Deyaar properties from defaulting buyers. The fund has secured $54 million so far from regional investors and will be launched beginning July, says Giebel. It will offer these properties for rent for a couple of years before putting them back on the market. The reason why Deyaar does not sell these projects, as Giebel explains, is that more supply would destabilize the market, driving prices down.
“I cannot be seen driving prices down because we are a publicly traded company… so the fund is a tool to guarantee my cash flow, stabilize the price and make a lot of money for the industry,” he says.

Giebel explains that for a company to achieve or maintain a solid financial position, it must take care of its cash flow and debt. Once that is done, the company will not have to depend on past contracts and projects to secure its position, but will be able to look at new opportunities arising in the midst of the current crisis.

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Lebanon

Reconstruction – The Jewish revival

by Executive Staff
written by Executive Staff

The dilapidated structure of the Magen Avraham synagogue is nearly all that remains of the Jewish presence in Lebanon. A once vibrant community that numbered in the tens of thousands is now almost non-existent. The few Jews that remain in Lebanon live as discreetly as possible. A new project to raise $1 million, launched by the Lebanese Jewish Community Council to restore the Magen Avraham synagogue in downtown Beirut, holds the possibility of bringing back the community’s presence. Those behind the renovation plan want to reestablish Magen Avraham as a functioning synagogue, and they’ve raised hopes that an overt Jewish presence in Beirut and the Mount Lebanon environs — which has Jewish history that may stretch back as far as 3,000 years — can emerge again.

The Magen Avraham synagogue  — the name means “Abraham’s Shield” — was built in 1926 in what was the Jewish quarter of Wadi Abu Jamil in downtown Beirut. The grandness of the synagogue plans meant that a great deal of money needed to be raised. The Lebanese Jewish Community Council, just after World War I, managed to raise some funds for its construction, but it was considerably less that what was needed for the ambitious project.
While the community kept a very distinct Lebanese identity, the majority were also part of the transnational Sephardi Jewish community. The Sephardi Jews originally came from the Iberian Peninsula (Spain and Portugal) and North Africa and, despite their early geographical dispersal, kept a distinct identity and liturgy separate from the Jews of Eastern European descent, the Ashkenazi, and the Jews who remained in the Middle East, called Mizrahi Jews. Thus, the Lebanese Jews used this Sephradi Jewish network to raise funds for the synagogue. The community appealed to Moise Abraham Sassoon from Calcutta, who donated money toward the completion of the Magen Avraham synagogue, while the land was donated by Raphael Levy Stambouli. Sassoon would dedicate the synagogue to his father.
The synagogue was designed by architect Bindo Manham and was built in the imposing symmetrical style of the Renaissance. When completed the synagogue would be declared the grandest in the Middle East and secured Wadi Abu Jamil as the focal point for the Lebanese Jewish community. Jacques Baghdadi, who grew up in Wadi Abu Jamil and left when he was 18 (in 1970) to the United States, described to Executive what it was like living in the Jewish quarter of Beirut.
“It was very cliquey; it was like living in one big family,” he said. “We had two schools and everyone went to the two schools… so it was a very cocooned area and I have very fond memories of the community there.”

The wider community

Despite the fact that the Jewish community was “cocooned” in Wadi Abu Jamil, there is a historical Jewish presence in other areas of Beirut as well.  One noticeable trace of the once thriving community is the  Beth Elamen cemetery just off Sodeco square that, similar to the synagogue, is in disrepair and overgrown with trees and weeds. According to Georges Zeidan, who wrote an article on the history of the Jewish cemetery in Beirut in French, entitled “Histoire du Cimetière Juif à Beyrouth,” the first Jew was buried in the cemetery in 1829. Now the gravestones lie in tatters.
The Jewish community also had a presence in other parts of Lebanon.
“The first significant wave of Jews to Lebanon came in 1710 when a significant number of Andalusian Jews fled from the Spanish inquisition to the safety of the Chouf mountains,” Kirsten Schulze wrote in her book “The Jews of Lebanon: Between Coexistence and Conflict.”
In Miziara, a village in the mountains above Tripoli in northern Lebanon, Diab Doudib, in his 70s, said Jews had once lived there. “If you look at the patterns of the olive trees, that is not our way, but the Jewish way of planting. They were here a long time ago, but there are no Jews here now,” he said.
 

Family
Origins
Contribution in Lebanon
Where they are now

Safra

 Jacob E. Safra was a banker from Aleppo who fled to Beirut when

the Ottoman empire

disintegrated.

 Safra opened the J. E. Safra bank in Beirut in 1920. The bank would become  the bank of choice for the Lebanese Jewish community. Edmond Safra, the son of Jacob, was born in Beirut in 1932. The Safra family moved to Brazil in 1952, where Edmond Safra built on his father’s business to accumulate personal wealth of $2.5 billion. Joseph Safra, the son of Edmond, now runs the Safra group and was listed as the fourth richest South American by Forbes, with an estimated wealth of $8.8 billion.

Zilkha

Originally from Baghdad

Credited with bringing modern banking to the Middle East and formed a central part of the commercial and finance activites in Wadi Abu Jamil. The family was among the wave of Syrian and Iraqi refugees that moved to Lebanon in the 1940s.

83 year old Ezra Zilkha inherited Zilkha & sons, a private investment company, from his father Khedouri Zilkha. The family moved to New York in the 1950s. By the 1980s, Ezra was listed on the Forbes 400. Ezra now concentrates on philanthropy and is a board member of the Council on Foreign Relations and a Brookings Institution trustee.

Tarab

Originally from Damascus

A prominent business family in Wadi Abu Jmiel who founded the Talmud Torah Selim Tarab school. The school was located behined the Magen Avraham synagogue and
was demolished in April 2008.

Isaac Tarrab was killed in 1986 in Beirut by The Organization of the Oppressed People on Earth. His son, David Tarrab, emigrated to the US, and now lives in New Jersey where he works as a pediatric dentist. His brother is an attorney in New York.

 Deir al-Qamr was the location of one of the first concentrations of  Lebanese Jews. The Chouf village is still home to the oldest synagogue in Lebanon, but like most of the remnants of the Lebanese Jewish presence, the synagogue is in a ruined state. From the Chouf, the Lebanese Jewish community spread to Saida and Tripoli as they increasingly moved toward commercial hubs.
This migration would ultimately lead the community to Beirut and Wadi Abu Jamil, as the city was becoming an ever-more dominant trading hub at the beginning of the 20th century.
Lebanese Jews would rise to prominence around the world for their business acumen, although unfortunately not in Lebanon. “Being Lebanese and Jewish was a real winner when it came to trade and banking,” George Lati, a Lebanese Jew who left Lebanon when he was a teenager and immigrated to the US, told Executive.
The Latis are a famous banking family whose members still own property in Beirut and exemplify the business success of the Lebanese Jewish community.
“Italy saw an export resurgence in the 1970s thanks to Lebanese Jews [who emigrated] as well as Hong Kong, Mexico, Brazil, Panama, USA [and] Canada, where there were all successful Lebanese Jewish businesses,” he said.
Most famous of all the Levantine Jewish families was the Safra family. The Jacob Safra Bank was a central banking institution in Beirut for many of the Sephardi Jewish families of Lebanon and Syria. Safra’s son, Edmond Safra, was born in Beirut and earned a reputation for being one of the outstanding figures in 20th century banking, and died a billionaire.  The Safra family would move from Lebanon to Italy in 1949, just after Israel declared statehood. Although the Safra family left Lebanon when Israel was created, this was not typical of Lebanese Jews.
“Lebanon was the only Arab country in which the number of Jews increased after the first Arab-Israeli war,” Schulze wrote.
Lebanese Jews were highly integrated into Lebanese society and became the only Jewish community in the Middle East to be constitutionally protected in the proclamation of Greater Lebanon in 1920. Even after the first Arab-Israeli war, the tradition of sharing religious festivals continued.
“In 1951, during the Passover celebration, the president of the Jewish community Joseph Attie held a reception at Magen Avraham synagogue which was attended by Lebanese Prime Minister Sami as-Solh, Abdallah Yafi, Rachid Beydoun, Joseph Chader, Habib Abi Chahla, Charles Helou, Pierre Gemayel and the Maronite Archbishop of Beirut,” Schulze wrote.

The disappearance

A gradual exodus of Jews began with the internal strife in Lebanon in 1958. Jacques Baghdadi, a Lebanese Jew who left the country in 1970, described to Executive how tensions increased after the Six Day War.
“We never felt the threat like in Syria and Iraq. We never felt oppressed, but after the Six Day War you felt in the air a certain bothering feeling,” he said.  “Even though we were born Lebanese, you felt not welcome… so [the Lebanese Jewish community] left… and it was like a sixth [sense]; sure enough the civil war broke [out].”
The decisive moment was the Israeli invasion and occupation of Lebanon in 1982, which was effectively the beginning of the end of the Jewish presence in Lebanon. Robert Fisk, a British foreign correspondent who lived in Beirut during the civil war, wrote in his book “Pity the Nation,” that “incredibly, the Israeli shells even blew part of the roof off the city’s synagogue in Wadi Abu Jamil, where the remnants of Beirut’s tiny Jewish community still lived… The last 10 families to worship there padlocked the door after the Israeli shells came through the roof.”
The Israeli invasion of 1982 left the Lebanese Jewish community particularly exposed to the vicious violence that would occur post-invasion. Wadi Abu Jamil was the scene of fierce fighting, and was first occupied by the Palestine Liberation Organization and then the Amal Movement. The Amal logo is still on the walls of the synagogue to this day, along with torn pictures of the late Amal leader Musa Sadr. Former Associated Press bureau chief Terry Anderson, who was kidnapped in 1985 and held for six years, was reportedly taken into the Wadi Abu Jamil area.
Between 1984 and 1987, 11 leading members of the Jewish community were kidnapped and killed by a militant Shiite Islamic organization called “Organization of the Oppressed of the Earth,” according to Schulze and news reports from the time. The terminal decline of the community began, as did the underground nature of the remaining Jews.
Fred Kanter, whose great-grandfather was a rabbi at the Alliance School in Beirut (a Jewish school system founded and funded by the Rothschild family), articulated the fear of those few Jews who did remain.
“I was in touch with a young Jewish man in Beirut who photographed the gravestone of my grandfather,” Kanter told Executive by email. “When a Jewish friend went to visit Beirut, he was afraid to be seen meeting a Jewish person from the West.”
Executive contacted a number of Jews still residing in Lebanon, but none were willing to talk about the community, even anonymously.
Of those that have left the country, many in the Lebanese Jewish community have maintained a strong cohesion. Jacques Baghdadi said that despite leaving Lebanon nearly 40 years ago, he is still in contact with the Lebanese Jews who he grew up with in Wadi Abu Jamil.
“We see each other in synagogues… there are two big synagogues [in Brooklyn] that are especially for Lebanese Jews… the Lebanese by nature are very clannish people and we hang out with all Lebanese — Christians or Muslims — it doesn’t matter here.”
A testament to the strength of Lebanese Jewish identity is the Maghan Avraham synagogue in Montreal that was set up by Lebanese Jewish immigrants.
The Internet, and particularly social networking sites like Facebook, have also enabled Lebanese Jews to maintain contact. Most recently, the official Lebanese Jewish Community Council website (www.thejewsoflebanonproject.org) has been launched that now gives an official public face to the community. The website was also set up to help raise funds for reconstuction of the Magen Avraham synagogue.
 
Community revival

“Those who don’t have a past don’t have a future,” Isaac Arazi, president of the Lebanese Jewish Community Council, is quoted as saying on the website’s welcome page — ostensibly linking the renovation of the Magen Avraham synagogue to the reconstruction of a Jewish presence in the country.
“It pains me immensely that I have to pass by [Magen Avraham] every day without being able to enter,” wrote one anonymous Lebanese Jew on the website. “If only to view the destruction, to say a prayer (even though I do not know how to say prayers), to stand there and imagine and visualize what the 1940s, 1950s and 1960s were like.”
Mira Elmann and other Lebanese Jews are already discussing how the synagogue will function once it has been renovated.
“The Magen Avraham synagogue will only succeed as a place of worship for the Orthodox Jews. Services must be with an Orthodox Rabbi,” she wrote in an email.
Elmann, a Lebanese Jew who left Lebanon in October of 1968, believes that if the reconstruction of the synagogue is achieved, the Lebanese Jewish community may even come back.
“The only way the Jews will ever return to Beirut would be because of the renovation of the synagogue,” she said. “The Lebanese Jewish community of the Diaspora is looking forward for the day to go back to the new Wadi Abu Jamil.”
Yet, it is unclear whether the synagogue will be rebuilt soon or not, as Executive was unable to interview the head of the Lebanese Jewish Community Council, Isaac Arazi.
An article in Israel’s Haaretz newspaper on May 27 said the renovation of the synagogue was about to start. The article, entitled “Beirut shul [synagogue] to be refurbished, and even Hezbollah’s on board” stated:
“The ruined main synagogue in central Beirut is due to be renovated in the coming weeks, after an agreement between various religious denominations and permission from the Lebanese government, planning authorities and even Hezbollah.”
 
Déjà vu?

If the Haaretz article is accurate, then the reconstruction of the synagogue, and Lebanon’s Jewish community, could come soon. There is good reason for skepticism, however, as it is not the first time a newspaper announced the imminent refurbishment of Magen Avraham.
Haaretz reported that Solidere was to donate $150,000, but cited unnamed sources regarding $200,000 more that had been raised through private donations.
Nabil Rached, Solidere’s press officer, confirmed Solidere’s contribution, but would not say whether reconstruction would actually take place.
“The [financial] contribution is an old decision taken by Solidere for the restoration of each one of the religious buildings in the Beirut City Center,” Rached said. “But the restoration of each religious building is done by its respective community. So it is not a Solidere project.”
Angus Gavin, the planning advisor for Solidere, also refused to comment on the renovation of the synagogue but added that it’s “about time [the synagogue] is reconstructed.”
A Bloomberg article in September 2008 also claimed that $240,000 had been raised, quoting the Lebanese Jewish Community Council President Arazi. Unconfirmed reports  suggested the Safra Foundation put up $100,000 of this money with another unnamed Swiss bank. Arazi refused to name where the money came from, while the Safra foundation has also declined to comment.
Whether the Lebanese Jewish community has been able to obtain the $200,000 that Haaretz reported, or the other funds for the restoration, is doubted by some in the community.
George Lati is among those who throw cold water on the idea: “There just has not been the interest in the community financially to be able to raise the money; the money has not been raised.”
 
History repeating

Like in the early 1920s, when the original synagogue was constructed with the financial assistance of the larger community of Sephardi Jews, a similar approach may be underway regarding the rebuilding. Regardless of whether the Lebanese Jewish community actually has the money now or not, the community council appears determined to see that the reconstruction of the synagogue eventually does take place.
“The plans to renovate the Magen Avraham synagogue are already underway,” the website states.
The community council seems convinced that as long as the Maghan Avraham synagogue remains in its current dilapidated state, so too will the status of Lebanon’s 18th sect.
Jacques Baghdadi told Executive that while the return of Lebanon’s Jewish community is not yet at hand, there is no reason why in the long run the community cannot reestablish.
“There was a time of Jewish persecution in Spain and again you have a Jewish population in Spain, the same in Italy and Portugal… history repeats itself, people come back.”

(Editor’s note: This is the first in a series of articles profiling Arab Jewish communities Executive will publish in the coming months.)

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Companies & Strategies

Brandcell – Joe Ayoub (Q&A)

by Executive Staff
written by Executive Staff

Aveteran of the communications and marketing field with over 25 years of experience, Joe Ayoub successfully managed Proctor & Gamble’s brand communications for years before taking on the task of managing and restructuring the Intermarkets Agency Network’s offices in Kuwait and Lebanon. He then founded Spidermonkey Communications in 1999 in partnership with the WPP group. Ayoub recognized the need for Levant-based companies to adopt the concept of strategic guidance, and created BrandCell consultancy in 2008 to develop key local and regional clients’ branding strategies in the service, retail and media sectors. Executive recently sat down with Ayoub to get his views on strategic branding strategies in the Levant region.

E Can you explain your conception of ‘strategic branding’ being used or abused in the Levant?
Branding as a philosophy is nothing new. But people use the name for a zillion different descriptions: from describing a corporate identity logo to delivering a complete brand strategy. Unfortunately in the Middle East and in Lebanon specifically, the understanding of the importance of strategic branding, as opposed to design branding, is extremely low, even though the impact of having a good brand strategy is extremely high. This we have seen in the West when it comes to names like Starbucks or Apple. You see that they have crafted a strategy around their brand and they consistently try to improve it and deliver on it time and time again. In Lebanon that delivery, when we are talking about the service industry, is extremely erratic. There is no consistency. Not because the people are not up to it or not qualified, but they don’t have a sort of ‘brand guideline’ to follow that will ensure the right ‘key messages’ that they have to communicate day in and day out to their customer, are being done in a very consistent way which over time, will build this effect.

E Why do you think there has been reluctance in the region to embrace the concept of strategic branding as central to a marketing strategy, and instead focus on disparate messages similar to those we witnessed during Lebanon’s recent elections?
The issue is not that they are reluctant; the issue is that they don’t understand it. This is a role that someone, a consultancy or a specialized agency, is supposed to educate its clients about. The election issue is a very good example of how you see the segregation of incoherent messages within an extremely short period of time.
You see the difference when you look at the West if you followed Obama’s campaign or Sarkozy’s campaign. They take one message and they keep hammering it home over and over. They are adamant to remain focused on a particular point because their strategy is that this is the weak point of their opponent and they have to hit at it. In Lebanon they tend to react to things. If one party launches a slogan or a key message, all they care about is how they are going to respond to this. So they are distracted by their own strategy and the same extends to businesses. If someone claims something about his product and I sell a similar product, I tend to think: ‘There must me something good about this, let me do it. Why should I bother and strategize and dig for my own benefit? Let me consider that we are in the same category and benchmark.’

E What would you advise entrepreneurs in the region to do in order to reap the benefits of strategic branding?
Unfortunately, you cannot teach an old dog new tricks and it costs much more to fix something that is broken or radically wrong than to do it right from the beginning. Entrepreneurs normally don’t have a lot of money because they are starting afresh and have scarce resources. But at the same time, they have the opportunity to do things right as long as they focus on bringing something new to the table. Today, entrepreneurs have to clearly define what business they want to be in.
Even if they are in Information Technology and they want to sell computer solutions, [strategic] branding will help them define whether they are in the business of selling software, hardware, total solutions, supplying material or whether they are a niche brand or a mass market brand. They need to define their territory clearly and then they need to define how they want to position themselves within the competitive landscape and, most importantly, how they are going to translate this into their daily work.

E So what should they focus on?
Entrepreneurs have an important asset they can bank on — their personalities. I really encourage entrepreneurs to put their personal branding up front. They probably don’t have a lot of money. But if they have a charismatic personality, a clear sense of purpose for their company and a long term vision, then they should communicate it. We all know Richard Branson. What sells the Virgin brand more than Richard Branson? What sells Apple’s brand more than Steve Jobs or the stories people circulate about him on a daily basis in the news? Entrepreneurship by definition is a very personalized business and [entrepreneurs] should not be afraid, if they have all these qualities, to brand themselves first.

E In markets where branding is fully developed we have seen brands such as Starbucks employ methods such as store clustering and below-market price cutting to push out smaller niche companies, small to medium enterprises and start-ups and thus  limit avenues for entrepreneurship. What do you think about this argument, and how can you preserve the ability of new businesses to enter the market space and at the same time push
branding to the limit?
In a free market economy you have to accept the laws of this free market. You have to accept the laws of supply and demand and, at the same time, that the best man wins. This is a cycle. Before Starbucks there were others that were famous. Probably the small private neighborhood coffee shop and then Starbucks came and standardized the whole thing. In five or 10 years we might see that standardization is no longer en vogue and probably more authentic local neighborhood touches will become extremely important once again. Branding doesn’t come out of the blue. Branding is a natural reflection of what consumerism is all about. It is about understanding the psychological needs of consumers. Branding is like a human being. A brand is born, it is young, it reaches a maturity stage after a period of growth, and then it could reach a decline or death stage. So we have to look at the brand as a human being. We give it a name, we give it packaging or a dressing like you dress a child; you give it certain values the same way you educate your children, and then you put it on the market as an adult. Then it has to perform. Either it will perform or it will underperform and be left out of the market. If their customers start to feel that Starbucks is overdoing it and it is in a monopoly stage, it will be the customer who will stop it first. No law or anti-trust law can do as much as the veto power of the customer and we have to trust our customer. What will dictate things is the consumer’s own perception of what is right and what is wrong in the free market economy. Whenever you do something out-of-line, the verdict will come from the customer. So managing your brand is like managing your children; you have to really make sure that it behaves, [that] it is constantly polite, constantly performing in its environment, and it’s up to you to manage it properly.

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Lebanon

Energy – Like oil and water

by Sami Halabi
written by Sami Halabi

There’s an old saying in the oil industry: “Oil is like a wild animal. Whoever captures it has it.” The late American oil magnate, Jean Paul Getty, may have been talking about the oil and gas market of the 1950s, but his words continue to ring true. Ever since a joint US-Israeli exploration group headed by Texas-based Noble Energy discovered a large natural gas deposit at Tamar (90 kilometers off the coast of Haifa) in January, the proverbial animal has been officially let out of its cage in the Eastern Mediterranean.

Analysts estimate reserves at Tamar of around 142 billion cubic meters (BCM), valued at around $3.6 billion, with a $1.5 billion extraction cost. The discovery has been heralded by Noble’s Chairman and Chief Executive Officer Charles Davidson as possibly “the largest discovery in the company’s history.” For a company like Noble that boasts assets of more than $12 billion, that’s no passing phrase.
A few months after the initial discovery, Noble found another deposit of gas at Dalit, 13 kilometers east of Tamar. That discovery is expected to yield reserves of around 14 BCM, or around 10 percent of the Tamar find. Noble declined to comment on the finds and Executive is legally forbidden to correspond with Noble’s Israeli partners.
The amount of gas present in the two fields could potentially serve Israel’s gas demand for a decade, or even longer.
“We are witnessing an historic moment in Israel’s energy market,” Israeli Infrastructure Minister Binyamin Ben Eliezer said at the time of the Tamar find.

Noble Energy’s operations in Israel and Cyprus

Source: Noble Energy.

Tectonic structure of the Eastern Mediterranean

Source: Noble Energy.

A thorny relationship

At present Israel depends on Egyptian gas exports to run its power plants. The agreement for Egypt to supply Israel with a constant stream of gas comes under a clause of the Camp David accords, signed in 1979, and stipulates that the two parties will set a fixed price for each million thermal units (MMBTU), the standard unit of measurement for commercial gas exports, which corresponds to around 28 cubic meters of gas. The export of Egyptian gas to Israel has been the cause of much controversy in Egypt where anti-Israeli public sentiment is pervasive 30 years after the two countries’ leaders signed a peace treaty.
The issue of Egyptian gas exports to Israel remains a thorn in the side of both governments; politically for the Egyptians and in terms of energy planning for the Israelis. Hence, while energy independence for Israel would constitute a negative for Egypt’s current account, it could also translate into some much needed wiggle room for Egypt’s autocractic government.
“The opposition parties are always questioning the wisdom of supplying Israel with gas,” says Ibrahim Saif, resident scholar specializing in the political economy of the Middle East at the Carnegie Middle East Center. “Egypt is [always] trying to downplay that subject because there is a sentiment in Egypt that is against supplying Israel with gas.”

How much do they really have?

While Israel’s estimated gas reserves seem promising, they are still just that, estimates. The numbers currently available only indicate a ‘geological reserve’ based on seismic surveys conducted from above the seabed. The fields still have to undergo an appraisal phase to ascertain how large the ‘proven reserve’ is and exactly how much of the gas can actually be extracted.
“The initial discovery does not provide a clear picture as to the structure of the field. You need a year until it becomes a proven reserve and only part of it can be extracted,” said Ziad Arbahe, a Syrian energy consultant.
Arbahe explained that commonly only 30 to 40 percent of a geological reserve can be extracted. There have been rare cases where up to 50 percent has been extracted, but this usually requires that a company inject water into a field, increasing operational costs and often damaging the field itself.
“In general, when there is a find, countries and companies are optimistic about the amount. But when you start to produce… the initial estimation is usually much higher than the actual amount,” Arbahe adds.

On the Lebanese side…

The recent discoveries have “caused a flurry of interest in the Lebanese offshore area,” says Charles Harmer, executive vice president of multi-client services at Spectrum Geo, the company that previously performed preliminary seismic surveys for the Lebanese government between 2000 and 2007.
Fawaz Mourad, the regional representative of Petroleum Geo-Services (PGS), agrees. His company  and Spectrum Geo have both conducted seismic surveys in Lebanon’s offshore area, which is part of the “Levantine basin.”
The Levantine basin is the underwater geological structure that is located beneath the territorial waters of Lebanon, Israel, Cyprus and Syria. The basin itself has “similar structures and formations” in both Israeli and Lebanese waters which makes “offshore Lebanon even more interesting and more prospective,” says Mourad.
Lebanese oil and gas exploration began in the late 1960’s and early to mid-1970’s with the drilling of several wells across the country. Then, like many things in Lebanon at the time, exploration came to a grinding halt when Lebanon’s civil war began in 1975. After the war, Syria and Lebanon formed the “Committee of Cooperation between Lebanon and Syria for Oil Exploration in Lebanon,” which lasted until Syrian troops pulled out of Lebanon in 2005 after the assassination of the former Prime Minister Rafiq Hariri.
“The order from [current Syrian] president Assad’s father was to help Lebanon by all means possible, even for free, to get oil out of Lebanese ground,” says Ali Haidar, a former member of the committee and current petroleum studies professor in Beirut. “There were some favorable interpretations of this behavior on some Lebanese sides and on others there were unfavorable [interpretations].”
During the run-up to Lebanon’s parliamentary elections, Nabih Berri, the country’s speaker of parliament and member of the current opposition, stressed the importance of “encouraging the exploration of [oil and gas] prospects in all the Lebanese territories,” ostensibly referring to the continuation of onshore exploration.
However, little headway has been made in Lebanon since pre-war drilling, despite the fact that Lebanon is part of the same geological structure where proven gas deposits have been found in Syria “only 40 kilometers from the Lebanese border,” says Haidar. Today, Lebanon’s old wells still sit idle and efforts to resume exploration have been “postponed” according to a senior executive at Lebanon’s Ministry of Energy and Water.
Ghazi Youssef, a member of Lebanon’s new ruling parliamentary coalition who used to manage the oil and gas file as an advisor to former Prime Minister Rafiq Hariri in the earlier part of this decade, is nonetheless pessimistic about the prospects of oil and gas aground in Lebanon. He says that the issue of exploring these wells should be put on a “back burner” because “all the reports I have seen in the past do not really show the possibility of a major find [onshore]. It’s mostly tar and other residue but not hydrocarbons. Things point more to the offshore fields than they do onshore.”

Move to water

Indeed, since 2000 the focus of the Lebanese government and international oil and survey companies has been on offshore exploration. In 2002, the Lebanese government entered into an agreement with Spectrum Geo to perform a two-dimensional seismic survey off the coast of Lebanon to supplement a survey completed in 2000, which did not require government permission “because of the location and the fact that there was no previous work in the area,” says Harmer. Two-dimensional seismic surveys are used to identify breaks and possible traps in geological formations where there is a high possibility that oil or gas may be present.
The agreement gave Spectrum Geo the right to gather data off the Lebanese coast at its own cost and to later sell the data to prospective oil companies on a licensing basis. The Lebanese government would then receive a percentage of the license agreement and get a copy of the final data.
“We had to try to sell it as many times as we could to cover our costs and then make a profit on it,”says Harmer.
The agreement itself, however, ended in 2007, and the government says Spectrum Geo has requested another five year agreement with the Lebanese state.
In both 2006 and 2007, the government commissioned another Norwegian survey company, Petroleum Geo-Services (PGS), to perform three-dimensional seismic surveys off the coast of Lebanon. Three-dimensional studies subject geological formations to sets of waves which then ‘bounce back’ off these structures to provide a clearer view below a surface.
But several experts have questioned the manner in which the three-dimensional studies were conducted. “Normally when you have such a huge possibility… you do a lot more than this,” says Haidar. Harmer of Spectrum agrees. “It is very unusual to shoot a [three-dimensional seismic survey] like that. I still don’t understand why they have shot those.”
Mourad of PGS, however, insists that the data acquired was “comprehensive” and that “there is enough data to allow the companies to drill. They don’t need to do more 3-D surveys. So if a bid-round takes place over the areas which are covered by the 3-D survey, then the oil companies are able to drill immediately, thus saving a lot of time,” he says.
According to Sarkis Hlaiss, general manager and head of Lebanon’s gas and oil installations committee at the Ministry of Energy and Water, the main reason that a more extensive survey was not done is that the Lebanese government and PGS are currently performing another two-dimensional survey on Lebanon’s Exclusive Economic Zone (EEZ), which was only delimited — the process by which a country defines its borders — in May by a committee at the energy and water ministry. A source at the United Nations, who spoke on condition of anonymity, said that the issue of border demarcation between Lebanon and Israel has yet to be officially resolved by the UN and stressed that maritime borders would only be addressed once the border delimitation on the ground has been completed. PGS insists that the issue is inconsequential.
“Even if they haven’t officially delimited it, it doesn’t mean that it is disputed. There is no dispute,” said Mourad.
In any case, most experts agree that it is premature to consider the possibility of common resources before all the results of Lebanon’s seismic surveys are completed to ascertain if there are fields shared with Israel. The results of the survey are expected to become available within four to five months.
“By the end of September we will have the complete data in two-dimensions and three-dimensions from PGS,” says Hlaiss.
The new survey will employ seismic technology developed by PGS that enables seismic waves to overcome the distortions caused by layers of salt present across the Levantine Basin. The results of the survey will provide data that is much clearer and more useful to prospective oil companies and the Lebanese government, who can negotiate better if a bidding round ever materializes.

Dollars for data

According to Mourad, PGS has invested “tens of millions of dollars” to acquire data off the Lebanese coast. The company “hopes to recover its investment by selling the data” to oil companies looking to enter any Lebanese oil and gas market, once the government starts a bidding round and offers licenses to companies to start drilling offshore.

“PGS has not sold any data for the simple reason that companies, when they own data, need to know that they can do something with it, like participate in a bid round,” said Mourad.
But in order to open up a bidding round, Lebanon would need to have a law that dictates the terms and obligations of both the Lebanese government and prospective oil companies — something the Lebanese government has been dragging its feet on for decades.
“Until now we don’t have a law, it’s a disaster,” says Hlaiss. All the countries of the Eastern Mediterranean who have access to the Levantine Basin have legislation that apportions their maritime territory into blocs, ready for sale to prospective oil companies looking to explore their offshore prospects. Cyprus opened its first bidding session in 2007, as did Syria.
Fortunately for Lebanon, they have some friends in high places within the oil and gas industry. Since 2007 the Norwegian Agency for Development Co-operation (NORAD), as part of its ‘Oil for Development’ program, has been assisting the Lebanese energy ministry to draft a new law to the tune of “several million dollars to start putting legislation in place [and] actually start a bid round,” says one oil and gas industry executive who spoke on condition of anonymity.
Martin Yettervik, counselor at the Norwegian Embassy in Lebanon, says that the program is about institution building as opposed to drilling and is aimed at helping the Lebanese avoid the pitfalls of an energy dependent economy.
“For any country that is new to petroleum, it is important to take into account the economic effect of the petroleum economy, because it is different from other kinds of economic factors,” says Yettervik. “There are examples around the world where, when the petroleum economy dominates, it is to the detriment of the other fields in the country.”
Countries such as Nigeria and Iran have felt the pain of an economy overly dependent on petroleum resources. However the risk to Lebanon is not just economic. The potential for oil and gas revenues to play into Lebanon’s polarized and volatile sectarian political mixture is very real. One look at the electricity or telecommunications situation in the country and an ineffective or politically tainted oil and gas industry could be “another killer,” according to professor Haidar.
Nonetheless, Yettervik insists that the program has not become “a tool for one or another power factor in a country” and that “since the beginning we have seen a trans-political cooperation, even when the country was in the deepest of crisis,” referring to the 18-month political standoff that led to the May 2008 conflict in Lebanon.

Norway’s helping hand

The Oil for Development program is set to carry on until 2011, at the behest of the Lebanese government. In order to expedite the process of drafting the still non-existent law, the Norwegian government has contracted an international law firm to assist the energy ministry with setting up a bidding round and has trained several officials at the ministries of energy and water, and finance and environment. Both Spectrum Geo and PGS’s head offices are located in Norway, but Hlaiss insists that the Norwegian government “didn’t ask for anything in return.”
Yettervik admits that the program “gives the Lebanese authorities familiarity with the Norwegian system,” but insists that any collusion between the Norwegian government and its companies “would be contrary to the spirit of the program.”
The government has confirmed that the new law will allow Lebanon to alter the output of any firm that extract’s oil or gas, which, if done hastily, could damage any potential field and substantially reduce its long term productivity. Moreover, the law will oblige future oil companies to adhere to the Lebanese labor law, which compels them to hire a majority of Lebanese citizens if qualified persons are present in the country.
According to the energy ministry and the Norwegian embassy, the draft exploration law is all but completed. The text, which is still in English, is complete and is in the translation process. Once in the Lebanese Parliament, it will be subject to the scrutiny of the country’s conflicting political interests.
“We are trying to push [the law] through this government,” says one government official who spoke off the record. “If we don’t, and the minister [of energy and water] changes, it will take us another three months to explain to the new minister what we are doing and then who knows [how long it will take].”
MP Youssef expressed his coalition’s desire to depose the current minister, whose party is part of the opposition, but insists that it will not derail the process.
“We believe that when someone comes to power you don’t just take everything and throw it down the drain; there’s continuity. We have to deal with [the law] and try to finish it as soon as possible.”

Sharing with the enemy

Perhaps the most important point to consider in Lebanon’s energy saga may be that if Tamar, Dalit or another field is a common field between Lebanon and Israel then the latter is currently usurping Lebanon’s natural gas.
“Whoever starts before gets the resources because of drainage,” says Haidar, adding that the clock is now ticking down on the Lebanese government’s opportunity to tap this resource before the Israelis do.
Contested borders have always posed a problem in the Middle East, especially when it comes to hydrocarbon resources. The “neutral zone” between Saudi Arabia and Kuwait that was demarcated by the Anglo-Turkish convention in 1913 still exists today. It has been a source of ongoing disputes over maritime borders between Kuwait and Iran for some time, although Kuwait and Saudi Arabia have come to an agreement over how to share the resources present in the area. Lebanon and Israel however remain in a state of war, and Israel still occupies some of Lebanon’s territory. Hence the issue of sharing resources, if indeed they do exist, seems far-fetched at best; more likely, perhaps, is the prospect of further conflict between the countries over energy.
“This is not going to be an easy issue,” says Saif. “If Israel starts to pump and utilize [any common resource], it would be a source of contention and Lebanon will find itself forced to move and to block any Israeli unilateral move.”
Most experts agree that it is highly improbable that the recent finds at Tamar and Dalit constitute a common field because of the distance between the finds and the border area, but that does not preclude the possibility of it being one or that one could exist, given the commonalties between the Lebanese and Israeli areas of the Levantine Basin. Just to make sure Israel is aware of Lebanon’s territorial concerns, the  prime minister’s office has sent a letter to Noble demanding that the company does not encroach upon Lebanese maritime territory, according to a government source who spoke on condition of anonymity.
Even if Lebanon does manage to pass a law, starts the bidding process and brings in the oil companies in to begin drilling, the economic benefits will not be felt until much further down the line. The Tamar field is not expected to produce commercial quantities of gas until at least 2013. One energy consultant offered to bet this journalist $1,000 that commercial quantities would not be extracted before 2015. Moreover, any potential Lebanese field may take even longer enter production.
“In eight years, if we find something, we can actually open the lid and start making some money. Whoever wakes up first gets the money and the resources,” says Haidar.
If the Lebanese don’t wake up soon, they may well find themselves snoozing through yet another regional boom and lose the chance to revive their debt-ridden economy.

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Companies & Strategies

Deyaar Development – Markus Giebel (Q&A)

by Executive Staff
written by Executive Staff

Markus Giebel is the chief executive officer at Deyaar Development PJSC, one of the region’s biggest real estate companies. Executive Magazine had the pleasure of sitting with Giebel as Deyaar unveiled the recently completed project at Saifi Village II, which is comprised of 72 upscale apartments and penthouses and is located in the Beirut City Center master development.

E This is not the first time you invest in Lebanon. What makes this country, in your opinion, a good destination for real estate investment?
It is the first project that we have completed in Lebanon. Other than that we have a total investment of $200 million in the country. But the first project we completed is the Saifi II, which is a $100 million project. The sad portion of it is that many things got destroyed, and someone had to rebuild it. So there is an intrinsic and real need for real estate. It is a privilege actually to be one of the people who can rebuild, and Solidere does a wonderful job. To be a partner with Solidere and a part of the rebuilding is something anybody can be proud of. The second thing is that if you look at the financial crisis, Lebanon became one of the most attractive places. So historically there is an intrinsic need and if you are looking forward, this country looks very strong. We have real GDP growth, a real growth of 1.6 percent positive. The world is 1.9 percent negative. So there is something which is very intriguing. For us as a developer, we develop in developing countries. There is a developing element of this country so there is an incentive that we like.

E So you think that Lebanon has good market fundamentals?
There are many fundamentals. We come from Dubai; many people from our part of the world love the place here. So there are many people who enjoy the countryside, the people, the food. So there are these elements; the other element is that there is a real demand for real estate.

E The project is 100 percent sold. Who are the people who bought in? Lebanese mostly or foreigners?
There is a complete mix. There is a vacation element of it. People would come a month or two per year. And there is also real demand from Lebanon. Many of them are also Lebanese expatriates. That is exactly one of the areas we cater to. Starting with the new project, there are three elements. There is the vacation element, the expat element, and there is the extrinsic element. That is what makes Lebanon so thriving.

E Which market segment does the project target? What is the price range?
It is an upper-scale development; there is a luxury element to it. There are some penthouses which are pure luxury, and there are also higher mid-end affordable elements in it. It is mid-high. But the penthouses are high-end. The price range doesn’t help you much, because we launched the project in 2007, and prices in 2007 were very different than 2009. In these three years the prices went up. So anyone who bought with us when we launched is a very happy person. People who bought now have higher prices. There is a tremendous increase in prices.

E What added value does the project have? Why should someone buy into this project and not in another project?
If you look at the project, there are many added values. First, there is the master developer Solidere. The company itself brings credibility to any project. And Solidere does a wonderful job. Second, the location of the project. It is overlooking the sea. Another added benefit is the proximity: in five minutes you are everywhere. So there are many elements. But again when you buy a property, it is a very personal thing. For some people, things are very important but I think for most of the people the elements we have covered in our development are appealing. If you like to be in Beirut and you want to have something calm, close to everything, overlooking the ocean, in a master development from a well-known name, then we have a good product.

E At the World Economic Forum this year, you said you will shift focus to emerging markets — is this a part of it?
What happened is that with the crisis, many people have to rethink. We are very strong in Dubai. We have a very strong foundation there. What we do is a pitch-and-catch strategy. We take the best practices we developed in Dubai and they are pitched out into different countries. For example in Lebanon someone catches our best practices and localizes them and implements them. That makes us a little bit stronger than other people because we have this strong foundation. So that is our strategy all along. And we will focus on emerging markets. Why emerging? Because there is no value added in developed countries. What value added do I have in New York? We really go into countries where we can add value, and the developing countries. Lebanon is a different case because in one sense it is developed, and in the other sense it is still in need for some rebuilding and some assistance. So Lebanon is in a very special situation. But we do believe we can deliver a lot of value to the country.

E Are you planning any future investments in Lebanon?
We are now looking. With the first project we were really happy. You always test the market with the first project. If it doesn’t go very well, you reconsider. But the first project went very well, which makes it very easy to go to the next step. We are actively looking for many reasons. One, we know the country much better, we found strong partners and we have a very positive first experience so, yes, we would like to. We look more to our partner  Solidere. It is not an exclusive partnership, but a very strong partnership.

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Lebanon

Architecture – Project Lebanon 2009

by Executive Staff
written by Executive Staff

Project Lebanon 2009 opened its doors again this year at BIEL Exhibition Center to gather local and international engineers, architects, building materials specialists, investors and other key market players under one roof. Exhibitors came from Italy, Germany, France, Iraq, Switzerland and other countries looking to establish partnerships and enter the Lebanese and regional markets.

“Lebanon is back in business,” said Fadi Jreissati, vice president of operations at IFP Group, Project Lebanon’s organizers. The event’s packed parking lots, entrance queues and the rush on the stands were proof that Jreissati was right.

“We have an 80 percent increase in size,” he said. “We have sold every single meter we have, and if we had known that elections would not have a negative effect on the exhibition, we would have opened the whole tent.”
The fact that the exhibition takes place in June has not helped it much recently. Last year, the conflict in May crippled the show and the parliamentary election this year also made some exhibitors shy away.
“We had a very bad edition last year; the conflict in May affected us very badly,” said Jreissati. “[This year] there are a lot of people who were afraid and did not participate.”

This year’s highlight

For the first time, Project Lebanon is hosting the “Sustainability Week” which includes a series of conferences tackling the issues of green building, sustainable architecture, water and energy conservation, as well as recycling and saving resources. A green pavilion is also included where companies either have new technologies to introduce or are offering consulting services to help implement green initiatives in new and existing buildings.
Since Lebanon is still taking its first steps toward achieving sustainability, the green pavilion at the exhibition attracted considerable attention. Most companies started working in the green field only recently, since this technology was prohibitively expensive to import and the Lebanese market was not welcoming to the idea.

Project Lebanon attendance

  2008 2009 % increase
Number of exhibitors 220 350 59
Number of national pavilions 4 9 125
Number of countries participating 11 23 109

Source: IFP Group

“We started two year ago,” said Mohammed Nasser, electric and power engineer at Somiral Energy, an importer of solar panels. “Before, it was too expensive and not very available. Now, it is more affordable.”
Another company, Schneider Electric, also started working on providing energy efficienct solutions for its customers in the last 24 months, by introducing electrical devices that consume less electricity or switch off automatically in order to save power, and other new technologies. By using these energy-saving products, industries can save up to 20 percent on electricity, while residential houses can save from 10 to 40 percent.
“We are in a world where we have a challenge,” said Julien Feghali, chairman and general manager of Schneider Electric East Mediterranean (SEEM), the Lebanese subsidiary of Schneider Electric. “We want to protect our environment and we have very tough objectives.”

Feghali explained that his company is currently getting positive feedback in Lebanon, which would not have been expected two to three years ago, because the concept was still new. Schneider is also working with the Ministry of Energy and Water, the Lebanese Order of Engineers and the Électricité du  Liban to implement these solutions on the national level.
“The order of engineers has to play their role in terms of standardization. Sometimes you have to [implement] rules and regulations. We should work in the same [way] in Lebanon,” Feghali said.
Jad Bsaibes is a project engineer at Energy Efficiency Group (EEG), a Lebanon-based firm that offers consultancy services for existing buildings in order to find ways to save energy. He said many in Lebanon are open to receiving green technologies and services, but there are still some engineers who do not collaborate.

“Some work with us, and others don’t,” said Bsaibes, whose company is currently working on buildings such as Intercontinental Phoenicia Hotel and Studio Vision.
Michel Tannous, president of Entech Coatings, relocated his company from Canada to Lebanon six months ago, finding the country and the region offered a good opportunity to introduce his new coating technology. With a 25-year guarantee, Tannous explains that his new Entech Coatings Product would keep a building nicely painted for a long time while isolating the outside heat or cold, thus saving a large amount of energy used for heating or cooling.
“Everyone is excited and wants the product,” he said.

It’s not only private companies that were advocating for the use of  green technologies at Project Lebanon, but also Lebanese nongovernmental organizations. For example, the Lebanese Solar Energy Society (LSES) was established in 1980 and aims to convince people to use solar and renewable energy. Other NGOs present at the exhibition were the Lebanon Green Building Council, and the Lebanese Association for Energy Saving and for Environment.
Even though private companies and NGOs are doing their part, there is no doubt that the path to sustainability will be hard, especially due to the lack of regulations backing these initiatives.
“The hardness softens when there is commitment,” said Dr. Sadek Owainati, co-founder of the Emirates Green Building Council. “It is not a one day, but a long-term commitment. It is not one group, but everybody.”

Owainati also emphasized the need to have a national strategy which is realistic and achievable. He also expressed his concern on the lack of urban planning in the city.
From this year on, Sustainability Week and the Green Pavilion will be a integral part of the Project Lebanon exhibition.
“It is definitely not the last time… It is a great start for us and a big success,” said Jreissati from IFP.
“We did a lot and we invested a lot in [Project Lebanon]” he added. “Everybody is so happy, and we are still at the beginning [in terms of] potential. There is so much to do, the event will still grow.”

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Capitalist Culture

Politics – Obama in Cairo

by Michael Young
written by Michael Young

Barack Obama’s speech in Cairo last month provoked mixed reviews. Some said the US president spent too much time apologizing for American behavior in the Middle East; others said his words were just that, words, needing implementation. The only consensus reached was that Obama had been eloquent, but that somehow reminded us of the old Monty Python sketch where a game contestant fails to summarize Proust in 15 seconds, earning the consolatory words: “A good try though and very nice posture.”

Where Obama came up short most flagrantly was in his inability to define a clear position on political freedom, and how to advance it in the Middle East. In fact the president seemed to want to have his cake and eat it too. For example, in referring to the war in Iraq, Obama stated: “Unlike Afghanistan, Iraq was a war of choice that provoked strong differences in my country and around the world. Although I believe that the Iraqi people are ultimately better off without the tyranny of Saddam Hussein, I also believe that events in Iraq have reminded America of the need to use diplomacy and build international consensus to resolve our problems whenever possible.”

Indeed. But if Iraqis are “ultimately” better off without Saddam Hussein, what does that tell us about US policy when it comes to supporting Middle Eastern democracy and human rights? After all, neither diplomacy nor an international consensus would have ever freed Iraqis from being under Saddam’s thumb. So did the US do the right thing in getting rid of the Baath regime by force? Obama avoided addressing that prickly question.

This fuzziness permeated Obama’s later discussion of democracy in the region. The president pointed out: “So let me be clear: no system of government can or should be imposed upon one nation by any other.” But then he went on to say that this view did not lessen his commitment to governments that reflect the will of the people. Except that “America does not presume to know what is best for everyone.”
But hadn’t Obama just presumed to know that the Iraq war was beneficial for the Iraqi people, since he felt that they are better off without Saddam? Aren’t Iraqis better off without Saddam because the new system they now live under was imposed on them by an American led-invasion? And weren’t Obama’s bromides in favor of democracy and democratization not also statements implying that he presumed to know what was best for everyone?

If so, then why did the US president not just come out and state the obvious: that democracy, openness and pluralism are indeed better for all states, as is respect for human rights. Why did Obama prefer to avoid rocking the boat when it came to autocratic regimes in the region? Not a word was uttered on actual cases of human rights abuses, whether in Egypt, the country hosting him, or in any other part of the Middle East. Clearly, the president, for all his high-flying rhetoric, preferred to fall back on the aversion of political realists to involving the US in the region’s domestic affairs.
Equally interesting was what the president had to say about the Christian Maronite and Coptic minorities.
“Among some Muslims, there is a disturbing tendency to measure one’s own faith by the rejection of another’s,” he said. “The richness of religious diversity must be upheld — whether it is for Maronites in Lebanon or the Copts in Egypt.”

This advice Obama placed under the rubric of “religious freedom.” This was strange, because the problem of minorities in the Arab world is usually more a political than a religious one. What the Copts would like more of is political power, not the freedom to exercise their religion. As for the Maronites, their sense of decline is attached not to the fact that they cannot practice their religion, but that they feel their political power is waning. 
All this leads to a disconcerting conclusion that Obama has few coherent views of political freedom in the Middle East. He overemphasized religion while underemphasizing how the US might address political matters, such as what to do about dictatorial regimes. He also failed to address the absence of democracy in the Middle East in illegitimate states that fail to fulfill the aspirations of their citizens; or what to do about minorities denied political power, both Muslim and non-Muslim.

Obama submerged his Cairo speech in the holy water of religion, but it is freedom, the failure of the Arab state, and the lack of accountability of regional regimes that are more central to the dilemmas the Middle East faces today. In one word, it is about politics, and on this Obama was too busy being polite to his listeners to raise the difficult questions he promised to raise at the start of what, in retrospect, sounded like a puzzling homily.
(Editor’s note: A version of this article first appeared on Harvard’s Middle East Strategy blog)

Michael Young

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