Special SectionYoung Arab Leaders

Salah A.H. Al-Qahtani- Q&A

by Executive Staff
written by Executive Staff

Salah A. H. al-Qahtani is the executive vice president of Al Qahtani Pipe Coating Terminal and the chairman of the Saudi Arabian chapter of Young Arab Leaders (YAL). Executive magazine recently spoke with him about YAL’s critical role.

E  There’s been a lot of talk today about finding practical solutions to the problems young Arab students face, particularly with specialized education. Is that something affecting you in Saudi Arabia?

Yes, there is a lack of education, for sure. We understand it, but we have to just fix it, we don’t have to talk about it. What we have to do as business people is we have to train our kids. You have to build a team under your company. You build a team, and you educate them.

E  So, in other words, you see filling this gap as a responsibility of the private sector?

No, it’s not the responsibility of the business sector, it’s the responsibility of the government, but the question is, what can we do to boost it? In Saudi Arabia, we are a part of the government and at the same time we are not.

The way I see it, it’s like a wagon and a horse. The government is the wagon, but you need a horse — the business community — to move it.

The wagon, there’s a value in it, but you need the two together. And without the two, the government cannot build infrastructure that the businessman can use.

I’ve worked with a lot of charities, and I like to participate in a lot of government institutions, because the government has helped us to build. Our father and mother taught us to build for tomorrow — to build up young people who can help you in the future.

E  And this, I assume, is where Young Arab Leaders (YAL) comes in. How long has YAL been in Saudi Arabia?

YAL in Saudi Arabia started in 2004. I started two years ago, and I  took the chairmanship eight months ago.

E  What sort of initiatives have you undertaken?

The best that we have done, thanks to God, is we signed a deal with a Saudi economics newspaper. This is a huge deal for us. They can train the students in a number of fields, including even PR work, like how to deal with news. Also every event that they have, anytime they have a speaker, they will bring it to our group, and invite our YAL members. In the last six months, we’ve had an event every six weeks.

Also — this is very good news, everyone is so happy about it — we just did an agreement with Cisco Systems, two weeks ago. The plan is that we get 200 students, all mature boys, class ‘A’, from university, and they get to work with Cisco for between eight and 12 weeks.

E  Like an internship program?

Right. We had a party to celebrate the deal, and the chairman of commerce in the kingdom came.

E  And young people are signing up for this?

Just last week, the board of YAL Saudi — me and my colleagues — we went to all the universities and explained that we have this system; these are the pros of it, these are the cons, and we need students. I brought in seven, one of my colleagues brought in 10, and now we have already signed up 25 students.

E  Sounds like things are taking off in Saudi.

When I started as chairman we had 84 members. Now we have 118.

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Special SectionYoung Arab Leaders

Elwy Taymour- Q&A

by Executive Staff
written by Executive Staff

Executive sat down to talk with Elwy Taymour after a press conference announcing the opening of the YAL Egypt Branch, the appointment of Taymour as its chair, and the formal launch of a program called Learning for Life, which is “designed to help Arab students bridge the gap between universities’ academic output and the marketplace requirements.”

E  So here we are, minute one.

Right. We just started, this is minute one.

E  Egypt seems like a pretty big gap in coverage.

What happened was that Young Arab Leaders realized from the very beginning that Egypt was very important, but for two or three years nothing really happened.

E  Why not?

I think it just didn’t materialize. But the Minister of Investment came in with SODIC [an Egyptian company that has been running a pilot program for the past year], and they tried to push the program and start the chapter. What’s good about Egypt is that the nucleus of the program was started before all this was organized, so there’s a structure that we can build around to hit the ground running.

E  So tell me what’s been happening

We’re doing two main things. We have the Learning for Life program, and the grants associated with it, but then we also have donated money for labs, for actual labs at the universities and that’s going to be an ongoing thing. It’s always going to be there, it’s always going to be serving as place to offer training courses.

E  It seems that students coming out of university without the necessary training for the workforce is a real problem in Egypt.

It’s always been a problem with this region. I think more and more there’s a gap between people coming out of university versus what’s out there waiting for them. Everyone wants to be an engineer and a doctor, and there’s a ton of other things out there that nobody knows how to do. So, I think one of the main things of YAL is that each chapter will try to reduce that gap. By introducing courses, by maybe getting a little bit more of a headway than what the government is doing, in terms of providing these guys with a little more of something to look forward to when they come out.

E  Do you have any specific plans, now that you’re in charge?

To continue the initiatives that have already started, that’s one. Second, I really would like to start working in places other than Cairo, so the focus is also going to be, for me, like Alexandria, and some of the poorer places in upper Egypt. That’s a priority for us and to also encourage more people to dedicate some of their own time to participating in the programs.

E  You mean adults, or kids?

Whichever. Whether they’re people who decide to join the chapter, or people who are older and would like to volunteer some of their time.

E  Big plans, it sounds like.

Well, I think these programs are quite important, but I also think that what Egypt suffers from is a lot of little problems. I think fundamentally there are things that need to change in the country, but to begin with, there are smaller things. If you were to assume the quality of education is currently at 20 percent of its potential, for it to jump to 60 percent or 70 percent I think you need very small things to change. Getting kids exposure to the arts and things like that, I think, is something much more important that we can focus on that will create a much bigger impact. I think the most important thing right now are the small things that we can change.

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Special SectionYoung Arab Leaders

The first step in progress

by Executive Staff
written by Executive Staff

Dr. Omar bin Sulaiman, the chairman of Young Arab Leaders (YAL), didn’t have to pay very close attention at YAL’s annual forum in Beirut last month to pick up on the high levels of youth frustration — although it’s probably a good thing he did.

“How do you start?” a young woman, a YAL member from Egypt, asked from the audience. She was standing with a microphone in a large ballroom at the Habtoor Grand Hotel during a morning discussion on how to create more opportunities for youth. And she was expressing a recurring sentiment.

“Young people do not have enough expertise to write a correct business plan,” she said. “We end up with young people saying, ‘No one will give me a job if I don’t have the right connections.’ Meanwhile, the public sector says you need more education. The private sector says the public sector has to change first. Your parents say go find a job.”

Like so many others in the ballroom, she was feeling exasperated. For one thing, the financial crisis had severely limited job opportunities. But she had also found that gaps in higher learning left recent graduates just a little shy of what hiring companies expect from them.

This is precisely the role Sulaiman envisions YAL playing. YAL has big ideas and lofty goals — their four pioneering initiatives are education, entrepreneurship, dialogue and leadership — but Sulaiman is a practical man, and he believes in practical solutions.

He was sitting in the front row and wasn’t supposed to be part of the discussion — he’d already given some introductory remarks earlier in the day — but now he rose to respond to this young woman.

“Who here is ready to train someone on the spot?” he said, turning to face the crowd. Half the adults in the room raised their hands. “That’s 400 hands! We could start right here, with ourselves!”

It was a start

Later, during a break in the forum, Sulaiman told Executive, “frustration is a part of life… We all go through it. You know, your house, your friends, sometimes something frustrates you. It’s fine, it’s a part of life. As long as you move on from that.”

Over the past year, YAL has faced its own frustrations and challenges — the economic crisis being at the top of the list — and it has steadily worked to make itself more streamlined and structured. They moved away from the non-profit model. They elected their first CEO, Assem Kabesh. They opened a new branch in Egypt. And, as Sulaiman pointed out, they increased their reach to more that 4,000 “beneficiaries” — nearly half of them in the past four months alone.

“You want a culture of debate, but eventually you want to move on,” he told Executive. “You don’t want to debate it forever. Kill the issue, hammer the issue, but move on. That’s what I was trying to bridge. Stop saying, ‘Why aren’t you doing something about it?’ We need to say, ‘I’ll do something about it.’”

At lunchtime — over Lebanese cuisine at the hotel’s spacious pool bar — several students said they agreed with this sentiment. They wanted more solutions, and fewer debates, especially political ones.

“If we had gotten into politics this morning,” a young Lebanese YAL member said, “we never would have gotten out of the room.”

In the afternoon, Sulaiman’s practical problem-solving was put to a test. The YAL forum-goers divided up into smaller breakout sessions, with experts discussing each of YAL’s main initiatives.

At the session on entrepreneurship, Rami Makhzoumi, the moderator (also President and CEO of Future Pipe Industries,) took a cue from Sulaiman and used the opportunity to ask the members of the panel, all corporate executives, if they would be willing to pledge to consider the applications of any young men and women who went through a YAL training course. They all said “yes.”

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Executive Insights

Engaging employees for the company’s success

by Tommy Weir
written by Tommy Weir

In the midst of the financial crisis, most organizations are looking for a proven way to improve their financial performance.

The likelihood is that you are as well, and there is a proven way you can do it. Kenexa Research Institute (KRI) studies conclude that there is a relationship between employee engagement and an organization’s financial performance.

In the graph below we see that organizations with high employee engagement scores have two times the annual net income of those firms with low employee engagement scores. This data points to the fact that there is a direct linkage and correlation between engaging your employees and an improvement in your financial performance.

Global employee engagement & annual income

Source: Kenexa Research Institute (2009)

You may be wondering, “What is employee engagement?” According to Jack Wiley at KRI, employee engagement is “The extent to which employees are motivated to contribute to organizational success, and are willing to apply discretionary effort to accomplishing tasks important to the achievement of organizational goals.”

Simply stated, employee engagement = employee pride + employee satisfaction + employee advocacy + employee retention. In other words, engaged employees are proud and extremely satisfied with where they work. They’re so satisfied they tell people about it and recommend their company as a good place to work. Engaged employees rarely think about looking for a new job with another company.

Some organizational leaders are skeptical about assertions that employees can be this satisfied. If you fall in this category as a leader, you need to reflect on the research analyzing employee engagement and understand the conclusive evidence supporting this research.

The way that employee engagement relates to an organization’s financial performance is that it drives an employee’s performance in terms of conscientiousness, organizational commitment and productivity. Additionally, higher employee engagement reduces absenteeism and employee turnover. These combined factors give us the most important result of employee engagement: an improvement in an organizations’ service quality and customer satisfaction.

Since it’s most probable that your organization wants to improve its customer service and financial performance, let’s contemplate the most relevant question: “What can an organization do to improve employee engagement?”

According to Wiley, to increase employees engagement, organizations need the following. 

  • Leaders who inspire confidence in the future because employees want to know what the future is and how their work relates to it.
  • Managers who recognize employees and emphasize quality and improvement as priorities.
  • To provide employees with exciting work and the opportunity to improve their skills. Employees who enjoy their work and are encouraged (and given the opportunity) to get better, contribute the most to organizational success.
  • Most importantly, organizations must demonstrate a genuine responsibility to their employees and communities.

So, how do you think your company is doing on employee engagement? Let’s take a look in the Gulf Cooperation Council and see what employee engagement scores indicate.

Employee engagement in the BRIC countries (Brazil, Russia, India and China) and GCC

0 = employees are not engaged at all

80 = employees are highly engaged
Source: Kenexa Research Institute (2009)

On average, organizations in the GCC are in line with global averages when it comes to employee engagement. But they are way behind India, which has a highly engaged workforce,which is one of the reasons why Indian organizations perform well and grow. If organizations in the region want to be global leaders, there is tremendous room for improvement in employee engagement.

One of the peculiarities about the GCC is the dual workforce: homegrown (nationals) and imported (expatriate) talent. Do you think there is a difference between the engagement of nationals and ex-pats?

Employee engagement in the GCC — comparing  ex-pats to nationals

0 = employees are not engaged at all
100 = employees are completely engaged
Source: Kenexa Research Institute (2009)

The results across the GCC are scattered as to who is the most engaged: homegrown or imported. But on  the whole, organizations in the GCC and all over the world have an incredible opportunity to improve their financial performance by driving employee engagement.

In conclusion, is your workforce motivated to contribute to organizational success, and willing to apply discretionary effort to accomplishing tasks important to the achievement of organizational goals? It is important for every organization to understand its specific employee engagement score and implement a plan to improve it and, in turn, to improve the organization’s financial performance.

Tommy Weir serves as managing director of the EM Leadership Center

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Editorial

Orphans and the ghosts of martyrs past

by Yasser Akkaoui
written by Yasser Akkaoui

This month’s Lebanese elections will be dominated by orphans and the ghosts of martyrs past. On the March 14 ticket no less than five children — Saad Hariri, Walid Jumblatt, Nayla Tueni, Michel Moawad and Nadim Gemayel  — of slain politicians are all, in one way or another, forced to follow in a tragic tradition that has become the hallmark of Lebanese politics. Meanwhile, the opposition March 8 bloc has its own martyrs whose blood has helped make the soil of Lebanon so sacrosanct.

Yes indeed, we Lebanese do like honoring our dead, but the living must not be forgotten. It is of the utmost importance that our politicians, while recalling past sacrifice, do not lose sight of future obligations. Lebanon is a country dominated by its business community — its bankers, its financiers, its hoteliers, its restaurant owners, its retailers, its property developers, its traders and its small business owners.

From the mega-wealthy, who shape the Beirut skyline, to the shopkeepers on every street corner, business, more than politics, is what courses through Lebanese veins. Any future government, whatever its stripe, must provide to the electorate a robust economic blue print, a model to drag the country from its slough of despondency. Now is the time to deliver on the promises.

The good news is that regionally the markets are picking up, clawing back one third of the losses sustained since the meltdown. It is the first sign that the critically-ill patient is on the mend. More money will be pumped into the region, but this time it will be allocated prudently into those companies that have demonstrated they suitably restructured and shed the fat of corporate excess.

But this new financial nutrition will take time to filter into the region’s bloodstream, and in the meantime, new regulations must be adopted to ensure this new investment is safeguarded. Meanwhile, the price of oil is creeping upwards and this bodes well for regional economies.

For the moment, let’s hope the dead can breathe life into the living.

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Lebanon

Real estate – Beirut in an eggshell

by Executive Staff
written by Executive Staff

In the heart of Beirut is the distinctive shell of what was once a complex called the “City Center,” also affectionately known as the “Egg.”

The Egg, with its nose chopped off and deep scars on its once smooth concrete exterior skin, has passed through dramatic changes in its 50 years of existence. Ever since Solidere in 2005 sold the land to Abu Dhabi Investment House (ADIH) as part of the Beirut Gate project, the Egg has been constantly threatened with demolition.
Solidere sold the land without any legal protection or financial incentive to save the Egg, meaning its destruction is almost inevitable. For now, the July 2006 war stopped its imminent demolition and the financial crisis delayed the bulldozers further. However, the end appears to be near for one of the last iconic, modernist architectural structures in the center of Beirut that also carries with it the physical manifestations of the civil war years.
The Egg was built between 1965 and 1968 as a multi-use shopping center, movie theater and office building. The developers, Samadi and Salha, had ambitious plans for this development and wanted to make it the biggest multi-use center in the Middle East. The egg-shaped cinema was designed to hold 1,000 seats and is 24 meters wide and 11 meters high. It was to be accompanied by two towers, of which only one was built and has since been destroyed. George Arbid, professor of architecture at the American University of Beirut (AUB), explained that the distinctive shape of the Egg came about through unintended consequences.
“The building code at this time was very strict about building movie theaters for structural safety,” Arbid said. “So the architect, Joseph-Philippe Karam, convinced the authorities that the law did not forbid the use of the space below the movie theater, so he created a retail space underneath. Once the movie theater was raised and visible, he was forced to give it a distinguished shape, hence the concrete egg shell.”

The architect and the egg
Joseph-Philippe Karam was one of Lebanon’s most distinguished modernist architects who trained in Lebanon and designed buildings throughout the region.
“The Beirut City Center was one of several examples of his innovative contributions to architecture,” said Joseph-Philippe Karam’s son, Sami Karam. “The surviving cinema [or Egg] has become an icon of avant-garde Lebanese modernism.”
Many of Karam’s buildings were destroyed in the civil war and the few that remain are being demolished to make way for high-rise developments, most notably the Building Gondole, in Rouche, that was demolished in 2004.
The architectural importance of the Egg is contested despite many top-notch international architects admiring the structure.
“Architecturally speaking the Egg does not have architectural value,” said architect Bernard Khoury. “There are many more important buildings in Beirut that are, architecturally speaking, more important. The attraction [to the Egg] is the curiosity of the building in terms of its role with the war and the fascination that it creates.”
Residents of Lebanon confirm this enchantment with the Egg and the history it represents in its current appearance.
Marie-Louise Ramy, who grew up during Lebanon’s civil war, explained the fascination.
“When we came down from the mountains to Beirut, the whole of Beirut used to look like the Egg does now,” she said. “So the structure acts as a reminder.”
Arbid disagreed with the idea put forth by Khoury that the Egg does not have any architectural value.
“It is one of the rare free-form structures in the city [and] it was a difficult task to execute such a form. It is also important because it is one of the rare cinema halls raised above a freed ground floor,” he said.
While the architectural importance of the building is contested, the debate over whether to demolish the structure or not has certainly stirred public interest. Dania Bdier, a student at AUB, started a Facebook group to ‘Save the Egg’ at the beginning of 2009.
“Within four days 3,000 people had joined up to the group,” she said.
The group now has more than 5,000 members and had to move to ‘Save the Egg Cause’ due to having so many members in the group. Much of the debate of the group does not center on the architectural intricacies of the building, but instead on the role the Egg plays in Lebanese identity.

The battle for identity
For many the Egg is becoming a centerpiece in the battle for the identity, not just of the downtown area, but the whole of Lebanon. Bdier was very clear about her reason for starting up the Facebook group.
“We are starting to look so much like Dubai and we are not, we are like the Egg. The Egg is very important in Lebanese history,” she said.
Many of those on the Facebook group who support preserving the Egg do so because they want to stop what they call the ‘Dubai-ification’ of Lebanon. This allegation is particularly sensitive given that the land where the Egg is located is now owned by the ADIH and the decision as to whether the Egg stays or goes rests not in Lebanon but in Abu Dhabi. This point has not been lost on those who argue for preserving the Egg. As Jack Samaha, on the Facebook group proclaimed, “Our identity and culture as Lebanese is not for sale [to] Gulf millionaires.”
Not all agree with this notion that the destruction of the Egg will make Lebanon more like the Gulf, and many posts support the demolition of the Egg.
“I saw the Beirut Gate project and I have to say it’s very nice,” wrote Patrick Saab on the Facebook group. “The Egg is a mess, and it can be replaced or rebuilt anywhere else. Put culture aside, think modern look for Lebanon… How do we expect to get more exposure if we keep our old, almost destroyed buildings standing?”
The ADIH would not speak to Executive but in an interview with Bdier, in January, an unnamed representative stated: “Solidere wishes us to keep the soul of this dome by either reshaping it or doing something similar. We took it into consideration and we are considering it, because it also has to financially make sense for us to do it. For this plot, we bought and paid [for] 39,000 meters squared of built up area, and the dome is only taking up 6,000 or 7,000 meters squared. The developer who is going to buy it is looking at it.”
French architect Christian de Portzamparc was commissioned to produce a study for the site, and according to the local architectural consultant ERGA Group, produced two designs for the site.
“One of the proposals keeps the shell of the Egg and the other demolishes it and no decision by the developers has been made as to which one will be built,” said Eli Abu Ghazaly, chief operating officer of ERGA.
With no legal obligation to keep the Egg it is highly unlikely that the developer will wish to keep the structure, as it reduces the built up area of the site and thus significantly reduces its profitability. Abu Ghazaly said that because no decision has been made as to which proposal would be accepted, no images of the proposals could be released.

The project that never was
One project proposal for the renovation of the Egg was Khoury’s 2004 commission by Solidere. In previous statements, Solidere Chairman and CEO Nasser Chamma, in The Wall Street Journal in 2004, admitted that Solidere wanted to demolish the structure straight away. But many of the star architects brought to Lebanon by Solidere, such as Philippe Stark and Jean Nouvelle, were struck by the Egg and Solidere decided to think again. It was then that they approached Khoury to propose a scheme to redevelop the Egg.
“There was deadlock over this site for a while and Solidere did not know what to do with it,” Khoury said. “Then in 2004, they called me to develop a temporary structure that would last five or six years while they figured out what to do with the land. But then with the assassination of [former Prime Minister] Rafiq Hariri everything changed. There was a huge change in Solidere with big interest in the real estate and many big transactions were made,” he said.
“It all occurred much faster than Solidere ever thought it would happen… The land where the Egg is was sold in one of the biggest deals and so my project was stopped,” Khoury added.
The role of Solidere in the Egg’s sale has also been highly controversial, primarily because of the way the company parceled up the land and sold it. When Solidere sold the land they expressed a “wish” for the dome to be kept, but they made no legal stipulations enforcing it. Abu Ghazaly defended Solidere by stating that “to make it illegal, there needs to be a government decree.”
But as Arbid explained, “the way Solidere sold the land makes it impossible to save the Egg.”
The manner in which the land was sold, with a total amount of built up area, including the area where the Egg is situated, did not leave any real possibility for saving the structure. Despite having already sold the right to make any assertion as to the future of the Egg, Solidere still maintains the structure is going to be preserved.
As another of Lebanon’s historical sites is destroyed many will be frustrated by the lack of transparency and debate over these architecturally significant sites. There is a clear lack of will to engage by Solidere or the ADIH in any sort of debate over whether these buildings are worth saving or not. Those who want to preserve Lebanon’s built environment face an uphill struggle.

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A blue line dance

by Nicholas Blanford
written by Nicholas Blanford

Despite recent speculation to the contrary, it appears that the Israelis intend to indefinitely remain on Lebanese soil in the northern section of Ghajar, the village bisected by the United Nations-delineated Blue Line.
The continued Israeli troop presence in northern Ghajar is a lingering legacy of the July 2006 war and has become a source of frustration for Lebanese, Israelis, the United Nations Interim Force in Lebanon(UNIFIL) and Alawite residents of the village.
Still, the monthly UNIFIL-hosted tripartite meetings, attended by Lebanese and Israeli military delegations, have raised hopes of reviving the long defunct military commission that monitored the 1949 Armistice Agreement. A renewed monitoring group, under UN auspices, may even generate sufficient confidence for Israel to withdraw from the Shebaa Farms, the last significant territorial dispute between Lebanon and Israel.
The curious fate of Ghajar is a consequence of the historically murky sovereignty of the tri-border area — the junction of the Lebanese, Syrian and Israeli frontiers.
Ghajar, populated by Syrian Alawites, was occupied by Israel during the 1967 Arab-Israeli war. The invading Israelis actually stopped just short of the village, as, according to their maps, Ghajar lay in Lebanon. A delegation from Ghajar traveled to Marjayoun and asked the local authorities to formally incorporate the village into Lebanon. The Lebanese rejected the request and after some hesitation the Israelis moved into Ghajar.
In 2000, the UN delineated the Blue Line which corresponded to the international border — behind which Israel was required to withdraw its forces from south Lebanon. UN cartographers discovered that over the years Ghajar had spread northward, actually crossing the then unmarked border onto Lebanese soil. The Blue Line split the village so that the northern two-thirds fell inside Lebanon while the southern third remained in Israeli-occupied Syria.
For a short period in the summer of 2000, it was possible to have some unusually close encounters with Israelis in Ghajar, as journalists from both sides stumbled around the village not realizing exactly where the path of the Blue Line lay. On one occasion, an Israeli television crew encountered a team from Lebanon’s LBC win the northern — Lebanese — two-thirds of the village. The Israelis asked the LBC team what they were doing inside Israel. We informed the Israelis that they were in fact standing on Lebanese soil. The two camera crews filmed each other filming each other as a convoy of shaven-headed Israeli security men drove past, glaring at us from behind their sunglasses.
After Hezbollah launched its campaign to liberate the Shebaa Farms in October 2000, the northern part of Ghajar was placed off-limits. But the village continued to be a conduit for Hezbollah’s intelligence penetration of northern Israel. Drugs were smuggled into Israel via Ghajar in exchange for cash for the Lebanese dealers and intelligence information for Hezbollah. The Israeli army described Ghajar as “Israel’s soft underbelly,” and struggled to find a way to secure the loophole along the border.
During the 2006 war, Israeli troops moved into the Lebanese part of the village, and there they have remained.
After the August 14 ceasefire, UNIFIL helped arrange a now monthly tripartite meeting of Lebanese and Israeli army officers at a UNIFIL position at Ras Naqoura on the border to discuss issues related to the implementation of UN Resolution 1701.
The tripartite group has been unable to resolve the Ghajar issue, despite indications in early May that the Israelis were preparing to vacate the northern end of the village. Israeli officials have hinted that they will review their stance on Ghajar after the Lebanese parliamentary elections, suggesting that there will be no withdrawal if the Hezbollah-led opposition wins.
Still, the tripartite meetings have achieved some minor successes, such as an agreement to mark the Blue Line with blue painted barrels in several locations to prevent accidental boundary violations. Alain Le Roy, the UN under-secretary general for peacekeeping who attended the May meeting, described the forum as an “indispensable instrument” to address security and military issues related to Resolution 1701.
The tripartite sessions have spurred some in Washington to mull the possibility of formalizing the meetings by reestablishing the Israel-Lebanon Mixed Armistice Commission (ILMAC), which monitored the 1949 Armistice Agreement. ILMAC, grouping Lebanese and Israeli army officers, met regularly from 1949 until Israel abrogated the armistice agreements with its Arab neighbors in 1967.
A renewal of the Lebanon-Israel armistice agreement itself is probably unachievable for the time being — in Lebanon, Hezbollah would oppose a revived armistice, and in Israel it would required a change of law. But a resuscitated ILMAC could help further stabilize the Blue Line, serving as a forum for airing grievances and resolving disputes. In time, if ILMAC was shown to be a capable instrument, it could encourage the Israelis to withdraw from the Shebaa Farms and be replaced by, perhaps, a combined Lebanese army and UNIFIL force.
Whether the ILMAC idea bears fruit or not largely depends on June’s election results. UN sources said they expect greater restrictions to be imposed upon UNIFIL’s freedom of operations if the opposition wins. In that event, the continuation of the tripartite meetings may be threatened and ILMAC’s resurrection will be place on the backburner.

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

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Lebanon

Automotives – Sales in the passing lane

by Executive Staff
written by Executive Staff

Lebanon’s automobile market seemingly defies economic analysis, as it’s currently experiencing growth while others are in decline. In the Gulf, automobiles sales in the first quarter have plunged by some 23 percent and in the United Arab Emirates alone by 45 percent, while Lebanon saw 19 percent growth in sales. Last year, when the financial crisis came to a head, the Lebanese car sector had its best results in years, increasing from around 20,000 units sold in 2007 to more than 35,000 units in 2008. As Fayez Rasamny, vice chairman of Rymco, the dealer for Nissan, Infiniti and GMC put it, 2008 was a “perfect year.”
“The sector was growing very fast last year, no one had stocks so [we] ordered more and en route shipments were even pre-sold. There was no holding cost of inventories,” he said.
For Rymco, the market leader, 2008 certainly was an excellent year, with sales increasing nearly 50 percent, up from 4,200 cars sold in 2007, to nearly 8,000. While the upswing in mid-range cars could be expected, the luxury end also did well. For Mercedes dealership T. Gargour and Fils, last year was “the best year ever for five years,” said Marketing Coordinator Krystel Hajj. Sales of used cars have equally spiked, up by an estimated 50 percent over the past year, according to Cesar Aoun, the Chrysler Car Group Manager.

So what explains this surge in sales?
“To be honest, no one knows, and because we don’t know, we are having problems now,” said Rasamny. Indeed, developing a marketing plan in a volatile market like Lebanon’s has always been tricky, but when sales unexpectedly spike, this presents further issues — how many cars do you import, what kind of marketing will work and ultimately, why the up-tick?
Rasamny said their first assumption was that consumers were switching from used to new vehicles, but used cars sales also spiked. Then the Rymco team, just like other dealerships, considered the surge was due to an increase in purchasing power, but that had also remained unchanged. The dealers came to a consensus that the responsibility for the increased sales can be traced to two factors that have been the bane and savior of the Lebanese economy: politicians and the banking sector.
Following the dismantling of the opposition’s “tent city” in downtown Beirut, the Doha agreement and the appointment of a president in May, 2008, stability meant an upswing in sales.
“The president’s appointment meant sales went up like crazy, showing Lebanese had the money but were waiting on the political situation to improve,” said Hajj.
But the first quarter of 2008 was very different from the rest of the year as well as the first quarter of 2009.
“In Lebanon, you never compare year-on-year, [because] if there was a bomb in January, you cannot compare to last January,” said Rasamny.
The banks also played their part by offering car loans, with lower non-acceptance rates of clients and more access to funds than in previous years.
“A main reason for growth was that banks were very aggressive in loans, so this was good for prospective buyers rather than just replacements,” he added.
But while last year dealerships couldn’t wait for orders to be delivered, this year retailers have stocked more inventory, forecasting this year to be even better. However, comparing the first quarter to the last quarter 2008, Rasamny said “we’ve seen a slowdown in retail sales this year.”
The sector’s health now hinges on the outcome of the elections and continued stability.
“If nothing happens during the elections it will be a great year. I personally forecast similar sales to last year, less but similar, with profitability nowhere near 2008,” said Rasamny.

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Lebanon

Chrysler Car Group – Cesar Aoun (Q&A)

by Executive Staff
written by Executive Staff

Executive had a chance to sit down and discuss with Cesar Aoun, the car group manager for Chrysler, Dodge and Jeep in Lebanon, the troubles of the US automakers and how they’re affecting the local market.

E The Lebanese automotive market experienced strong growth last year and this year’s first quarter. Considering sales figures have slumped in most of the world, how is Lebanon bucking the global trend?
Mainly due to the banking sector not being affected, so financing for car loans were not touched, and overall, the economy was not affected. Lebanese expatriates are also back and this contributed to moving the Lebanese economy. Comparing 2005 to 2007, when there was political instability, explosions and bombs, after the Doha agreement [in May 2008], we had a great summer and a lot of tourists, so that resulted in a jump in [overall] sales. It’s all about political stability.

E Were people waiting to buy?
You can’t predict or plan in Lebanon, it’s about the situation. In May, showroom traffic was slow, not only for Chrysler, but all competitors, and we found there was a drop from the beginning of April until now, with people waiting for the outcome of the elections.

E Did the upsurge in sales pose any particular challenges for Lebanese dealerships?
By the end of 2008, and due to the world crisis hitting the sector, it increased the flow of ‘gray’ imports and used cars from the United States and the Gulf. This was a major threat to new car distributors, especially at a time of no logical link between customers buying new or used cars. From last year, there has been a 50 percent increase in used cars. It is now a fashion. Everyone’s a car dealer, with cousins or brothers in the States sending cars over. There is no control, and anyone can import. Unfortunately there is no action from the government. In effect, it has eaten into new car sales.

E What are your projections for the year ahead?
If after the elections there is no disorder, we are looking forward to a flourishing summer in terms of car sales. The second half of 2008 was almost exceptional after a freeze of almost two years, so if there is stability, it will be similar to the second half of last year, up by 10 percent.

E The US automotive sector has been badly hit by the financial crisis, with the Detroit manufacturers requiring bail outs and certain companies on the brink of bankruptcy. Has this affected sales of American brands in Lebanon?
When the world crisis hit the US market, the first damage was to US brands, then European and Japanese brands; all were affected by the slowdown of the US market, the largest car market in the world. But in terms of sales in Lebanon, we’ve not been affected. In fact, Chrysler, Jeep and Dodge sales have grown 42 percent in the first quarter of 2009, compared to the same period in 2008. Whenever we have a regional meeting, they are happy Lebanon is going against the trend. Everyone else is down while we are up.

E But will the brands be affected given that Chrysler filed for Chapter 11 in the US?
Chrysler started, a few months ago, with a restructuring plan and presented it to the government. By the end of April there was an agreement with Fiat, Ferrari and Alfa Romeo. Due to the bad debts of Chrysler, they decided that the best solution was a quick Chapter 11 to get rid of debts and have a new company. President Obama also gave assurances that the government will ensure warranties, and that is what consumers are most concerned about. We gave assurances in Lebanon that it is business as usual, and dealers elsewhere are still running. On the legal aspect, the Chapter 11 bankruptcy is only in the States. There was a perception in Lebanon that bankruptcy is liquidation, but in the US Chapter 11 is different from liquidation, it is about restructuring debts, and concessions by unions on labor costs.
In Lebanon, we are continuing our plans, and are very optimistic and happy that Chrysler is on the right track. The speculation of the last six to seven months is over.

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Lebanon

Franchising – First Beirut, then the world

by Executive Staff
written by Executive Staff

The Lebanese are hardly known for living in harmony. They are more often at each other’s throats — if politics is anything to go by — than working collectively for a mutually beneficial future. But where political and civic cooperation leaves much to be desired, the Lebanese entrepreneurial spirit is alive and kicking.

Over the past decade a flurry of Lebanese brands started up and the more successful, primarily from the food and beverage (FNB) sector, expanded abroad as franchises into the burgeoning Gulf markets. Following the Syrian withdrawal from Lebanon in 2005 and the opening up of the economy, Lebanese businesses have also opened up shop in Damascus, while Amman has become a solid revenue earner.
What is perhaps surprising is that, given such regional success, it took until late 2006 for a franchises association to be established to bring together Lebanese brands, learn from each other’s experiences and push forward the expansion of Lebanese franchises.
Just over two years on, the Lebanese Franchises Association (LFA) is demonstrating what the country’s politicians have been unable to do: work together to improve business. For while the first half of the LFA’s slogan might need to be taken with a pinch of salt, the second half has proven to be correct: “Great nations make great brands.”
“I think what’s good about it is that Lebanon is always very good individually but bad collectively, so I salute this effort of Lebanese working together towards a common goal,” said Dani Richa, chief creative officer of advertising firm Impact BBDO and a strategic partner of the LFA. “The LFA is definitely a positive — a sharing of knowledge, know-how and best practice.”

The Middle East, the Med & the World
The LFA has certainly been active, with 55 members signing up, from ABC Mall, Patchi and Crepaway, to Najjar Gourmet, Pain d’Or, Salmontini and Al Rifai. Companies gain from training and guidance, with a franchising school established at the École Supérieure d’Administration in Beirut, offering legal advice on franchising and international exposure.
“The motivation was to give members know-how about franchising, then work on intellectual property rights, which is important in Lebanon to protect know-how and the brand name,” said Charles Arbid, president of the LFA and CEO of men’s clothes wear company Rectangle Jaune. “We then want to become a lobby group to work and interact with the government regarding trade and the industry itself.”
With a vigorous membership criteria, Yahya Kassa’a, general executive of Kassa’a Paints Group and member of the LFA, said the association has been elitist.
“It’s been the nice ideas of Lebanon: Patchi, Rectangle Jaune and concepts like Casper and Gambini. But we are going to introduce people from abroad, with Dunkin’ Donuts joining lately, and trying to keep Lebanese flair while getting bigger,” he said.
Richa said the LFA was too heavily skewed towards the food and beverage sector, and needs to diversify.
“I’d really like to see it go beyond the food and beverage lead,” he said.
But Arbid says that’s part of the nature of the franchise.
“We are trying to cover all the sectors, but restaurants offer the biggest potential for franchising,” he said.
Whether the LFA is elitist or not, it does have to be less discriminate after gaining membership in the World Franchise Council (WFC), made up of 34 franchise associations globally. One condition of the WFC is that the LFA be opened to non-Lebanese franchises. This will drastically boost the number of LFA players. “We believe we can reach over 100 members soon, especially as we opened the door to franchises,” said Arbid.
The membership of the WFC clearly works both ways, allowing for Lebanese franchises to enter markets elsewhere, even while foreign franchises in Lebanon gain from LFA experience. Seeing this potential, the LFA helped create the Mediterranean Franchise Association with 14 other countries in April. It is an indication of the strategic markets Lebanese brands want to expand into following entry in the Gulf and Levant markets.
“The new markets are the south Mediterranean: Morocco, Tunisia, Algeria and Libya, as it’s maybe too early to go to Europe,” Arbid said. “It’s best to go not to virgin markets but emerging markets.”
While the LFA is actively working on such expansion, individual members are eying franchise prospects even further afield. Kassa’a has expanded eastwards beyond the Gulf to have a branch in Kabul, and is to enter the French market with niche decorative products.
“We’re not far from signing in France, so bucking the trend [of the global downturn]. People are shocked,” Kassa’a said.
Restaurant chain Casper and Gambini had a chance to open in Malaysia at a mall half owned by the Kuwait Financial House that would target the Arab tourism segment.
“We had an opportunity but we didn’t find a local partner,” said Anthony Maalouf, chief executive officer of Casper and Gambini.

Solid partnership
The need for partnerships, typically for 10 years, is one area that the LFA assists in, yet the decision is ultimately up to the franchiser. And getting the right partner is not always straightforward said Maalouf, adding that formal agreements in the Middle East are “only ink on paper.” In Dubai, the local franchisee shifted interest away from involvement with Casper and Gambini after two years.
“We missed the train, but what’s going on there now can get us into the market,” Maalouf said.
Yet Casper and Gambini is a strong brand, and the company is finding offers from local players, such as in Syria.
“Since the region opened as one market, and we have brand value, we don’t need locals to get land or the location,” Maalouf said. “Real estate developers come to us and we can go directly in or as partners.”
Given the current status of the financial markets, expanding abroad in the present climate would seem low on most business’s priority lists. But Lebanese brands have continued to enjoy growth throughout the Middle East, buoyed by strong growth in the local market.
“Last year was a very good year for everyone, and in 2009 [there is] still growth in the first quarter,” Arbid said.
Such results have only boosted brands appetite for expansion. For instance, Casper and Gambini opened three new outlets in Lebanon over the past year, revenues have tripled, and the brand is set to open in the soon to be opened Souks of Beirut. Abroad, outlets are to open in Kuwait and Qatar, while Casper and Gambini has expanded into a falafel franchise, Falafel Nadia, in Kuwait.
But for Lebanese brands to truly succeed internationally, they need to do well at home.
“In no way can the LFA do well abroad if it does not do well locally. There is a direct correlation,” Arbid said. “We need to wait and see what direction the global economy is going in, and in Lebanon over the next six months whether it remains politically stable.”

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