Since July 2008, stock prices of real estate companies have plunged continuously. This is especially true in the UAE where investors fled the stock market due to bad expectations, the need for liquidity to cover losses in foreign markets, or because they were simply following the crowd. Yazan Abdeen, portfolio manager equities at ING Investment Management thinks “markets are smart in their nature. They have the ability to discount future expectations and the fears of investors.” In this case, investors began to expect the burst of a real estate bubble that would result in a plunge in property prices and lower valuations for real estate companies. “Regardless of the size of the company, I think that the market was taking into consideration some trends of action will take place that will yield in the deleveraging that has happened to these companies,” says Abdeen.
At first, investors started to sell their real estate stocks irrespective of the company’s fundamentals, relying solely on the sector’s outlook and the overall macroeconomic situation. However, since concerns started to emerge about the financial status of these companies due to tighter liquidity and expectations of weaker earnings results, doubts about their fundamentals have grown. “Progressively, it would appear that people began to question the fundamentals and the overall features of some of the [real estate] companies in tighter liquidity conditions,” explains Sana Kapadia, vice president of equity research at EFG-Hermes. “What started as a more technical sell off [seems] to have become a questioning of long-term sustainability,” she adds.
Emaar’s stock price
Emaar properties’ stocks for last half year
Emaar properties, the largest property developer in the region hit its lowest share value of $0.48 on February 3 and as Executive went to print, stood at $0.75 after the Dubai government launched a $20 billion sovereign bond program to ease liquidity conditions. At the same time, other real estate companies in Dubai, like Union Properties and Deyaar, stood at $0.23 and $0.15, respectively. Even though these companies have witnessed a small increase in their stock prices, likely due to the $20 billion bond program, it is still too soon to tell if this indicates a trend toward market recovery
Since the beginning of the crisis, Emaar stocks have been the most affected in the sector as they have lost more than 80 percent of their value in 2008 and around 37 percent in the last three months. Thomas Schellen, publishing editor at Zawya Dow Jones, explains that even though Emaar’s stock price has suffered the greatest loss, that does not necessarily indicate that it has worse market fundamentals than other companies in the UAE or the region. In Schellen’s view, Dubai was the worst hit by the crisis because the relative importance of its the real estate sector in the economy is higher than in other GCC countries. Consequently, Emaar, being the biggest company on Dubai’s financial market and with a high trading activity, was affected the most. Kapadia also believes that the impact on Dubai’s stock market is more significant since “a distinction continues to be made between Dubai and Abu Dhabi, with more risk being perceived in Dubai companies in the property market… the property market crash [is] expected to be much worse in Dubai than Abu Dhabi.”
Emaar’s financial situation
On February 12, Emaar released the long awaited 2008 fourth quarter report announcing a 54 percent decrease in net profit, mainly blamed on the $480 million write-down in its US subsidiary John Laing Homes, which weighed down the company’s net profit. Emaar recorded a net operating profit of $1.519 billion in 2008, 15 percent lower than its net profit of $1.79 billion in 2007. It also announced that its revenue dropped by 10 percent, from $4.865 billion in 2007 to $4.360 billion in 2008. A week after the report was released, Emaar announced that it will not be paying a dividend in 2008.
Additionally, it seems that liquidity problems at Emaar are starting to emerge since the company revealed in January its plan to secure financing by raising up to $4 billion through Eurobonds and Islamic sukuk. It has announced the establishment of a $2 billion Euro Medium Term Note (EMTN) program and a simultaneous sharia-compliant $2 billion sukuk program, already listed on the London Stock Exchange. These programs are issued “as a part of the company’s global growth strategy,” said Emaar in a statement.
U.A.E. Property prices have fallen 40 percent and are expected to drop 20 percent more in 2009
Emaar’s possible downgrading
In mid-December 2008, Standard and Poor’s (S&P) rating service revised its outlook for the company from stable to negative, while keeping its ‘A-’ long-term corporate credit ratings. “A prolonged downturn could negatively impact our view of Emaar’s business risk, and it could also lead to deterioration of Emaar’s currently healthy financial position,” said S&P’s credit analyst Alf Stenqivist in a recent press release. Even though Emaar’s rating is still high, the fact that S&P’s outlook was downgraded is not a positive sign for the company. Moreover, Moody’s Investor Service said at the beginning of February that it is reviewing six leading Dubai companies, including Emaar, for rating downgrades due to Dubai’s macroeconomic outlook. Moody’s anticipates that the downgrade would be lowered by not more than two notches, still leaving these companies with investment grade ratings. Schellen explains, “the outlook forecast might influence negotiations between the debt issuer and the bond buyers. The bond buyers might demand a higher yield because the outlook is negative, but unless the actual rating changes, it is unlikely that there is going to be any change in the direct interest situation.”
Abdeen explains that the share prices of a company do not affect its operations from a financial perspective. “The movement of the share price is neither loss nor gain for the company. The price does not affect its performance,” but there is very much a link between the company’s performance and its share price. Therefore, any bad news for Emaar or the market in general might affect the company’s share performance.
Property prices
The fact that property prices are still on a downward trend — especially in Dubai — and that projects are being shelved, is not improving the confidence of investors who would rather stay out until the market starts to show some signs of recovery. Analysts at the UAE investment bank Shuaa Capital said in mid-January that property prices have fallen 40 percent so far and are expected to lose an additional 20 percent by the end of 2009. Collier International’s analysts were more optimistic since their fourth quarter House Price Index (HPI) revealed a drop of only eight percent in Dubai between October and December of last year. “If you come to the market here and see what is happening, [Collier’s numbers] are underestimated. I know that some major places in Dubai, like the Burj Dubai area, have gone back to the price of the third quarter of 2007. It seems they have dropped around 45 percent,” says Abdeen.
Forging into the future
Abdeen believes that any company should now have four key factors in mind to withstand the difficulties in 2009. These four elements are “visibility, profitability, proof of cash flow generation and lack of high leverage — you need these four pillars to stand, and if you have them, you will be immune,” he adds.
Kapadia believes “this is the time for companies to have strong corporate governance and corporate communication.” Everyone knows these are difficult times and companies are struggling to deal with changing market dynamics. Therefore, “if a company communicates and discusses how it is dealing with the current market challenges, it would help people believe that management is focused on dealing with the new dynamics,” she explains.
With the current chaos in the UAE real estate market, it seems that Emaar and others have a lot to do to revive investor’s confidence in their company, as well as the market in general. People are starting to suspect that Emaar is currently facing much more trouble than expected and they would rather stay out of the stock, even if it is priced at half a dollar. “I think there is high risk-averseness and a general desire not to spend on any kind of investment right now. Even if the stock may look cheap on P/E [price to earning ratio] basis, the earning is in question, given limited visibility regarding how the current cycle will play out,” explains Kapadia. “It has become challenging for companies to maintain the sustainability of their earnings.”
It certainly seems people are not expecting any improvements in the short run, however, with the fast changing market conditions and the complexity of the market mechanism, experts agree that the stock markets are very volatile and only a wait-and-see strategy should be adopted at this time. “Right now it would be pretty stupid for an analyst to claim that he or she knows what is going to happen in 2009 and what the scenario is most likely to look like,” concludes Schellen.
“Visibility, profitability, proof of cash flow generation and lack of high leverage — you need these four pillars to stand”
What does political murder have to do with capitalist culture? Quite a bit actually, in that the rule of law is better able to protect the free minds and free markets underpinning a liberal system worth its salt. This month, the special tribunal for Lebanon, which will address the assassination of former Prime Minister Rafiq Hariri, and dozens of others since February 2005, will begin operating in The Hague. However, it is obvious, and disturbing, to see how little agreement there is over what this may mean for the rule of law in Lebanon down the road.
It’s been almost four years since the investigation and trial process began. The politics of the case have been discussed and fought over, but relatively little attention has been paid, domestically or internationally, to its legal ramifications, and what the tribunal’s creation means for the general course of justice in Lebanon. The answer may not be as straightforward as some assume. The boilerplate view is that the Lebanese judiciary can only gain from the tribunal, and many would like that to be true. However, is there as clear a link here as the tribunal’s supporters suppose?
In arguing against the likelihood that the tribunal will radically change Lebanon’s judicial system, one might raise several doubts. First is the timing of the court case in The Hague. By most accounts, there will be no accusation presented this year, so that at the soonest the tribunal will bring suspects into the dock five years after the first assassinations in Lebanon. That may be standard procedure in such trials, but it doesn’t diminish the fact that the sails have been largely emptied since the heady days of 2005 when the United Nations investigation began, and when many Lebanese naively believed that justice would be swift.
A second doubt is technical. How will the impact of the special tribunal filter down through Lebanon’s judiciary to improve legal practices across the board? The real value of the tribunal, some point out, was that it was created mostly outside the debilitating confines of the Lebanese legal system, so that even if one seeks to implement the tribunal’s lessons, it will be very difficult to do so in practice. Rather than turning the punishment of political crimes into a rule, the doubters argue, the tribunal is an exception that cannot and will not soon be repeated. The dog will bark, and the flawed caravan of Lebanon’s judiciary will pass.
A third doubt is raised from the fact that the Hariri assassination has been so polarizing nationally, that there can never be any agreement over how to implement its results domestically. As the reflection of political divisions, Lebanon’s judiciary will swallow the good word coming from The Hague, mash it up and spit it out, with nothing to show for it.
All these criticisms are in some ways defensible. The relationship between the special tribunal for Lebanon and a more open legal system that defends free minds and markets is a tenuous one. The investigation of Hariri’s killing was indeed an exception in a country ravaged by political assassinations in the past three decades, none of which were ever solved. However, the Lebanese judiciary did participate in the tribunal’s formation, and Lebanese judges will be on the bench. There is also the fact that the impact of the tribunal will always be more moral in its repercussions than measurable in clear-cut tangible terms.
And how might one assess the moral impact of the Lebanon tribunal? For one thing, if the trial process is a success, it may encourage many more young Lebanese to join the judiciary, and many more lawyers to apply for judgeships — two persistent problems in recent years. It may also help alter the way that the police and judges investigate crimes in the future, reinforcing their professional pride. Already, those Lebanese who have collaborated with the UN investigation are in a position to benefit from their experiences and now train younger recruits.
Moral consequences are difficult to quantify, but in some ways their impact may be more powerful because of that. Nowhere is this more obvious than in markets, where moral choices, though not necessarily optimal in market terms, can have a fundamental impact on economic behavior. The notion of trust, to offer one example, is not easily quantifiable but can be the backbone of profitable exchange relationships. By the same token, a justice system that has as its model the successful prosecution of those behind the assassinations in Lebanon, may induce future investigators to ignore the negative consequences of searching out the truth, and persist in uncovering wrongdoing.
Much will depend, however, on what happens in the Hariri trial. The rule of law could be severely crippled if the tribunal loses momentum, or if the prosecution fails to reach a convincing endgame. Alas, many people in Lebanon will not regret that if it happens.
Michael Young
In late January I was asked to look into the closure of the Daily Star, Lebanon’s only English language daily. But discussions to financially prop up the paper were going on behind closed doors, so without a shareholder to quote, the story, as they say, was dead in the water. It also looked as if ‘the DS’ could be as well, and that this commentary might have been a eulogy of sorts.
On January 14, the DS was ordered to cease operations following a court order requested by Standard Chartered Bank over a loan of some $700,000. The presses were at a stand still, staff were on leave until further notice and the website frozen on the date the plug was pulled. It took until February 2 for the paper to raise the cash to get back on the newsstands.
To the hacks, editorial staff and interns that have spent time at the Gemmayze offices — of which I am one — the closure was but another episode in the drama of the DS.
As the old hands can readily recall, the newspaper has had many ups and downs, from the deal with the International Herald Tribune (IHT) that gave the DS a much needed boost in the early 2000s, to the unification of the Lebanon and regional editions, to the downsizing of the paper’s staff in 2005, when it shrank from occupying two floors of Marine Tower to only one. Then there was the ill-fated plan to gain a bigger slice of the regional market by moving to Dubai — I was even asked if I would be willing to make the move, it was supposedly that certain — and the loss of the IHT alliance in 2006.
Older staff still working at the paper were pragmatic following the shutdown, feeling the causes would be rectified as so many times before when the paper was in dire straits. Former staff were somewhat nostalgic — they certainly let each other know about the closure –— but were equally not surprised when recalling the financial constraints and lack of dynamism and morale in the newsroom itself.
The discontinuation of the DS did not bring about any schadenfreude though, but rather hand-wringing. For despite all of the paper’s shortcomings — notably reduced pagination and a heavier reliance over the years on the wire services and intern writers to churn out content — readers bemoaned the loss.
There was talk of what news options were left to English-speakers in Lebanon and for readers abroad interested in this perpetually problematic country. For Lebanon is extremely limited when it comes to daily news coverage in English, confined to a handful of mostly partisan websites, such as nowlebanon.com, which is linked to March 14, naharnet.com, equally pro-March 14, and almanar.com.lb, linked to Hizbullah.
Although no details were forthcoming about the re-financing of the DS, the fact that it is not openly sponsored by any political group and regularly has Lebanon’s two opposing camps breathing down its neck, makes the Star’s position in Beirut a much needed one.
Sure there is a need for less wire copy and more original content, as well as an overhaul of the opinion page, which more often than not reflects the ideas of those outside the region than in it — running counter to what anecdotal evidence suggests, that people want another perspective on Middle Eastern issues than what the Western mainstream media offers. The website also needs to be seriously revamped in keeping with the shifts in the media environment.
But these constraints appear to be acknowledged by the DS, as stated in a ‘We’re back’ announcement: ‘Expect to see some changes in format and style over the coming months as this newspaper tries to revitalize.’ That has, however, been heard before, so let’s hope some real change is afoot to boost readership and not lose the DS, again.
Media coverage of Lebanon aside, the loss of the DS would have deprived the world of a journalistic incubator for the numerous reporters, editorial staff, photographers and graphic designers that have passed through the Star since it was re-launched in 1996. From my time there and before, former DS staff have gone on to work for Britain’s Financial Times, The Economist, The Guardian, The Independent, and for Reuters; The Los Angeles Times, The Washington Post, The New York Times, Christian Science Monitor, Newsweek and Time; Germany’s Frankfurter Allgemeine Zeitung; Belgium’s De Standaard; Canada’s Globe and Mail; the UAE’s The National and The Gulf Times; Australia’s The Age; and on television with Al Arabiya, Al Jazeera, Future, and ABC.
The aforementioned are clearly some of the biggest names in global media, and a fact the Star’s management can take pride in. It is also another reason why it’s good to have the Daily Star back in print.
PAUL COCHRANE is a Beirut-based journalist. He worked at The Daily Star from 2002 until 2005.
The very high cost of rebuilding Gaza and other regional disasters is on people’s minds in the Middle East and beyond. Whether we are talking about the havoc wreaked by Israel’s summer war in 2006 against Lebanon, the more recent Nahr al-Bared conflict there, or numerous other episodes during the past few decades of large-scale fighting, there is no shortage in the region of massive destruction caused by war. Of course, the first and biggest cost in conflict is the incalculable loss of a human life, and there is no yardstick to measure this. With so many people in the region suffering, it may seem callous to discuss the economic costs of conflict. Yet, these are enormous and go well beyond budgetary outlays, so quantifying things might be a good way to wake everybody up to the enormity of our problems. Done properly, this will hopefully show decision-makers and the average person alike that war is a bad idea, if only because it is so expensive.
In that vein, a major project called ‘The Cost of Conflict in the Middle East’ has recently come to fruition with the publication of a report launched at the United Nations in Geneva. This initiative by the Strategic Foresight Group (SFG) think tank of Mumbai involves an innovative approach to engage people of the Middle East in collaboratively assessing future risks, at a time of failure of negotiation to find lasting solutions to the conflict.
The initiative has attracted interest from various regional and international actors, including the ruling party of Turkey, which hosted the project’s planning workshop in March 2008 in Antalya to define the parameters of the project. This was followed by a scenario-building event convened in Zurich in August and co-hosted by the Department of Foreign Affairs of the Government of Switzerland. Norway and Qatar also supported the exercise.
The Cost of Conflict in the Middle East project aims to quantify the numerous costs incurred by the region due to protracted conflict and to encourage public opinion to reflect on this. Researchers worked on developing a number of parameters to outline these costs, especially since the first event held in Turkey. The aim of the second workshop was to develop a “conflict escalation ladder” and a “peace building ladder,” outlining war and peace scenarios, with opinion makers and heads of think tanks from the countries of the region, as well as Europe and beyond.
The report produced from this exercise is now available in a comprehensive volume rich in graphics. After a preface by Sundeep Waslekar president of SFG, and an introduction by Swiss Ambassador Thomas Greminger, the book discusses multiple aspects of the cost of Middle East conflict since the early 1990s, including its $12 trillion “opportunity cost.” The latter expression is one used by economists to indicate “what could have been,” in this case, how much richer the region would have been without conflict. More precisely, this amount is the increment the Middle East would have earned from 1991 to 2010 (in 2006 dollar terms) under peace.
The past year also saw the unveiling of other efforts to measure the costs of fighting in the region — an especially notable one being by Linda Bilmes and Joseph Stiglitz, whose book The Three Trillion Dollar War estimated the economic cost of the current Iraq war to America at $3 trillion and the costs to the rest of the world to be another $3 trillion — in effect a $6 trillion conflict.
This is far more than the US government’s initial estimates and this is the first war in American history that has not demanded some sacrifice from citizens through higher taxation. Instead, the cost is being passed on to future generations. Yet, the largest cost has been borne by Iraq. Apart from the many people killed, unemployment is rampant, having soared to 60 percent a couple of years ago. Out of Iraq’s total population of around 28 million, two million have fled the country, creating additional costs for neighboring economies.
Like the Iraqi conflict, for which the US taxpayer will pay and the Iraqi people are paying, the war in Gaza has hit the population there directly and will also have an outside financial impact. As regards to the latter, the American people are involved through massive support for Israel, but the treasuries of European and Arab countries alike will also be footing bills. However, in the present world economic crisis, this is becoming less affordable, and efforts by SFG and others will hopefully wake people up to this expensive state of affairs.
Riad al Khouri is senior fellow of the William Davidson Institute at the University of Michigan in Ann Arbor
The multiple bomb attacks on Bombay last November were but the latest in a series of terrorist attacks that rocked India during the second half of 2008. In total, five cities were targeted killing over 200 people. While almost daily the Indian media launch yet another story “proving” that the hand of Pakistan is behind it all, most experts do not believe that either country can afford do be drawn into a war. There is a growing fear, however, that Indian Muslims may be drawn into the conflict.
The Bombay attacks have been claimed by the Lashkar-e- Toiba (LeT), an Islamist organization based in Pakistan that fights for the “liberation” of Kashmir and has close links with the Pakistani military intelligence (ISI). The consensus among Indian security agencies is that the series of attacks required such a level of training, coordination and funding that it could never have been pulled off without the support of Pakistan.
“Most terrorist attacks in India are executed with the help of Pakistan,” says Animesh Shroul, a scholar at the Institute of Conflict Management in Delhi. “Pakistan cannot fight India directly. It needs proxies. The aim is to create a climate of political and economic chaos, which ultimately would force India into negotiations over disputed Kashmir.”
Bombay is of course the economic engine of India. In addition, India’s tourist sector has taken a hit. Captain Alok Bansal of the Institute of Defense Studies and Analyzes believes there is a second, more fundamental reason for Pakistan to disrupt communal harmony in India. “A successful pluralistic India is a negation of the very reason for Pakistan to exist as a safe haven for Muslims on the subcontinent,” he says. “Pakistan, like Israel, is a state based on religion. It needs an outside enemy to keep its ranks closed inside.”
Although the perpetrators of the Bombay bombings arrived by boat from Pakistan, most experts believe they could not have operated without some sort of Indian help. People tend to forget that India is home to the second largest Muslim population in the world. It is feared that Pakistan and terrorist groups such as Al Qaeda may aim to incite some of India’s 140 million Muslims.
The main suspect to have offered “a hand” in the Bombay attacks is the Indian Mujahideen (IM), which claimed responsibility for the four attacks that preceded Bombay. A violent off-shoot of the banned Students Islamic Movement of India, IM believes jihad is the only option to improve the socio-political situation of Indian Muslims.
“If the Muslims are terrorized, the Hindus can never live in peace,” stated an IM e-mail posted after the Delhi bombing last October. The 13-page letter also called upon the youth of Gujarat to join their ranks. In 2002, a Hindu mob killed some 2,000 Muslims in the western state of Gujarat. It is widely believed that the state’s right-wing Hindu authorities were (partly) involved in the massacre, yet no one was arrested. Until today, many of the bloodbath’s survivors live as refugees in their own country.
Gujarat remains a serous stain on the image of India being a tolerant nation, while it serves as a main battle cry for Indian Muslims. In sharp contrast with the quite sensational tone of the Indian media, both Shroul and Bansal believe that IM is a relatively small group.
“It is possible that some Indian Muslim youth are involved in terrorist activities,” says Dr. Zafurul-Islam Khan, editor of The Milli Gazette. “Their motive is not Kashmir, but revenge for what happened in Gujarat and other places. Some of them may have been used by the ISI, but these claims have so far never been proven.”
India could prove a fertile ground for extremist organizations to find new recruits. According to a 2006 government study, Muslims are economically worse off than any other community on the Indian subcontinent. While they make up some 14 percent of the population, less than five percent enjoy higher education or have a government job. In fact, the report concluded that many Muslims in India are worse off than Dalits — the untouchables.
It seems, however, that the older generation of Indian Muslims stands in the way of a rapid radicalization of Indian Muslim youth. Aware of the delicate position of Indian Muslims in light of the recent terrorist attacks, roughly 2,000 Muslim clerics of the Jamaat Ulama-e-Hind (JUH) in November 2008, mounted a “peace train” to Hyderabad where they met with some 4,000 other clerics to ratify a fatwa against terrorism, which had been issued earlier in 2008.
With some 10 million members, the JUH is arguably India’s leading Muslim organization. “Please do not use issues of justice or discrimination with our plea against terrorism, and our plea for communal harmony,” JUH President Maulana Qari Usman told Tehulka Magazine. “They are different stories.”
In issuing the world’s first fatwa against terrorism, the Indian Muslim community proved it is more than able to speak with its own distinct voice, one that deserves to be heard elsewhere around the world.
Peter Speetjens is a Beirut-based journalist
Now that the initial euphoria behind President Barack Obama’s Middle East peace initiative is settling into the reality of the region’s intransigence, a different picture is beginning to emerge, and it is none too bright.
What darkens the horizon is the fear that if President Obama’s efforts — spearheaded by veteran negotiator George Mitchell — do not meet success, the backlash may be disastrous for the region, for US foreign policy and for the Obama presidency.
For once there is a president in the White House who is truly dedicated to the peace process because he understands the impact that peace in the Middle East has on US national security. As well, the president believes that solving the longstanding Israeli-Palestinian dispute will impact positively on addressing other grievances in the region. While settling the 61-year old dispute is not going to solve all the region’s problems, a comprehensive peace treaty between Israel and the Arab world will go a long way in bringing stability to the troubled region.
However, even if Obama is set on seeing peace in the Middle East, principal actors in the region seem less convinced that peace can be achieved at this point.
There are two reasons Obama’s initiative may fail.
First is Israel’s intransigence to cede on issues such as the settlements. This issue may become even more of a stumbling block now that Israeli President Shimon Peres has called on the right-wing Benyamin Netanyahu to form a government. Netanyahu has allied himself to the far right wing Avigdor Lieberman of the Yisrael Beiteinu — Israel Our Homeland Party — whom some consider to hold fascist tendencies not unlike those shared by Jean-Marie Le Pen’s National Front in France, the late Joerg Haider’s Freedom Party in Austria or Belgium’s Vlaams Blok. Netanyahu is against returning any land captured by Israel and very much in favor of keeping and expanding the settlements. A flexibility on the part of “Bibi” will depend directly on how much pressure Washington applies.
Now add Lieberman’s desire to expel Arabs en-masse and his views of Palestinians, whom ironically, as says Daniel Levy, a senior fellow at the Century Foundation and the New America Foundation, have been in this land far longer than Lieberman, an immigrant from Moldova. The ultra-rightist Avigdor Lieberman, far more so than Netanyahu, wants to see the settlements expanded.
Yet there is still room for optimism. History has shown us that it has always been the most hard-line Israeli prime ministers who have moved ahead in the peace process with the Arabs. Menahem Begin, considered one of the most conservative of Israel’s prime ministers, signed the Camp David peace accords with Egypt and returned the Sinai Peninsula in exchange for recognition by Egypt and the establishment of diplomatic relations.
And Ariel Sharon, the architect of the invasion of Lebanon in 1982, as prime minister withdrew from the Gaza Strip.
The second reason why the future of the peace talks is in jeopardy is Arab inability to reach a consensus before coming to the negotiating table. Inter-Arab squabbling, between Syria on the one hand and Egypt and Saudi Arabia on the other, does little to help the overall Arab cause.
Several high-ranking Arab diplomats in Washington have voiced their opinion that the differences between various Arab countries remain a cause of great concern.
Already Hamas, who has been at the forefront of the dispute with Israel in recent weeks, has been saying it might seek to form a new front independent of the Palestine Liberation Organization (PLO).
Many diplomats and observers agree that President Obama’s peace initiative may very well be the last chance to settle the Middle East dispute. Failure at this point will guarantee decades of more conflict and violence. And if the past helps us predict the future in any small way, we can reach the following conclusions: with each passing decade since conflict began in the Middle East, the level of violence has grown exponentially and the issues have become more complex.
To miss this opportunity for peace would be regrettable to say the least. However, history will judge today’s leaders, and so will their children, especially if they are condemned to fight yet another war.
Claude Salhani is editor of the Middle East Times and a political editor in Washington, DC.
Over the past quarter century, I have witnessed countless presidential and parliamentary elections in the Middle East and North Africa. I cannot remember one that went off without voter intimidation, violence or vote rigging. In fact, every time an election is announced it almost seems as though the country holding it is preparing for war. The military is mobilized and placed on high alert; buildings housing radio and television stations as well as government offices become armed fortresses and a feeling of doom grips the nation.
As a journalist, I have had rough times covering elections in the region. I have been arrested by police on multiple occasions. In one well documented case, during the 2000 parliamentary elections in Egypt, I was beaten up and had all my photographic equipment smashed to pieces. Thugs, or ‘baltaguiya’, hired by Egypt’s ruling National Democratic Party (NDP), accosted me as I was leaving a polling station in the center of Cairo and threw me to the ground, while taking all my equipment from me. If this had happened in a dark alley it would be one thing, but the attack took place in broad daylight right in front of roughly two-dozen armed police there to protect the polling station. After getting up, I called for the policemen’s help. But all I got from the senior officer on the scene was a denial that any such attack had occurred.
Since I moved to the Middle East, there have been seven presidential elections in the United States. Each president that has come to power during this period, except for Obama, has either served the maximum two terms or was defeated after his first four years in office. Over the last 25 years, elections in the US have been free of violence, intimidation and vote rigging. The only major hiccup occurred in 2000, when votes in Florida had to be recounted by hand because of irregularities with the vote counting machines. In the end, the problem was settled in a civil manner by the Supreme Court.
Presidential elections in the US have almost a festive mood about them. They come every four years like clockwork just before Thanksgiving and right in step with the holiday season. When it’s all over there is a period of reconciliation when all Americans — Democrats, Republicans and Independents — unite knowing full well that the system put in place by the founding fathers over 200 years ago, is still alive and well.
In most instances, elections in the Arab world are anything but festive, and elections for the highest office have proven to be nothing but a farce. Of the 22 member nations in the Arab League there are eight monarchies that don’t even pretend to be democratic. When it comes to the appointment of the highest office, they just appoint the next of kin to the throne. Then there are the so-called democracies. Egypt’s Mohammed Hosni Mubarak has been in office for almost 30 years, since Anwar Sadat was assassinated in 1981. The vast majority of Egyptians have known no other head of state. Sure, he has held countless referendums, many of which I covered, but the outcome of these referendums has always been the same. Take the 2005 election, the only time in Egypt’s history that a presidential election was contested by another candidate. In the end, Mubarak took 88.6 percent of the votes and the challenger, Ayman Nour, not only lost the election but was sentenced to five years in jail for supposedly “forging powers of attorney” to secure the formation of the his political party, al-Ghad — a charge he vehemently denies. Last month, he was mysteriously released after serving three years.
In many Arab countries, democracy equals a referendum, a mechanism used by autocratic regimes to appease Western calls for democratic reforms. In reality, a referendum is nothing more than an approval rating, which rarely dips below 90 percent. Besides Egypt, referendums are popular practice in Syria, Tunisia, and Yemen.
Algeria experimented with the democratic process, but when the FIS (Front Islamique du Salut) was set to win a parliamentary majority in 1992, the military stepped in and annulled the election. The military’s action sent the country into chaos and civil war for the better part of the decade, killing an estimated 100,000 people.
Lebanon knows a thing or two about chaos and when elections are held there is always a lingering fear that the country will disintegrate once again into civil war. The next elections are scheduled for June 2009 and since they were announced almost six months ago, it is as if lines are already being drawn. Chances are that nothing major will happen, but if the fragile sectarian balance is altered, nobody knows what may happen.
America’s presidential electoral system is imperfect, but it has been tested for more than 200 years. A valid complaint is how a country with such a diverse population can have only two major political parties. Despite this flaw, with every new administration there is a major change in policy that has worldwide repercussions. Let’s all hope this new administration will repair the damage done by the last and once again shine the light on the democratic process. As one friend so appropriately put it, “not an abomination, rather an Obama nation!”
Norbert schiller is a Dubai-based photo-journalist and writer
The spillover of the current financial crisis into the main economy is fast raising the specter of a global recession. A natural reaction is for companies to batten down their hatches in anticipation of the coming storm. But natural reactions are not always the ideal ones. Companies that cut investments and headcount in previous recessions have found to their cost that they could not respond to the upturn when better times came.
It is the brave and the leaders who take advantage of temporary downturns to invest, retool and regroup. It is the Warren Buffets, who start buying when the market is down, that will emerge stronger.
In October, research firm Gartner revised its 2009 global IT spending growth forecast from 5.8 percent to 2.3 percent but also maintained that, despite reduced growth, recession in IT spending is unlikely. The research firm noted that the industry has remained fundamentally strong, with replacement cycles in emerging regions and technology shifts, such as renewed interest in cloud computing, helping to sustain the industry through the tough times.
One could argue that delaying IT and networking investment until an upturn is the most logical move in this age of uncertainty, but enterprises could — and should — see this period as an opportunity to pursue IT expansion. Organizations should be searching for higher value solutions to help them drive efficiency now while they prepare for better days. Now is the time to leverage the availability of more cost-effective equipment and support.
If anything, the current financial crisis is helping to usher in the next cycle of networking that research firm IDC calls “flight to value,” a phase when customers re- evaluate their IT and working investments based on a number of factors, including technological pervasiveness, flexibility, sustainability and pricing.
Linking the value chain
Such re-evaluation will inevitably take us back to fundamentals, and that is to the basic IT infrastructure, or what could be termed as ‘infostructure.’ That infostructure is the corporate network that today has become the central nervous system for enterprises. However, much has changed in this past decade. The corporate network today links not just its software and hardware, but also its ‘heartware’ — employees, customers, partners, distributors and other stakeholders. By linking the creators of value, the network becomes the company’s own value chain. Indeed, it would not be an exaggeration if we were to say that ‘the network is the company’.
Network value creation
Viewing the corporate network as the company’s central nervous system can create a paradigm shift from the network as a cost center to the network as a mission- critical creator of value. Organizations are discovering the economic advantages of converging their various communications systems into a single network infrastructure. They are deploying IP telephony and increasingly, video over IP on their networks, thus saving on the costs of maintaining two separate network infrastructures. Others are deploying video over IP as a backbone for their security surveillance systems. ‘One network, many services’ has become the new clarion call.
Beyond cost savings
Perilous times such as these invite critical re- examinations of investment portfolios. IT investments will not be excluded. As mentioned earlier, such re-evaluations must include IT not as a cost center but as a creator of business value. It’s not just about cost savings. The ‘flight to value’ should not be confined to acquiring lower-cost alternatives. Rather, this is a good opportunity to look at how much each investment dollar can be stretched. Companies can translate the lower costs they enjoy on a network upgrade into a bigger redundant network. By acquiring additional network switches on the same budget, they can create a redundant network and ensure uninterrupted operations for their business activities.
Another important aspect of IT investments is long-term investment protection, which often relates to the issue of open systems and standards. Most network solutions today are open, but it can be argued that some are more open than others. A network infrastructure that creates interoperability problems with other vendors’ equipment, or one that locks you in with one vendor, cannot be considered open. It is also an investment that may not be fully protected. A truly open network architecture must enable and support other third-party solutions, as well as the development of open-system plug-ins. Investment protection must also include future-proofing your network infrastructure to support new and emerging services. Again, the full support of industry standards, as well as the vendor’s active involvement in the development of those standards, will be critical in protecting your network investments for the long term. These are hard but interesting times for many companies, but for discerning managers this is an excellent opportunity to create new value from your network investments.
Mahmoud El Ali is general manager, Middle East and North Africa for 3Com
Over the last few years, Middle Eastern governments have significantly opened up their telecommunications markets and broken up the monopolies of their state-owned, historic operators. Spectrum licenses were awarded at record prices and the new entrants engaged in head-to-head competition with the incumbents. As a result, mobile penetration soared and rapidly exceeded the psychological limit of 100 percent in many markets. In Saudi Arabia, for instance, mobile penetration was hovering around 30 percent in 2003. In 2008, it quadrupled to 120 percent according to Booz & Company analysis. While this spectacular growth brought countless benefits and choices to the end-users, it does mean today that mobile subscriber acquisition in the mainstream market has become a more difficult challenge. Thus, to achieve the growth and returns their shareholders have come to expect, leading Middle Eastern mobile operators have essentially pursued a two-pronged approach: on the one hand, they want to maximize the value capture from their domestic markets and defend their positions; on the other hand, those who can afford to are seeking additional growth in foreign, less penetrated markets.
While international expansion comes with an evident load of challenges that several Middle Eastern players are facing for the first time, maximizing value capture in the domestic market is, perhaps unexpectedly, no less challenging. It requires mobile operators to pursue, also for the first time, smaller niche segments, which typically crave customized value propositions and are usually ill-served by the generic, one-size-fits-all offerings that prevail in the mainstream markets.
Answering the call
Successfully pursuing niche segments is no small task for most operators in the region. It requires major discontinuities in just about every aspect of their business: strategy, branding, technology, organization structure, human resources, corporate culture… no area is spared! But mobile operators will find comfort in convergence, which comes with just the right toolkit to make them relevant to niche markets, at least from a technology point of view. Indeed, the convergence of media, fixed and mobile communications is making it possible for mobile operators to keep growing through customized value propositions targeting different customer segments. Mobile content is witnessing exponential growth and technology innovations, such as IMS (IP Multimedia System), promise superior and unprecedented user experiences centered around convergence. These game- changing technology developments are disruptive enough to not only bring niches within “business-case-proof” reach of mobile operators, but also to re-invent the mass market game and effectively turn it into a long tail of niches and segments, each with their own needs and wants and each with their own willingness to pay.
This is nothing short of a revolution in the mobile communications space and could mean a vast blue ocean of opportunities for players able to take advantage of them and augers well for the industry as a whole. Indeed, mobile operators stand to reap the benefits of price discrimination, service bundling and content differentiation, and the move away from cut-throat price competition that is characteristic of a mature or declining industry.
To make the most of this technology-driven opportunity and durably rejuvenate their domestic markets, regional mobile operators must first develop strategies aimed to firmly and unequivocally embrace convergence and its ‘customer first’ corollary. Their strategic intent should be to further their customer intimacy and understanding, to leverage the new technology-driven capabilities of convergence to come up with pertinent and multi-platform offerings that customers are willing to pay for. They should aim to provide integrated, end-to-end solutions that grow their shares of the customer wallet and reduce churn by increasing switching costs to customers. Next and foremost, regional mobile operators need to embark in major organization restructurings, moving away from product-centric organization and towards customer-centric structures. They should organize around well-defined customer segments while preserving any scale or scope advantages they might be deriving from their legacy structures.
A notable example of such restructuring is the Saudi Telecom Company (STC), who was among the first industry heavyweights to embark in a major structural transformation sparked by its FORWARD corporate strategy. At the heart of the FORWARD strategy lies the customer, whether an individual, a small business or a large corporation. To execute its ambitious corporate strategy, STC adopted a customer-centric structure that centered around four business units: personal, home, enterprise and wholesale, each of which is focused on a broad segment of the market and has profit and loss responsibility. These market-facing units are all supported by horizontal functions such as network and shared services. Concurrently, and to support the structural transformation and durably instilled in the minds of customers and employees alike, STC conducted a major re-branding exercise that aimed at affirming its new customer-centric direction and signaling to all stake-holders the completion of its 10-year long transformation from a public ministry of the Saudi government to an agile, market-oriented telecom heavyweight.
A corporate lifestyle choice
But customer-centricity does not stop at level one of a mobile operator’s organization structure. On the contrary, it can go far into levels two, three and beyond. Functions such as marketing, sales and customer care can be entirely structured around customer segments with product teams virtually absent. Customer-centricity can also turn into a corporate “lifestyle” as far as organization structure is concerned, with customer-centric inter-BU processes and one-stop-shop windows between downstream and upstream units.
In sum, customer-centricity clearly comes in different shades and shapes and the key organizational question for any mobile operator CEO should be: How customer-centric does my structure need to be? To answer this question, mobile operators need to understand the markets they operate in, including the mass and niche components. They also need to understand their capabilities, existing and envisioned. In the former, they should have a very good understanding of market segmentation and assess the appetite of each segment for service and product customization. In the latter, they should assess their ability to offer integrated solutions and accurately address the customization needs of their target segments. In both, they should strike the right balance between supply and demand and come up with an organizational structure that is tailored with just the right dose of a customer-centricity and realism to implement it.
Hilal halaoui is a principal and ADEL BELCAID an associate at Booz & Company