Comment

Near death of a star

by Paul Cochrane
written by Paul Cochrane

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.

0 comments
0 FacebookTwitterPinterestEmail
Comment

The costs of our conflicts

by Riad Al-Khouri
written by Riad Al-Khouri

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

0 comments
0 FacebookTwitterPinterestEmail
Economics & Policy

Expat largesse

by Austin Mackell
written by Austin Mackell

 

During the first quarter of 2009, Lebanon braced itself for a steep fall in remittances. The logic held that the global financial crisis would severely affect remittance inflows from outside the country,  as Lebanese working abroad saw their own budgets tighten. The Lebanese government even prepared its 2009 budget proposal, which was never ratified, “on a very strict assumption of a 20 percent decrease in the level of remittances,” according to Lebanon’s Minister of Economics and Trade Mohammad Safadi.

It was a reasonable fear since, according to the International Monetary Fund, 70 percent of Lebanon’s remittance inflows are from the Gulf Cooperation Council and the United States, both of which were badly exposed to the crisis.

A few months into 2009, however, a less gloomy picture emerged with the IMF predicting a drop in remittances of 12 to 15 percent. Today the picture has brightened further, with Safadi saying that the predicted decline “has not yet materialized,” and pointing out that Standard & Poor’s ratings agency, who had expressed concerns that a fall in remittances could hurt Lebanon’s ability to pay its debts, had actually improved Lebanon’s credit rating.

In fact, in November 2009 the World Bank released its updated figures predicting that Lebanon would only experience a 2.5 percent drop, from $7.18 billion to $7 billion in remittance inflows for the year as a whole.

Projecting in the dark

The numbers are even more significant considering Lebanon’s remittance to gross domestic product ratio has also dropped, from 24.8 percent of GDP, using official figures, to a projected 21.4 percent, according to data provided by the World Bank, the IMF and Bank Audi.

The decrease can be attributed to the IMF’s forecast that Lebanon’s GDP will grow by 7 percent to reach $32.7 billion by the end of 2009. It should be noted, however, that many debate the methodology used to calculate Lebanon’s GDP [see page 58]. The Economist Intelligence Unit, for instance, expects Lebanon’s GDP to grow at a rate of 5.1 percent to reach a total of $30.2 billion by the end of 2009, resulting in markedly different figures.

Nassib Ghobril, head of research and analysis at Byblos Bank, is quick to point out the inexact nature of such predictions. “[At this stage] they’re not even forecasts, they’re expectations,” he says. “It’s very difficult to put your finger on a forecast given the lack of regular data… there simply are no figures since the end of 2008, and that’s exactly where we need greater transparency from the authorities.”

Ghobril frequently bemoans this lack of information.

“There are no remittance figures from local authorities here,” he says. “In Jordan,  we have figures on remittances every month.”

Ghobril sees this lack of information as a major problem given how important remittances are to the economy, and he advocates that it be addressed immediately.

When contacted by Executive, the Banque du Liban, Lebanon’s central bank, said that they publish remittance results quarterly on their website. However, as Executive went to press, no data for 2009 had been published.

Not yet a science

The significance of remittances to development and world capital flows only became a fashionable part of economic calculations in the last decade, so even the figures that are released are somewhat questionable. 

 

“The calculation of remittances is not a science yet,” says Ghobril. He points out that there are major methodological issues not yet settled. For example, the World Bank includes deposits (as opposed to transfers) of less than $10,000 made by expatriates into Lebanese banks in its calculations of remittances, despite the fact that in many cases these expatriates may simply be taking advantage of Lebanese banks’ high interest rates to maximize their savings and not directly contributing to actual economic activity.

The decision to include these deposits was part of a shift in the World Bank’s method for calculating remittances in 2003.

That year the World Bank reported that Lebanon received around around $4.7 billion in remittances, nearly doubling the 2002 figure of $2.5 billion — a jump Ghobril asserts was more a result of the change in methodology than an actual increase.

There has not been major methodological change since then, however, meaning that the growth from $4.7 billion in 2004 to $7.18 billion last year can be regarded as an authentic increase. The IMF also recently suggested including remittances in Lebanon’s GDP, which would significantly improve its debt-to-GDP ratio.

Uncertain inflows

As around $1.4 billion per month continue to flow into Lebanon’s banking sector from abroad, many believe that remittances must be doing well. It is also possible though that, in these uncertain economic times, a significant amount of this money is arriving from investors who have turned to Lebanon’s trusted banking sector as a safehaven to stash their cash, rather than true remittances, which would be Lebanese sending money home to be spent.

Kamal Hamdan, economist and managing director of the Consultation and Research Institute, says that a significant though unknown part of this year’s figure can be attributed to the liquidation of fixed and non-fixed assets from non-resident Lebanese.

“You liquidate once and for all so I don’t know if this $7 billion is a sign of strength or rather an ultimatum,” says Hamdan. He expects, however, that remittances will remain relatively steady in terms of their ratio to GDP “because a decrease of a few percentage points is not enough to affect its weight with respect to GDP.”  

Another (and perhaps more meaningful) indicator that remittances can be expected to stay fairly stable is the lack of an influx of returning expatriates, tens of thousands of whom were predicted to return home as a result of the crisis — though in Hamdan’s view, the absence of repatriation figures constitutes “the worst example of the lack of accurate data.”

There was “no reversal of the brain drain phenomenon witnessed so far, despite the fact that local demand for skilled labor has been rising,” says Safadi. 

While this return of talented expats would have presented positive opportunities, the fact that it hasn’t occurred also has a positive dynamic, as it means that those who have lost their jobs have likely taken up other employment, or moved from city to city or country to country seeking work in markets where wages are high and from which they can continue to send remittances.“We didn’t see thousands of Lebanese returning here, so that means they’re still working somewhere,” says Ghobril. 

Perhaps the strongest indicator of the continued strength of remittances, however, is data coming from the remittance sending countries. Saudi central bank data estimates that total remittances — to all countries — from Saudi Arabia reached $15 billion in the first eight months of 2009, an increase of 12 percent compared to 2008.

While this growth, probably fueled by the kingdom’s massive development plan, is a slowdown from the 26.7 percent growth in remittances that took place between 2007 and 2008, it certainly paints a brighter picture than many predicted when the financial crisis first kicked off. 

Resilient but not immune

Other Gulf states have also dug into their remarkably deep pockets and ploughed ahead with their own long-term strategies for infrastructure development. This was reflected in the IMF’s Regional Economic Outlook report for October 2009, which said that counter-cyclical government spending had helped protect economies in the Middle East from the worst effects of the global economic downturn.

Overall, according to the World Bank’s latest data, outward remittance flows from the Gulf have dropped only 3 percent this year relative to last year. Remittances from the Gulf to other countries in the Middle East have dropped from $34 billion to $32.2 billion, according to data from the World Bank, IMF and Bank Audi, and the IMF outlook report predicts that remittances will stabilize at $34 billion next year and grow to $36 billion in 2011.

However, there are negative signs as well. In Jordan, (where data on remittances is more readily available than in Lebanon) there has been a decline of 6 percent in remittance inflows, and Egypt, the biggest recipient of remittances in the region, has announced a decline of 8.8 percent.There are reasons to believe that remittances from the US may have suffered a more serious decline, with remittances to Mexico having dropped 15 percent year-on-year in the year to August, as reported by The Wall Street Journal.

With the region expecting to have a better year in 2010 and the US officially out of a recession, there is reason to be optimistic.

However, as Ghobirl says: “There is no way not to be effected…The Lebanese economy has shown that it is insulated from the crisis but not isolated. It is resilient but not immune.”

0 comments
0 FacebookTwitterPinterestEmail
Business

Sayfco Holding

by Nada Nohra
written by Nada Nohra

Cache Yerevanian, chairman of Sayfco Holding

Good news for middle income house seekers searching for affordable apartments: Sayfco Holding, the Lebanon-based high-end real estate developer is going back to its roots, said Chahe Yerevanian, Sayfco’s chairman. After having abandoned the middle income market for many years, the company is planning to launch  a new housing project in Jdeideh (Metn) this month for mid-range budgets.

‘Abraj Jdeideh’ will feature five 15-storey towers and will include apartments ranging from 122 square meters, which will be priced at $140,000, to 166 square meters — priced at $180,000. Sayfco is not planning to stop developing luxurious housing projects, but is now entering a new market, which is projected to be healthier in the forthcoming years.

“Luxury [demand] will stop for a while because of the economic crisis. The prices [of high-end apartments] will never go down, but I think luxury will stop having a quick turnover,” said Yerevanian. Sayfco has finalized the plans and is waiting for the permits to come through in order to launch the project. Construction will start by the end of this year or beginning 2010 and will take around two years.

From politics to real estate

Even though Sayfco has not been involved in middle-income housing for some years now, this segment was the sole target of the company when it was first created. Ara Yerevanian, Chahe’s father, took the challenge upon himself, when he was elected a member of the Lebanese parliament in the 1950s, to provide housing for the middle income market, something which the government failed to do. He established ‘Ara Yerevanian Establishment’ and began building 200 to 300-unit residential developments,  priced at around $30,000 per unit. When the Lebanese Civil War began, the family immigrated to Canada and started conducting its business there until they returned in 1995. The company was then renamed Ara Yerevanian & Sons. In 2000, Chahe took over the leadership of the company and started targeting Gulf Cooperation Council  (GCC) clients, while also entering higher market segments.

“I foresaw that the luxury market is going to have a boom, so instead of building apartments for $100,000 to $150,000, we went up to half a million and from there we went to Clouds [Faqra Club]— 11 villas for $5 million each,” said Yerevanian.

In 2004, Ara Yerevanian & Sons was substituted with Sayfco Holding and all its subsidiaries were created: Sayfco Development, Sayfco Brokerage, Sayfco Financing, Marina Hills, Villa des Roches and Ahlam Lands. This move was the first step to restructuring Sayfco and turning it into a corporate entity, rather than a family business.

“I believe family businesses do not last more than two generations… once the kids and the cousins meet, and the wives come in, the company is gone,” said Yerevanian. Therefore, potentially, the management of Sayfco will be separated from its ownership and when Yerevanian retires, a non-family member may take his place. “This is how I see the future of Sayfco,” said Yerevanian.

Sayfco Holding </p> </div> </div> <div class=

0 comments
0 FacebookTwitterPinterestEmail
Comment

Strengthened by sanctions

by Gareth Smith
written by Gareth Smith

When Iran introduced gasoline rationing in 2007, Ehud Olmert, then Israeli prime minister, said the torching of some Tehran gas stations showed “economic sanctions are working increasingly well.” Threats to blockade Tehran’s gasoline imports brought rebellious Iranians to the streets and the Islamic Republic to its knees. But the more things change, the more they stay the same. Since 2007, there have been two more rounds of United Nations sanctions, far tighter United States sanctions and a European Union ban on investment in Iran’s energy sector. 

And yet Iran’s nuclear program is further advanced, Mahmoud Ahmadinejad is still president and Ayatollah Ali Khamenei is still the supreme leader.

Iran’s reformists have long pointed out that sanctions strengthen the very people they are supposedly designed to undermine, enhancing the role of the state and its various agencies. US President Barack Obama was elected with a pledge to “engage” Iran, but once in office strengthened the sanctions regime developed under President George W. Bush, on the grounds it may push Iran to abandon its nuclear program. Many Obama supporters say this is the only alternative to military action — hence those who back sanctions need to show they are “working” or come up with new ideas for sanctions that will “work” better.

The saga of gasoline imports shows the pattern all too well. It was fear of sanctions — rather than, say, the chronic air pollution in Tehran — that led Ahmadinejad’s government to introduce gasoline rationing in 2007. Politicians had long dragged their feet over increasing the price of fuel from a subsidized price of 9 cents a liter, despite a consequent demand for gasoline that Iran’s own refineries were unable to supply.

When rationing was introduced in 2007, the allocation of cheap petrol was 100 liters a week, with motorists paying a higher price for any extra. The ration stayed at this level for three years, but was reduced to 80 liters at the beginning of the current Iranian year (in March) and to 60 liters in June, despite the usually higher consumption of the summer holiday period. During the summer, oil minister Masoud Mir-Kazemi put production at 44.5 million liters per day and imports at 20 million liters.

At the time of rationing, consumption was 75 million liters per day and appears to have fallen 14 percent to 64.5 million, while imports — 35 million liters daily back in 2007 — have fallen from 47 percent of consumption to 31 percent. A report in August from the Paris-based International Energy Agency forecast a 75 percent fall in the cost of Iran’s gasoline imports within five years, partly through opening new refineries and curbs in consumption. Incrediblely, the National Iranian Oil Company announced at the end of last month that a sudden 40 percent jump in domestic production had allowed the country to actually begin exporting gasoline, having covered domestic demand.

As production has increased and consumption has fallen, the sources of supply that have made up the difference have also shifted. Oil traders such as Glencore, Trafigura and Vitol, and companies such as Total and Shell began to end gasoline sales earlier this year as talk of sanctions increased. But the gap left by Western companies has been filled by Turkish refiner Tupras and state-owned Chinese companies including Sinopec.

Chinese companies have supplied around half of Iran’s gasoline imports in recent months, and there have even been reports that the Russian oil giant Lukoil, despite its substantial US retail operation, has resumed sales to Iran in a partnership with China’s Zhuhai Zhenrong. All this despite Lloyd’s of London — which has 15 to 20 percent of world marine insurance — announcing in July it would not insure or reinsure gasoline shipments to Iran. Iran’s trading partners and neighbors lack sympathy with the American approach, arguing sanctions should relate solely to Tehran’s nuclear and missile programs. The new UN measures passed in June blocked assets of individuals and entities allegedly involved in proliferation, whereas EU and US sanctions go much further. Washington’s financial sanctions seek to block from the US market not just Iranian businesses but third parties with significant dealings in Iran’s energy and financial sectors.

Widespread resentment at the US approach aids Iran’s search for partners willing to continue or expand trade. As one Iranian economist recently told me: “I actually believe Ahmadinejad likes sanctions. They help make him the underdog, standing up for his country’s rights against a superpower behaving unfairly.”

0 comments
0 FacebookTwitterPinterestEmail
Economics & Policy

Shaking up the system

by Sami Halabi
written by Sami Halabi

Until recently, thelabor laws of the United Arab Emirates seemed as stationary as the tectonicplates under the Arabian Gulf. Those plates seldom shift, but when they do the result is earth shattering.

The new laborregulations in the UAE may not be as dramatic, but they do have the potentialto shake up the country’s antiquated employment market.

The regulations came inlate December in the form of a ministerial decree, an edict from the laborministry that is not actually a piece of legislation. As Executive went topress, an official document had not been posted by the labor ministry, but theminister of labor had made radio and press announcements.

Perhaps the mostsignificant reform is that workers looking to change jobs will no longer need a“no-objection certificate” (NOC) from their former employer, without whichworkers were previously barred from taking up new employment for a ‘coolingoff’ period of six months.

But this regulation doesnot apply equally to all; a classification system has been put in place tocategorize workers according to their qualifications. Those with universitydegrees or a management position can move to new jobs without the NOC, buteveryone else must remain in their jobs for two years (as opposed to theprevious three-year validity of labor cards) before they may change theiremployer.

The measure to reducethe duration of labor cards to two years is expected to save private sectoremployers $184 million in costs incurred by the defaulted contracts of the 70percent of employees that left before the three-year period. According to arecent poll of workers in the UAE by Bayt.com, a recruitment and job researchcompany, 24 percent of workers stay in their position for a period of two yearsand only 21 percent stay for all three.  

“The recent UAE Ministryof Labor announcements are set to give more freedom to employees to switch jobswithout the previously… imposed six months ban and the required no-objectionletters from employers,” said Amer Zureikat, vice president of sales atBayt.com. “We see this as an attempt to not only attract more talent to thecountry but also to promote flexibility and transparency at the workplace —which was deemed ‘very’ important by 72 percent of UAE participants in a recentBayt.com poll.”

Local jobs for localpeople

That added flexibilitymight well be stymied, however, by the inclusion of another regulation in thereforms that seeks to increase the level of UAE nationals in the private sectorto 15 percent. Currently the private sector workforce is less than 1 percentEmirati, with most locals preferring to be employed in the public sector, whichin 2008 saw a low of 54.5 percent of employees being Emirati, reaching to 60.9percent in April 2010, according to recently released official figures. It hadbeen reported that the 15 percent target was to be hit by July, but officialsfrom the International Labor Organization (ILO) told Executive this was not thecase.

Other reforms includelowering the minimum working age to 16, while imposing tough regulations onwhich type of work can be practiced by minors. Expats are also now allowed toofficially take on a second part-time job or part-time work, which applies topeople with spouse visas as well. Six-month work visas are also to become parfor the course.

While the internationallabor community has lauded these measures, the UAE still has much more to do tofall in line with international standards. According to the ILO, the countrystill does not have any legal representation in the form of unions orcollectives, and these regulations are not expected to cover the tens ofthousands of workers in the free zones.

UAE labor law alsoleaves out domestic labor, which therefore excludes an estimated 300,000 to500,000 domestic workers.

If these issues, alongwith the kafeel, or guarantor, system are reformed in the future, perhaps thenthe changes really could be viewed as a tectonic shift in policy as opposed toan aftershock from the financial crisis.  

 

 

0 comments
0 FacebookTwitterPinterestEmail
Financial Indicators

Global economic data

by Executive Staff
written by Executive Staff

CLIs signal deep slowdown in OECD area and major non-OECD member economiesn OECD Composite Leading Indicators (CLIs) for November 2008 point to deep slowdowns in the major seven economies and in major non-OECD member economies, particularly China, India and Russia. The following outlines the extent of these slowdowns:

  • The CLI for the OECD area decreased 1.3 points in November 2008 and was 7.3 points lower than in November 2007.
  • The CLI for the United States fell 1.7 point in November, 8.7 points lower than a year ago.
  • The Euro area’s CLI dropped 1.1 points in November, and was 7.6 points lower than a year ago.
  • In November, the CLI for Japan decreased 1.6 points, and was 5.5 points lower than a year ago.
  • The CLI for the United Kingdom fell 0.6 points in November 2008 and was 6.7 points lower than a year ago.
  • The CLI for Canada fell 1.2 points in November and was 6.1 points lower than a year ago.
  • For France, the CLI decreased 0.8 point in November and was 5.7 points lower than a year ago.
  • The CLI for Germany fell  2.0 points in November and was 10.7 points lower than a year ago.
  • For Italy, the CLI fell 0.2 point in November and stood 5.0 points lower than a year ago.
  • The CLI for China decreased 3.1 points in November 2008 and was 12.9 points lower than a year ago.
  • The CLI for India fell  1.2 point in November 2008 and was 7.6 points lower than in November 2007.
  • The CLI for Russia decreased 4.3 points in November and was 13.8 points lower than a year ago.
  • In November 2008 the CLI for Brazil dropped 1.1 point and was 2.9 points lower than a year ago.

Strong slowdown in the OECD area

Strong slowdown in the United States

Strong slowdown in the Euro area

Strong slowdown in China

Strong slowdown in the United Kingdom

Strong slowdown in Canada

Strong slowdown in France

Strong slowdown in Germany

Strong slowdown in Italy

Strong slowdown in Japan

Strong slowdown in India

Strong slowdown in Russia

Downturn in Brazil

  • The above graphs show each country’s growth cycle outlook based on the CLI, which attempts to indicate turning points in economic activity approximately six months in advance. Shaded areas represent observed growth cycle downswings (measured from peak to trough) in the reference series (economic activity).
0 comments
0 FacebookTwitterPinterestEmail
Financial Indicators

Regional equity markets

by Executive Staff
written by Executive Staff

Beirut SE  (1 month)

Current Year High: 1,629.74           Current Year Low: 724.04

  • The Beirut Stock Exchange ended the review period with low trade volumes as the BLOM Stock Index closed the January 23 session at 1,114.77 points, down 5.3 percent from the start of 2009. Shares of real estate firm Solidere recorded limited price movements in the $16 range throughout January, whereas banking sector stocks BLOM and Audi came under some selling pressure. Although the Lebanese banks have been regarded as largely impervious to the calamities experienced by financial institutions in most other countries, the two largest banks on the Beirut bourse traded lower by 5 percent to 10 percent in the first weeks of 2009. Political and security concerns, which intruded upon the country in January through the Gaza invasion and its potential implications on Lebanon, are known as depressants for trade on the BSE, whose wishes for good fortunes in 2009 are likely to depend predominantly on internal stability, regional economics and international progress in solving conflicts in this part of the world.  

Amman SE  (1 month)

Current Year High: 5,043.72             Current Year Low: 2,561.30

  • The Amman Stock Exchange Index closed at 2,677.03 points on January 22, trading lower in the first weeks of 2009 but only at a minor net loss of 2.95 percent from the start of the year. When measured against the first trading session on January 4, the trajectories of the four official sub-indices on the ASE showed industrial and banking sectors underperform the general index by 5.5 percent and 3.5 percent, respectively, to January 22, while services and insurance did better than the general index by small margins. Jordan’s parliament started debating the issue of legislating stronger supervision of financial intermediaries, most specifically foreign exchange companies whose dabbling in brokerage last year had caused problems. Arab Bank started the year under pressure, weakening 12.7 percent between January 4 and January 22. Mining firms Arab Potash Co. and Jordan Phosphate Mines Co. dropped 6.5 percent and 8.4 percent, respectively, in the same period. With a price to earnings ratio of 14.78 times as per Zawya calculations, the ASE is in the top tier of share valuations across the MENA region at this time.

Abu Dhabi SM  (1 month)

Current Year High: 5,148.49             Current Year Low: 2,136.64

  • The Abu Dhabi Securities Exchange index closed at a 52-week low of 2,136.64 points on January 22, 10.6 percent down from the start of 2009. At first glance, the ADX has moved in step with its smaller neighbor, the Dubai Financial Market. Both waded through troughs in the last two weeks of 2008, both reached relative highs at the end of the first week in 2009 and both have weakened since. Real estate, banking and finance sub-indices accounted for the ADX descent, with a notable difference to the DFM in that Dubai’s banking values performed better than the investment companies tracked by a separate sub-index. Analysts have many arguments about Abu Dhabi’s real estate outlook being more robust than Dubai’s, but in the review period the ADX real estate sector index dropped more than its DFM counterpart. While much fuss had been made in the past three months about the differences between the two emirates, in early 2009 their bourses point to them being on the same macroeconomic team.

Dubai FM  (1 month)

Current Year High: 5,960.16             Current Year Low: 1,462.11

  • The Dubai Financial Market closed at 1,472.82 points on January 22, representing a drop of 10 percent from the start of 2009. Real estate and construction stocks have been through the mill again last month as the concerns and often highly emotional decisions of investors continued to drive the market. Emaar Properties, Union Properties and Arabtec Holding were among the companies hit by selling pressure. Arabtec traded at $0.29 and Emaar at $0.51 on January 22, both down in the 90 percent range from their 2008 highs. On macroeconomic turf, forecasters of banks such as Standard Chartered revised their forecasts for the Dubai economy even lower than their views had been around October, in the previous round of prediction making. Standard Chartered in January dared an estimate of 0.5 percent real GDP growth for Dubai in 2009. Sector-wise, the emirate appears to have developed a collective over-sensitivity to bad real estate predictions, just as it had seemed oblivious to all warnings of potential bubbles and downsides of property markets until spring of last year.

Kuwait SE  (1 month)

Current Year High: 15,654.80            Current Year Low: 6,496.80

  • The index of the Kuwait Stock Exchange moved south, in daily increments, during the January 1 to January 22 review period. Its close at 6496.80 points on January 22 indicated a new 52-week low as well as a 16.5 percent drop from the start of the year. In international and regional context, the KSE underperformed the Dow but was not far from the MSCI Arabian Markets, which also exhibited strong downward pressure in the same period, with a drop of near 17 percent. In terms of sectors, real estate, investments and banking underperformed the KSE general index by between 4 and 7 percentage points. Besides worries about oil prices in the massively energy export-dependent country, punches to the securities market came in the form of news that Investment Dar (TID) and Global Investment House had been hit by problems. TID, overexposed on the debt side, slumped 62.75 in the review period. Global, whose shares similarly lost more than half of their value, had defaulted on close to $3 billion in debt obligations but in mid-January was given 60 days to find a solution. The company could also bask in being winner of an award as “Best Islamic Fund Manager,” according to a January 22 press release.

Saudi Arabia SE  (1 month)

Current Year High: 10,351.03            Current Year Low: 4,264.52

  • The Saudi Stock Exchange’s Tasi fared like a man with mild stomach flu in the middle of a GCC epidemic of markets diarrhea. Closing at 4,556.80 points on January 21, the Tasi was down 5.13 percent from the opening of its first session in the year. Results season has cast increasingly darker shadows from the middle of the month. The big bad earnings day on the SSE was January 20 when market leader Sabic presented its astoundingly low Q4, 2008 net profit of $90 million — representing a drop of 95 percent from Q4, 2007 and undercutting analyst expectations for the last quarter by around $800 million. The company attributed the change in net profit to global weakening of demand for its products. Sabic’s share price lost around 21 percent from January 1 to January 21; theoretically, similar to many other stocks in MENA, Sabic is now a total bargain. Another massive downward surprise came from food conglomerate Savola, whose shares plummeted by close to 30 percent over some 15 days before and just after the company announced a Q4 loss of $124 million because of provisioning related to deterioration in the value of its investment portfolio. 

Muscat SM  (1 month)

Current Year High: 12,109.10            Current Year Low: 4,223.63

  • The Muscat Securities Market just doesn’t get the full attention of international analysts, and there aren’t really many opinions to choose from why the MSM index dropped 19 percent from January 1 to January 22, to a close at 4,405.43 points. Banking stocks were the most obvious culprits in the downtrend; while Bank Dhofar achieved a seven percent price gain during the review period, its peers Bank Muscat and National Bank of Oman traded at the other end of the price development spectrum and saw their share prices drop 25.5 percent and 33 percent, respectively. Jazeera Steel was the market’s worst performer, with share price losses of almost 47 percent, presumably linked to the weakening demand expectations for steel pipes. An international analyst opined that Oman would face economic pressures in 2009 due to the falling oil price and its comparatively low amount of oil resources.   

Bahrain SE  (1 month)

Current Year High: 2,902.68             Current Year Low: 1,660.05

  • The Bahrain Stock Exchange Index closed at 1,660.05 on January 22. This reading also represented a new 52-week low, as the KSE recorded on the same day, but the drop from the start of 2009 for the BSE was a comparatively benign eight percent. The BSE might even boast of doing better than the Dow these days, if only the tiny bourse were not light years behind the size of a major stock exchange. By sectors, the banking and investment sub-indices were the BSE’s downward drivers, while hotels, insurance, industry, and services kept their noses pretty much above water. Market cap leader Batelco could report a modest increase in its annual results to $276.4 million net profit for 2008; its fourth-quarter results in 2008 appeared to be in line with the overall earnings development. Batelco shares gained less than one percent in the review period, meaning the company was among the BSE’s best performers in the year to date.

Doha SM  (1 month)

Current Year High: 12,627.32            Current Year Low: 4,589.76

  • Qatar was the least fortuitous securities market in the GCC in the early weeks of 2009. The Doha Securities Market index closed at 4815.02 points on January 22, down 30 percent from the start of the year. Note that making a fresh start doesn’t mean that things go well from the first minute. All investors and market augers who might have hoped that 2009, either from the get-go on January 1 or from the Obama presidential oath on January 20, would see global financial markets blessed by a magical Oz factor have the counter proof: the most-watched US index performed unimpressively during inauguration week and even dropped below 8,000 points on inauguration day. When measured against its first active day in 2009, the Dow gave up 10 percent by market close on January 22. Of all GCC exchanges, only the Saudi and Bahraini ones performed better than the Dow in the New Year, while Qatar came in abysmally. One wonders why the DSM underperformed every market in sight, but Doha-based analysts don’t appear unified on the issue quite yet: some experts explained the slide as catching-up with peers, while one investment firm simply called a one-week, 14 percent drop “a mixed performance.” 

Tunis SE  (1 month)

Current Year High: 3,418.13             Current Year Low: 2,648.43

  • The Tunindex accomplished a gain of 2.41 percent from January 1 to January 23 when it closed at 2,959.66 points. With its economic and political profile that is more removed from oil export prices and from the Near Eastern conflict, the Tunis Stock Exchange started the year under the conditions of a positive disconnect from regional and global share price trends. Poulina Group Holding, which since its entry to the exchange in September of last year is the TSE’s strongest company by market capitalization, shed 5.63 percent in the review period. Banque de Tunisie, the exchange’s strongest bank, ended the period 1.8 percent higher. According to ratios computed by Zawya, the Tunisian bourse saw 8.69 percent volatility in January trading and its price to earnings ratio stood at 11.58 times at the end of the review period.

Casablanca SE  (1 month)

Current Year High: 14,925.99            Current Year Low: 9,405.86

  • The Casablanca Stock Exchange opened the year with a sudden and strong slide of nearly 1,600 points that resulted in a two-year low of 9,405.86 points when 2009 was just a week old. The index then regained 450 points and closed its January 23 session at 9,979.81, down 5.6 percent from the January 2 session. The CSE’s market cap leader, Maroc Telecom, saw some volatility and experienced a net drop of 5.4 percent in the review period; the company announced positive results for both the fourth quarter of 2008 and the entire year on January 19. Its net profit for 2008 grew 7.2 percent to $3.5 billion. The real estate group Addoha and the conglomerate ONA Holding were among the weaker performers in the review period, registering share price losses of around 15 percent each.

Egypt CASE (1 month)

Current Year High: 11,935.67            Current Year Low: 3,643.34

  • With the start of 2009, the Egyptian bourse headed straight into another tunnel with only the slightest glimpse of light around after the year’s first full three weeks of trading. When measured from the January 4 year-opening session until its January 22 close, the CASE 30 Index dropped 19.1 percent and only just moved up a notch from a two-month low in the final session of the review period. It closed the day at 3,810.18 points. Local market analysts and brokers pointed to regional and international conditions, saying that the Cairo and Alexandria Exchanges were affected by heavy selling from regional investors; the analysts added they saw nothing wrong with the domestic market that would explain the above-average downward pressure. Orascom family heavyweights Orascom Telecom Holding and Orascom Construction Industries shed around 24 percent apiece from the start of the year. Manufacturing firm El Sewedy Cables took a steeper fall and lost over 30 percent.
0 comments
0 FacebookTwitterPinterestEmail
Finance

Money Matters by BLOMINVEST Bank

by Executive Staff
written by Executive Staff

Regional stock market indices

Regional currency rates

Algeria connects Spain to gas pipeline

Medgaz, the international natural gas consortium of five companies, completed the process of laying pipeline between Algeria and Spain. The 210 kilometer distance separating the coasts of the two countries is now connected by a 61 centimeter diameter subterranean pipeline. The pipeline that is laid at depths of up to 2,160 meter is projected to transport 8 billion cubic meters of natural gas per year between Spain and Algeria. The project that cost $1.27 billion was signed in August 2000 and will start transporting gas before the second half of 2009.

Oman to develop airports’ maintenance facilities

The Middle East maintenance, repair and overhaul (MRO) sector was worth $2.2 billion last year and is expected to grow by 70 percent to $3.4 billion over the next 10 years. The Omani government is participating in this growth with issuing tenders for contracts to design and supervise the construction of two new maintenance facilities at Muscat and Salalah airports. The Transport and Communication Ministry is continuing the expansion scheme at the two airports by planning a maintenance, repair and overhaul facility for both sites. The project has an objective for enhancing the Omani aviation services capabilities and developing the country’s transport and tourism infrastructure.

Morocco’s inflation hits five-year high

Inflation in Morocco has reached its highest level in five years. Prices increased by 3.9 percent in 2008, compared with an inflation of 2 percent in 2007. The rise in food prices was the main factor, with food inflation at 6.8 percent, while non-food inflation was just 1.4 percent. It is worth noting that Morocco’s underlying inflation, which excludes commodities such as diesel that are subsidized by the government, grew by 4.5 percent and is higher than the overall inflation. Rabat recorded an inflation rate of 4.9 percent, Tangier and Casablanca’s inflation were 4.5 percent and 4.1 percent respectively. On the other hand, unemployment in 2008 is projected to hit 9.5 percent, down from 9.75 percent in 2007, with a labor force of 11.3 million. Furthermore, in 2008, Morocco’s main exports of phosphate rock increased by 168 percent over 2007 to $5.66 billion with a price of $409 per ton in the third quarter of 2008.

0 comments
0 FacebookTwitterPinterestEmail
MENA Cristal AwardsSpecial Section

Antony Lawrence – Q&A

by Executive Staff
written by Executive Staff

Antony Lawrence has been the director of marketing and innovation at Jumeirah Group since 2005. Founded in 1997, Jumeirah Hotels & Resorts is considered as one of the most innovative and luxurious hospitality providers worldwide. With the company’s rich portfolio, it continues to be a hospitality industry leader in the MENA region.

E What is your marketing strategy at Jumeirah Group and how has it changed since the financial crisis began?

Our marketing strategy has changed slightly. What we are trying to do is create not just brand campaign, since that is what we were traditionally doing, but also to do tactical advertising. ‘Tactical advertising’ means that you get a response rather than just telling people about yourself and how wonderful you are. The other big change is, instead of press advertisement, which was traditionally one of our ways of getting across, we try to use the web more to be able to track where our customers come from as well as their habits, so it is more sophisticated. We just finished an 8 million Dhs ($2.17 million) campaign only on the web. We will be promoting the brand on the web, as our cost of sale, which has become much lower on the web since we adopted direct booking, can offer our customers better deals.

E How exactly do you implement the two-way communication between you and your client?

We have a matrix solution involved in the web booking so we can actually track our customers and see where they are coming from and what the trends are, what they are booking in terms of length of stay and which media is most successful. So since the campaign started running we have seen successful results on BBC for instance, where we have been doing a lot of work. We have also been working with few of our partners like the Emirates Holidays and Emirates Airlines to make sure that we leverage our media dollars and to generate joint initiatives.

E How are you being affected by developers delaying projects?

It is just frustrating what is happening, six months before the opening of a hotel in the region we try to push some activity into that area and we would promote that space. But until we have got the opening date in place there is no point in starting to do that. So we have to slow down a little bit. Certainly the momentum is already there, because the sort of signings that were already made are from more than two to three years ago and are due to open, so it is not like they are not happening; it is only the ones that have not come out to the ground yet. I think that we will have to wait and see what happens. The other thing that I think is being big for us is that the Dubai brand is really spread around the world and that has been really helpful for us. In America three years ago we only had two percent brand awareness and now it is 10 percent awareness, so it is a huge and incredible change.

E What are your expectations for advertising in the hotel industry?

I am the judge and on the jury of advertising creativity and what was interesting to me was that the creative standards were very high in certain categories. We knew who the winners were; there was a lot of average [advertisements] and some where very good. The challenge now for advertising in the region is to raise the bar, try to be resourceful and not just do the creative work but really use media more creatively as well. As a client our demands are going to be very high and we need to work together [with agencies] to try create something that is going to hit the target that we are looking for. We need to do something that will track and measure our customers, and we are going to need to put more matrix solutions in so that we can see what is delivering and what is not delivering, as well as be more flexible. Every penny has to count. I think we have to be wiser and work a bit harder and possibly to take risks and deliver results at the same time. Within the hotel industry as well, we are being very tactical. Anybody can come up with a campaign saying ‘2 nights for the price of one’ — it is like a supermarket and there is nothing clever about that. Then again if everyone is doing it anyways it does not make any difference. It’s about creating some sort of difference and producing some new offerings. My view is to continue to build the brand message, both globally and locally, and really try to create a unique space.

0 comments
0 FacebookTwitterPinterestEmail