Property developers in Jordan have stated that residential apartment prices have dropped between five and 10 percent recently and may be down by 20-30 percent in 2009. Experts say the reason is the slowdown in demand due to market conditions and a decrease in mortgage lending, as well as the huge drop in prices of construction material, which is making properties under construction less expensive.

Up until September 2008, demand for residential apartments was healthy and increasing year-on-year. The Department of Land and Survey reported more than 18,000 apartments were purchased in Jordan between January and September 2008, compared to 14,498 the year before, with more than 13,500 sold in the capital, Amman.

Prices of property in Jordan have skyrocketed since the US-led war in Iraq began in 2003, forcing 750,000 Iraqi refugees to escape to neighboring Jordan. Additionally, higher oil prices also led to higher prices in the real estate sector in general.

Some experts fear a property recession, since many people bought their houses on mortgage, and defaults due to the current financial turmoil might lead to foreclosures. Currently, banks are being very selective in giving mortgages. Additionally, available mortgage financing, which was up to 100 percent of the property price, fell to 70-80 percent of the property price. Applications for mortgages fell greatly as a result.

Market confidence has decreased and investors, as well as end buyers, are adopting the ‘wait and see’ strategy. Even though some experts anticipate a huge fall in the housing sector, it seems that the government has not yet implemented a strategy to mitigate the expected downturn.

As Gaza licks its wounds and starts to make up the balance of the latest Israeli assault, Lebanon’s Hizbullah has, since the end of the July 2006 War, worked on the reconstruction of Haret Hreik in Beirut’s southern suburbs. By the people, for the people and a quick return to what once was, seems to be the motto. While Hizbullah officials emphasize the reconstruction of the southern suburb has nothing to do with Solidere’s reconstruction of downtown Beirut, there are nevertheless some striking similarities.

“There is no ‘divine victory’ without reconstruction,” said Hassan Nasrallah in his speech on August 14, 2006, which marked the end of the July War with Israel. Although many Lebanese saw little divinity or victory, they did notice that Nasrallah kept his promise, as the reconstruction is in full swing, especially in Haret Hreik. With over 200 buildings under construction in an area of 0.8 square miles, the “capital of south Beirut” is arguably the largest construction site in Lebanon.

The toll of war

Home to Hizbullah’s former headquarters, the southern suburb was severely bombed in the 2006 war. According to the Lebanese army, 942 air strikes hit south Beirut. The Haret Hreik municipality reported that 265 residential, commercial and office buildings were partly or completely ruined, while a total of 3,119 housing and 1,610 commercial units were destroyed. Some 20,000 people lost their homes.

For the $400 million reconstruction of Haret Hreik, Hizbullah created a new organization, Waad al Sadiq (the faithful promise). The organization technically works under Jihad al Binaa, Hizbullah’s construction arm, yet in reality it works largely on its own. Situated opposite the church of Haret Hreik, Waad signed for the urban master plan and set the criteria for builders to abide by. At the start of 2009, 233 buildings in Haret Hreik were under construction, some 150 of which had their basic structure complete.

“Waad is the largest democratic collective reconstruction project ever undertaken anywhere in the world,” said Waad CEO Hassan Jeshi. “We did not impose Waad on the people. The people asked us,” he said. Waad gave Haret Hreik’s homeowners a choice: either to keep the state compensation of some $53,000 for war damages and rebuild their homes themselves or to hand over money (and responsibility) to Waad, which pledged to pay for all additional costs. Perhaps not surprisingly, most people chose the latter.

Jeshi declined to elaborate on Waad’s sources of funding. It is a public secret, however, that Hizbullah is partly financed by Iran. In addition, it receives donations from individuals in Lebanon and abroad. Jeshi emphasized that the reconstruction of Haret Hreik was not strictly a Hizbullah affair, as the master plan was drawn up with the help of an advisory board of eight leading Lebanese architects, while dozens of consultancy firms, from all segments of society, were involved in the process.

Still, the main themes for the reconstruction were set by Hizbullah, more precisely, by Hassan Nasrallah in his victory speech; a quick return of the internally displaced, to good quality buildings in a recognizable, yet more beautiful Haret Hreik. The return to “what was” is at times taken quite literally, as even buildings that suffer from a lack of natural light are to be rebuilt.

Improvements refer, among other things, to the alignment of buildings and the widening of streets and sidewalks. Most buildings will be painted in uniform (pastel) colors. Interesting novelties include the introduction of solar-powered street lighting and the use of double walls to save energy. Regarding individual preferences, inhabitants have a say in the design of their future home’s interior.

Some critics have claimed that the Waad Project only reinforces the image of Hizbullah operating as a state within the state. “We don’t aim to replace the government,” Jeshi countered. “One should know, however, that the government pays compensation, yet never re-built a single house. What’s more, civil society in Lebanon has always played an important role. Every community has its schools, hospitals and media. That is not a specific Hizbullah feature. That is Lebanon.”

Others ague that Waad is not solely interested in the comfort of Haret Hreik’s inhabitants, but as much in the well-being of Hizbullah’s armed wing. “Mao said that the resistance is like a fish in the sea of the people,” one Waad official said. “Israel knew very well that Haret Hreik was not a military area. It aimed to destroy the sea.”

“Even if you do not like Hizbullah, you have to admit that, in some ways, it has done the inhabitants of Haret Hreik a huge favor by allowing them to rebuild their homes, which otherwise would have been impossible in the current legal and institutional framework,” said architect and urbanist Mona Fawaz. “While on the other hand, the Lebanese state missed a huge opportunity to re-establish a positive presence in south Beirut. The one complaint you hear again and again when talking to the people of Haret Hreik is, ‘no one from the government came to see us.’”

Why not rebuild better than before?

“What I find a pity is that there has been so little debate about the future of Haret Hreik,” Fawaz added. Shortly after the 2006 war, Fawaz and a number of colleagues at the American University of Beirut established the Task Team Haret Hreik (TTHH) with the aim to improve living conditions in the densely populated suburb. In January 2007, it developed a proposal that was eventually published as a booklet with recommendations, including an emphasis on public space and greenery, and improving traffic circulation. This was preceded by three months of trying to initiate a call for an international design competition. 

Although Fawaz had never expected that Hizbullah would share the responsibility for reconstructing its “home” with outsiders, she hoped to at least initiate some sort of debate. Hizbullah at first welcomed the TTHH’s work, yet quickly dismissed the call for an international competition. “For several reasons,” Fawaz said. “Most importantly, it argued that a design competition would require too much time, as it aimed for the rapid return of the internally displaced. Furthermore, Hizbullah feared that outside intervention would seek to (partly) depopulate Haret Hreik.”

When talking about the future of Haret Hreik, Waad officials like to emphasize that the reconstruction of the southern suburb is nothing like Solidere’s facelift of downtown Beirut. Echoing traditional left-wing criticism of Solidere, they argue that the heart of Beirut has become a city that is unrecognizable and unaffordable for its former inhabitants. Yet despite the obvious differences in approach, there are some striking similarities as well.

In both cases a private entity supervises the reconstruction process, aided by a board of well-known architects to produce what Fawaz called “an air of credibility and legitimacy.” Meanwhile, according to Fawaz, both boards worked largely behind closed doors and allowed for little input from third parties. Also, both have redesigned the city in enclaves that seem disconnected from the rest of the city. Both Solidere and Waad have mastered the art of public relations and, finally, both often work with “legal exceptions.”

Solidere has been severely criticized for demolishing buildings of historical or cultural value in downtown Beirut under the pretext that they no longer met minimum safety regulations. In its aim to resurrect Haret Hreik as it once was, according to Fawaz, Waad is reconstructing buildings that were in violation of urban zoning laws (floor regulation ratios, maximum heights, etc.) and the building law (natural light, ventilation).

Large parts of South Beirut consist of “informal” and often poorly constructed settlements, especially in areas such as Uzai or Hayy el Sellom, mainly as a result of years of civil war and Israeli occupation in South Lebanon, which forced many inhabitants to flee to the Lebanese capital. At the same time, as Haret Hreik during the Civil War was the domain of Muslim militias, the once predominantly Christian population left, selling lands and possessions to property developers.

“When constructing, especially in the early 1990s, most developers found legal loopholes to avoid, for example, the minimum of 25 percent of public space that is required when large lots are subdivided in commercial units,” said Fawaz. “As a result, Haret Hreik and South Beirut have become the densely populated areas we know today. Yet, if I as an individual rebuild my home, public officials can prevent me on the basis of the building law and 1994 Regulation Law. Yet, if Hizbullah collectively rebuilds, no one will stop them.”

“What is more alarming, however, is that the pre-war urban fabric badly needed interventions to improve livability and, in that context, Waad does very little, since it has committed itself to replicate the pre-war fabric,” Fawaz added.

Building “terrorist infrastructure”

Finally, on a rather different note, the US administration regards Hizbullah as a terrorist organization and in early January it included Waad on a blacklist of organizations that support terrorism. Jihad al Binaa had already been listed. According to US authorities, Waad has rebuilt the Hizbullah “command center” and underground weapons storage facilities. Waad officials dismissed the notion that Hizbullah is a “terrorist” group, denying the allegations.

Fawaz called the allegations unreasonable. “After the destruction of the 2006 war, everyone was free to walk around Haret Hreik to see there was no military infrastructure (such as bunkers and tunnels), as had been alleged,” Fawaz said. “And today too, everyone can go to Haret Hreik to see what is being rebuilt.”

In a world where information, technology and communication converge constantly, the rapidity and efficiency of a country’s telecommunication system are key to the development of its society. In Lebanon, where the telecom sector is decades old, a group of professionals is trying to promote the importance of broadband in businesses and society overall, with an awareness campaign scheduled for next month.   

“There is no real broadband in Lebanon, where communication speed and download capacity are extremely low. I really believe that the term broadband should no longer be used loosely to refer to speeds of less than one megabyte per second upload speed,” says Salam Yamout, chief program manager at Cisco and member of the Lebanese Broadband Stakeholders Group steering committee. 

A dirt road of an information highway

Broadband refers to telecommunication allowing information to be transmitted over a wide band of frequencies in a given amount of time.

Lebanon’s telephone infrastructure was built in 1993. Three years later Internet was introduced, using phones lines for data transportation. Unfortunately, today Lebanon is no longer on par with other countries in the region or the Western world.

“Connectivity does not only refer to Internet connections as it also has other uses. Individuals and the private sector have different needs for connectivity,” adds Yamout. “Individuals usually want to have their home connected over a single broadband connection to have access to many applications and services such as TV, video on demand, telephone directory services, Triple Play, the Internet and other services. For businesses, insuring connectivity between branches nationally and internationally is essential. An illustration we could all relate to is connecting branches in the banking sector.”

Jennifer Sarraf, IT manager at Malia Group, reckons that connectivity is vital to her company’s operation, which owns offices in three different areas of Lebanon as well as abroad. “In spite of disposing of four DSL lines, accounting for monthly bills of over $5,000, our company is unable to make proper use of its new software system which relies on high speed internet connection, due to connectivity problems,” she adds. Issuing invoices by connecting to the company’s central server is a process that requires as much as 15 minutes because of slow connectivity, explains the IT manager. The company has been forced to invest in three servers instead of one because slow connections render remote backup operations extremely difficult. “We faced similar problems when expanding in Jordan, as our international branches did not have the possibility to properly connect to our headquarters’ system,” Sarraf remarks. Backups are therefore done daily and manually on tape, which are then couriered to the company’s headquarters.

Broadband connectivity has been linked to lower costs and higher productivity, two things Lebanese businesses are in need of, while slow connections are synonymous with lost opportunities in our global world.

Yamout points out that while in number of users Lebanon ranks high among other countries in the region, it lags behind in terms of speed of connections and affordability. “The idea for creating a Lebanese Broadband Stakeholders Group stemmed from a conference held last year in January,” says Yamout. “ICT company owners had complained they were losing thousands of work hours due to slow connection. Their testimonial was backed by the dean of the American University of Beirut who had argued that greater connectivity could allow Lebanon to save lives with the use of remote medicine. And a broadcasting company reported loss of income and business opportunities because of the lack of availability of broadband services in Lebanon,” explains Yamout. Stakeholders, headed by the steering committee including professionals and business leaders representing Lebanese industries, decided to pen their grievances in a document that was called the ‘Broadband Manifesto’.

“lebanon is not advancing at the same speed as technology is globally”

The Broadband Manifesto

The manifesto was signed by more than 500 people including heads of all Lebanese chambers of commerce, professional associations such as the union of industrialists and association of Lebanese banks, major television stations, the bar association as well as the order of Lebanese doctors.

The document calls for true broadband, affordable and reliable for all, which allows for economic and social development as broadband reduces costs to business and improves productivity. Broadband is not to be perceived as a source of revenue and thus should not be overtaxed. Preserving privacy and security was another point mentioned in the manifesto. The broadband market should be a simple, fair and competitive market, something that can only be attained with the liberalization of the telecom market at all levels of networks — international, national and transmission — highlights the manifesto. Access to public infrastructure should be made possible for license providers. No restriction on content or application and service should be applied, while support and development of local content and development of online services ought to be supported by the government.

Today, an economy’s growth and development rests on its ability to process information using communications technology and the ability of consumers, businesses and governments to use ICT to their benefit. Therefore, policymakers should facilitate the creation of an environment where digital connections can thrive.

“We need to build the telecom infrastructure using new technologies that adapt to current uses. Experts believe the completion of a national network would require approximately one to three years,” asserts Yamout.

“Let the market build it…”says the E-readiness report by the Economist Intelligence Unit, adding that “It has long been true that competitive telecommunications and Internet service markets are more efficient than governments in building networks and finding affordable price points for consumers. Policymakers should allow market forces to determine the course of the digital economy.”

Yamout admits that the Lebanese telecom sector, which is still discovering itself, needs to be liberalized. “Lebanon is not advancing at the same speed that technology is globally. Price differences are also extremely high. For example, in Lebanon one can obtain a 256 kilobyte per second connection for $30, while in the West the same price can guarantee you a 350 megabyte per second” connection.

To create awareness, the Broadband Now Group is launching a campaign using mass media, combined with professional seminars and lobbying activities. “People have to be aware that Broadband is essential to a country like Lebanon because of its large Diaspora present around the world,” concludes Yamout.

The perpetual strife afflicting the Palestinian Territories has taken its toll on the Palestinian population, whose aspirations for a viable state have withered away over the past 60 years of conflict with Israel. The consequences of the conflict are evident to any objective observer, including the diminishing area of any future Palestinian state due to settlement expansions, an increasing number of Palestinian civilians who have been killed or injured and the damage to Palestinian social fabric punctuated by the schism of political power and the recent Israeli offensive on Gaza. 

Perhaps the most nuanced aspect of Palestinian suffering is the state of the Palestinian economy. The systemic economic hindrances imposed upon the Palestinian economy by the Israeli government are considered by most experts to be the primary impediment to allowing the Palestinian economy to reach its full potential. The World Bank (WB) identifies three principal “paralytic effects” of Israeli policies on the Palestinian economy: access to economies of scale, access to natural resources and access to an investment horizon. Moreover, the bank also cites physical impediments such as road blocks, closures, earth mounds and the ongoing construction of the separation barrier deemed illegal under international law as a “paralysis confronting the Palestinian economy.”

Further exacerbating this paralysis is the political and economic division of the West Bank and the Gaza Strip. The lack of a contiguous Palestinian land mass and the Israeli economic blockade of the Gaza Strip have resulted in the divergence of the West Bank and Gaza in terms of the effects on total GDP, which stood at an estimated $4.14 billion in 2007, according to the Palestinian Central Bureau of Statistics (PCBS). The PCBS also noted that Palestine’s total GDP for 2008 is expected to comprise 70 percent of that in 1999 (prior to the second intifada). Per capita GDP fell nearly 30 percent from its height of $1,610 in 1999 to $1,099 in 2007 and is expected to decrease by 7.4 percent in 2008, according to figures by the PCBS and the World Bank. Furthermore, the effects on real GDP of the West Bank and Gaza cannot be accurately gauged due to Israel’s continuing economic blockade and its subsequent military offensive. The IMF  and WB estimates that results from the first quarter of 2008 are slightly negative and project modest growth of 0.8 percent in 2008 “due to a continued, yet marginal drop in economic activity in Gaza, given its already-low base, matched with a modest rise in economic activity in the West Bank.”

The inevitable emergence of Gaza’s alternative economy as a result of the Israeli blockade was estimated to provide nearly 90 percent of all products entering the strip each month, equivalent to about $40 million of contraband, said Palestinian economist Omar Shaban in an interview with Bloomberg. Facilitated by a series of tunnels between Egypt and Gaza, goods that traveled through the tunnels ranged from vegetables to Viagra and served as the main lifeline of the civilian population of Gaza. The associated costs of these improvised means of transporting goods is evident in shops and markets across the strip where an Apple iPod Nano, that lists on Amazon.com at around $150, would cost $500 in Gaza, according to Bloomberg. The Israeli offensive that started on December 27, further intensified the upward pressure on essential items such as food, which has seen a 20 percent and 23 percent rise in prices in the West Bank and Gaza respectively, according to the World Food Program (WFP). The price of one kilogram of tomatoes in Gaza during the Israeli bombardment is said to have risen from about 1.5 shekels ($0.40) before the Israeli onslaught to 7 shekels ($1.75), an increase of over 400 percent, according to Reuters. To date Palestine still does not have its own currency.

Gaza’s imports/exports before Israel’s blockade, during the blockade and after ceasefire deal with Hamas

Increase in obstacles* in the West Bank, Dec 2006 – April 2008

Israel has hobbled the means of transporting palestinian products in a competitive manner

Trade with Israel

The inherent nature of the Palestinian economy, being small and resource poor without its own airport or seaport, predicates that the majority of its economy relies on its ability to trade ­­within its territories and with its neighbors. Trade flows constitute nearly 85 percent of GDP, the vast majority of which (85-90 percent) is with Israel, according to the World Bank. This dependence on the state of Israel can be seen as a direct result of Israel’s economic policies. After Israel invaded the West Bank, it engaged in a policy of “integration” and, in theory, sought to eliminate the barriers that stood between the two economies. This resulted in a rise in Palestinian income as workers took up jobs inside Israel. Palestinian dependence on the Israeli economy at the time of the Oslo Accords in 1993 was immense. Trade with Israel represented more than 90 percent of total trade volume and the trade deficit stood at 45 percent of GDP, according to the Royal Economic Society. After the second intifada in 2000, Israel announced that it intended to end all Palestinian employment in Israel, effectively pulling the rug out from under the Palestinian economy.

Since the Israeli siege on Gaza came into effect in June 2007, essentially stopping all intra-Palestinian trade, the conventional trade of Palestine has relied solely on the internal and external trade of the West Bank. The numerous restrictions and administrative blockades imposed upon the Palestinian residents of the West Bank by the state of Israel have crippled the means of transporting Palestinian products in a competitive manner, thus creating enormous amounts of uncertainty and hobbling shippers’ abilities to compete in regional and global markets. The result has been a perpetual decrease in the amount of Palestinian trade over many years, even before the blockade and the construction of the separation barrier. According to the World Bank, between 2000 and 2006 the amount of West Bank enterprises that made a significant amount of sales outside of their home cities decreased from 60 percent to below 40 percent.

Such increased levels of uncertainty continue to add to the anguish of Palestinian enterprises that are becoming subject to increasingly high fixed costs per kilometer within the West Bank and by default the rest of the world. A recent survey conducted by the World Bank commissioned Palestinian Trade Center (PalTrade) identifies several parameters that increase costs for transporters inside the West Bank. The survey identified as much as a 40 percent increase in distance covered to reach key areas such as Jerusalem and the Allenby Bridge (connecting the West Bank and Jordan) as a result of Israeli policies that do not allow Palestinian trucks to take a direct route. The survey also points out increases of up to 70 percent in labor costs due to delays caused by road closures without announcement, flying checkpoints, unexpected variations on restrictions on cargo and movement of vehicles and people, losses due to inability to deliver on time and the waste of resources waiting and trying to predict certain outcomes.

Intra-West Bank trade routes and effect of impediments

Ultimately, trade dependency on Israel has proven to be detrimental to the Palestinian economy. In order for trade to thrive, Palestinians must have access to global markets and alternative trading routes. As Executive went to press, the Rafah border crossing between Egypt and Gaza remained closed by Israel and Egypt, as it has been since the Hamas takeover of Gaza in June 2007. Although the crossing could potentially provide an enormous amount of respite for the ailing Palestinian economy, this has yet to materialize. Even when the crossing was “operational,” it proved not to be a viable alternative to accessing the global market as the crossing operated only 16 percent of its scheduled working hours between June 2006 and March 2007, totaling a daily loss of $500,000 worth of exports according to the United Nations Office for the Coordination of Humanitarian Affairs (UNOCHA).

A viable palestinian state would need a sustainable economy free to trade and operate its businesses

Trade to the east

Trading through Jordan is also uneconomical due to the fact that all goods moving to and from Jordan must first cross the Allenby Bridge controlled by Israel. This is “a cumbersome and inefficient process that adds to the cost of shipping and discourages West Bank shippers from using the Jordan routes,” says the World Bank. Goods traded through Jordan are subject to redundant searches, parcel volume restrictions and lack of adequate storage facilities for sensitive products like vegetables and medical supplies. The only silver lining is that due to the recent increases in Israeli restrictions, coupled with some improvements in Jordanian logistics, Queen Alia Airport has become slightly more competitive for handling large volumes than its Israeli counterpart Ben Gourion, which tacks on $1,150 for “security surcharges” per metric ton, according to the World Bank. Nevertheless, the World Bank states that Palestinian traders still prefer Ben Gourion because of “better service, easier access and more frequent flights.”

Positioned at the heart of the Middle East, on the Mediterranean, Palestine has tremendous inherent potential. The promise of a thriving and prosperous Palestinian economy is as logical as it is fleeting in the face of the ongoing Israeli persecution of the Palestinian people. Undoubtedly, a viable Palestinian state would need a sustainable economy free to trade and operate its business without the current hindrances imposed upon it by the ongoing Israeli occupation.

Unless realities on the ground change, the economy of Palestine looks set to remain a burden shouldered by Palestinians, rather than a operable underpinning for a future Palestinian state.