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Capitalist Culture

Populism – Dazed by idolatry

by Michael Young February 3, 2009
written by Michael Young

As the carnage in Gaza escalated in January, about the most popular foreign leader in the region was the Venezuelan President Hugo Chavez. We might be able to understand the Arab delight when Chavez expelled the Israeli ambassador from his country (as later did his Bolivian counterpart, Juan Evo Morales), but less understandable was why so many Arabs ignored that Chavez is a populist autocrat who not long ago tried to change his country’s constitution to extend his mandate.

The question might seem disingenuous. The obvious answer is that Arabs don’t much care about what Chavez does at home, as long as he stands as a symbol for those issues the peoples of the Middle East consider important: uneasiness with Western capitalism, suspicion of globalization, hostility toward the United States and Israel, and a taste for radical behavior, or at least what can be sold as such abroad. Fair enough. However, the too- frequent Arab attraction to foreign autocrats tells us a great deal about the Arab world itself.
Here we have the region that perhaps most suffers from despotism, that is the most in need of open societies, term-limits on leaders, and lucid alternatives to the visceral aggression underlining populist behavior, and yet whenever its peoples look overseas, they tend to embrace those leaders who in most ways duplicate the behavior of their own oppressors. Instead of a capitalist culture of free markets and free minds, many Arabs will go for the radically chic choice of applauding dictators who irk the West. This was especially visible throughout the Cold War. The notion that America was more popular at the time than it was under George W. Bush is only true in relative terms. Even if America is deeply disliked today, it was never particularly liked two, three, and four decades ago, when Arabs were moved much more by the likes of Fidel Castro and Che Guevara, or by the bevy of post-Stalin Soviet leaders from Nikita Khrushchev to Leonid Brezhnev, then they were moved by the generally duller representatives of Western democracies.
Defenders would say this didn’t diminish the fact that, for many Arabs, such approval was mostly related to parochial concerns. The enemy was Israel between the 1950s and the 1990s, so it was natural to lean in the direction of those who were most antagonistic to Israel’s leading sponsor after the 1960s: the United States. Perhaps, but if that was the case, then this was a remarkable example of how so many people in the Middle East allow their agendas to be shaped by what they are against, rather than what they are for. And this may be one explanation, among others, for why the region ends up being so tolerant of its foul regimes. This was certainly true in Iraq. That the US was responsible for a bloody war and its aftermath is entirely possible. That this could have been avoided had the Bush administration made less of a mess of its postwar policies cannot be denied. But the removal of Saddam was, in and of itself, a necessary step toward any realistic chance of achieving a democratic Iraqi future.
That future may come or it may not come, but under no circumstances could it come while Saddam Hussein was in power. Yet how many Arabs would admit this is true? A tiny minority. For over two decades, since the start of the war against Iran, Saddam was a hero to the Arabs. And if they could once laud the “anti-colonial” posturing of the mad Idi Amin Dada, for example, then we know why they had no problem with a Saddam Hussein. By the same token, if they could stomach a Hafez Assad or a Moammar al-Qadhafi, there was no reason for them not to look with sympathy on places like North Korea and North Vietnam, or to list Chavez today as their favorite foreign leader.
The writers Ian Buruma and Avishai Margalit put their finger on the problem in their essay ‘Occidentalism: The West in the Eyes of Its Enemies’. They wrote of liberal civilization that “[i]t is a threat because its promises of material comfort, individual freedom, and the dignity of unexceptional lives deflate all utopian pretensions.”
Indeed, the populist autocrat has in him the promise and excitement of the boldly unachievable. Many Arabs may never have been convinced that Brezhnev would bring on a bright millennium of justice, even though they sided with the Soviet Union in his day. Yet, somehow they could convince themselves that Castro would move us all closer to it, or Ho Chi Minh, or Chavez today. These all seem to be men of which dreams are made, charismatic men, though their legacies have often been nightmares. The path to utopia is usually paved with repression.
It’s a pity that so many Arabs should still believe in false utopias, but also a sign that when it comes to their own polities, they have nothing to believe in at all.

Michael Young

February 3, 2009 0 comments
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Fortress America in Baghdad

by Paul Cochrane February 3, 2009
written by Paul Cochrane

Opened in the midst of the slaughter in Gaza and the twilight of Bush’s presidency, the new American embassy in Baghdad garnered less coverage than when its astronomical budget was first publicized in 2005.
The opening was more than the completion of the largest and most expensive embassy in the world. It marked the day the US diplomatic corps moved out of Saddam Hussein’s former palace and handed it over to the Iraqi government, five days after US forces officially came under an Iraqi mandate on New Year’s day.
Many Iraqis are eyeing warily the move from one palace to what is essentially an even larger one. The embassy is far grander — albeit minus the gold plated bathroom fixtures — than anything Hussein ever built during his nefarious reign.
It is on a level of Cold War era grandeur, similar in scope to the colossal project Nicolae Ceaucescu attempted in Bucharest, the centerpiece being a palace the Romanian leader wanted to be seen from space.
The 104-acre embassy complex, which is the size of approximately 80 football fields, nearly turned into a similarly sized white elephant as costs ballooned to $700 million and the project taking nearly two years longer than expected. In that time it became a symbol of the quagmire Iraq has become for the US, with no end in sight and costs spiraling upwards. But with the embassy finished and operational, it now represents the most prominent symbol of ‘fortress America’ today and, moreover, that America wants to stay in Iraq for longer than Barak Obama’s presidency will last.
As the International Crisis Group commented in 2006, “the presence of a massive US embassy co-located in the Green Zone with the Iraqi government is seen by Iraqis as an indication of who actually exercises power in their country.”
Visible from space and larger than the Vatican, the embassy draws historical comparisons to the Crusader castles of the middle ages. All that is missing is a crocodile infested moat around the walls.
But secure it certainly is, nestled inside the Green Zone, with a 4.5 meter thick perimeter wall to protect this city within a city that includes a power station, a water treatment plant, schools, restaurants, swimming pools and a shopping area.
With an annual budget of $1.2 billion, the 5,550 Americans and Iraqis working at the embassy — half listed as security — are certainly not roughing it. The residence of the US ambassador to Iraq is 1,500 square meters, while the deputy chief of mission has a “cozy cottage” measuring 900 square meters.
Tough though a posting to Baghdad may be for the diplomats, State Department, FBI, and federal agents that are to work out of the embassy, it is far from the realities of the “red zone” that lies beyond the walls, of power cuts, broken sewage pipes and violence.
That the US needed a secure site is understandable, given the track record of attacks on US embassies. In Beirut, the Americans are in their third embassy in less than 30 years, while the former US embassy in Tehran stands as a memorial to the overthrow of the Shah, and resultantly the American presence in Iran, the walls covered in colorful murals depicting the US as an oppressor, imperialist and warmonger. As Ayatollah Khomeini said in December, 1979: “This place is not to be considered an embassy but rather a ‘spy center’.” Following the US embassy hostage crisis in Tehran, the US had to resort to the somewhat farcical position of operating out of the Swiss embassy.
A drive past other embassies in the region indicates how seriously security is taken, with the Istanbul compound a veritable fortress, as is the one in Amman, with armored personnel carriers lined up outside and reportedly surface- to-air missiles within the sandstone complex.
But as Niccolo Machiavelli points out in the section on fortresses in that Bible of realpolitik, The Prince, “If they are beneficial in one direction, they are harmful in another.” Indeed, despite US ambassador to Iraq Ryan Crocker saying at the launch that the new embassy is a testimony to America’s commitment to a “long-term friendship with Iraq,” given the US role in the country over the past nearly six years it is hard to see the embassy as a symbol of friendship. Furthermore, with the embassy a fortress, it doesn’t exactly give off the impression of amiability. But that is the Catch-22 situation in which America has placed itself due to its foreign policy decisions over the years in the Middle East. At the same time as presenting itself as a beacon of hope, democracy and freedom to the world, to gain access is akin to entering a maximum-security prison.
As Machiavelli remarked: “So, all things considered, I commend those who erect fortresses and those who do not; and censure anyone who, putting his trust in fortresses, does not mind if he is hated by the people.”

PAUL COCHRANE is a Beirut-based journalist

February 3, 2009 0 comments
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Power for a Persian rapproche

by Riad Al-Khouri February 3, 2009
written by Riad Al-Khouri

As instability in the region shows no signs of abating, the launch of a dialogue between the new administration in Washington and Iran is seen in the West and the Middle East alike as important for durable peace. While helping to solve long-standing regional issues, including problems like Gaza that affect stability in the Levant and beyond, talks between Tehran and the US could also shore-up the iffy American position in the region.

At the same time, Tehran’s need for friends and partners internationally will nudge it along the path to Washington. As with any sound diplomacy, a new approach to Iran needs sticks as well as carrots. Regarding the former, Germany said late last year that it wanted further sanctions to be imposed against Iran, hitting the bank and transport sectors. The suggested new measures aim to give the incoming US administration further means of pressure on Iran in any future dialogue, offering the carrot of incentives along with the threat of tougher sanctions over Tehran’s nuclear ambitions.
Iran, a leading oil and gas producer, denies seeking atomic weapons and says that its nuclear program aims to provide energy for a growing population when reserves of fossil fuels run out. At first glance, such an argument may appear strange, given that Iran has a massive reserve of hydrocarbons — especially gas, in which it is a world leader. For the time being, however, Tehran’s internal energy equation is precarious, but not because of lack of gas or crude oil underground. Rather, it is a question of politics and pricing.
One problem in this respect is that Tehran’s populist government tries to keep the poor happy through a subsidy system. Direct and indirect subsidies on goods in Iran amount to the equivalent of many tens of billions of dollars a year. However, under increasing financial pressure, Iran is considering a measure that would abolish costly subsidies on fuel and electricity, while compensating poorer people with cash. Currently falling oil prices encourage this and similar steps, which are part of a wider plan to make the country more efficient. Gasoline and electricity, among other basic items, are very cheap in Iran, but if the proposed measure comes into effect, prices of such vital supplies will rise at least fourfold.
Yet the point is being made in Tehran that prices need to become a reflection of real economic forces for the system to be reformed and that 60 percent of the money saved would, in any case, be used to boost the spending power of people with low and middle incomes. One of the basic problems of the Iranian economy is that despite the country’s wealth of varied natural resources, oil revenues still account for 80 percent of foreign currency receipts, making Tehran highly vulnerable to petroleum price shifts. The inability to diversify is partly due to lack of foreign investment and other forms of failure by Iran to engage with the world economy.
Meanwhile, crude output might fall drastically and the Islamic republic could even cease exports because of ageing oil fields and a lack of foreign technology. Crude oil production may drop to as little as three million barrels per day (bpd) by 2015 from over four million last year and the country could even halt petroleum exports (having shipped about 2.3 million bpd overseas in 2008).
Is this unthinkable? No. Without major new investments in Iran, its output and exports of crude oil will surely drop over the next few years. Though the Iranians are the second-largest producer in the Organization of Petroleum Exporting Countries, Tehran faces the prospect of an eight percent annual decline in production over the next decade because of the twin problems of lack of investment and old technology. Sanctions by the West and the tight credit market resulting from the global crisis have continued to cut financing for Iranian projects, while a lower demand for energy has already caused crude oil prices to sink. As a result, Tehran is looking for new partners to develop major projects, but because of sanctions, cannot find them in the technologically advanced West.
One of the problems for Iran’s energy sector is that it extracts less oil from the ground because of lack of adequate projects to enhance recovery. New developments using high technology could help compensate for natural declines in mature oil fields. But unless current impediments facing the oil industry are removed, rising internal demand may force crude exports down to one million bpd by 2015. This makes reconciliation with the West even more urgent.
The alternative is more Western-Iranian enmity, which risks destabilizing the Levant, the Gulf and eventually the whole world.

Riad al Khouri is senior fellow of the William Davidson Institute at the University of Michigan in Ann Arbor

February 3, 2009 0 comments
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Death and deceit for Gazans

by Peter Speetjens February 3, 2009
written by Peter Speetjens

Whatever happens in Gaza, blame Hamas! That was the official line of Israel’s well-oiled PR-machine and it was largely swallowed by most Western politicians and mainstream media. Hamas started it, so the argument goes, and if you hit someone, you may expect to be hit back. Hit Israel and expect to be hit back hard.
This is of course a quite simplistic view of things. First of all, Hamas did not start it. As Israeli columnist Uri Averny pointed out, the cease-fire between Hamas and Israel held for months. It was Israel that provoked Hamas by sending an army patrol into Gaza killing three Hamas militants allegedly digging a tunnel. Gaza’s ruling party replied by firing a salvo of Qassam rockets into Israel.
Now, one may argue that shooting homemade rockets into Israel is not the most effective way of promoting one’s cause and that it is time to find another method, but one is on thin ice to claim that Hamas initiated the conflict. In fact, as Averny also pointed out, it was predominantly Israel that did not live up to the conditions of the cease- fire, as it refused to lift the economic blockade that has strangled Gaza since 2007.
Nearly every international aid agency last year sounded the alarm. UNRWA reported last summer that half of Gaza’s population lived on food handouts, while unemployment amounted to 70 percent and that 87 percent of the population lived under the poverty line of $2.40 a day. The World Bank last year warned that the Gaza economy ran the risk of “irreversible collapse.”
Yet these gloomy observations hardly made headlines and they fell on deaf ears among Israel’s diehard supporters — and Hamas’ many enemies — who claim Hamas is to blame for the sorry state of Gaza’s economy. The fact that Israel has failed to implement the Oslo Agreement since 1994, long before Hamas even came to power, does not change things a single bit. That’s just politics, stupid!
The 1994 Paris Protocol on Economic Relations between Israel and the Palestinian Authority stipulates, “there will be free movement of industrial goods, free of any restrictions, including customs and import taxes between the two sides,” and “the Palestinians will have the right to export their industrial produce to external markets without restrictions.”
More importantly, the question of who is responsible for what in the latest wave of death and destruction in Gaza cannot solely be answered by determining who started it. Even if Hamas initiated the Israeli attack by firing rockets, that does not justify disproportional military retaliation. No courtroom in the world allows one to endlessly stretch the required link between cause and effect, as the right to self-defense is limited by the principle of proportionality. Yes, Israel has the right defend itself. No, it cannot respond in any way it wishes.
To put it in simple terms: if you hit someone in the face, the recipient is entitled to hit you back. They, however, are not entitled to bring out a crowbar to break both your knees, bomb the electricity plant in which you work and kill your whole family. On January 18, the day Israel unilaterally announced a cease-fire, Hamas rockets over a period of some three weeks had killed three Israeli civilians and 10 Israeli soldiers were killed. Over the same period, at least 1,300 Palestinians were killed, an estimated one third of whom were children. The immense material damage has since been estimated at nearly $2 billion.
Finally, the role of international media, such as BBC and CNN in the spectacle of death was highly embarrassing. Not allowed into Gaza, their reporters stood quite literally on the Israeli side of things. Their job was essentially to read out Israeli press releases and make sure that any accusation of wrongful conduct from Palestinians or the United Nations was countered by a smooth-talking Israeli press officer who, no matter what happened, blamed Hamas.
Israel bombed not one, but four UNRWA schools filled with refugees? Hamas is known to fire rockets from UN sites. Israel bombs a UNRWA truck killing its driver? Hamas is known to have fired at UN trucks in the past. Israel bombed a mosque filled with people? Hamas is known to hide weapons in mosques.
The Western media proudly claim to be objective, as they show both sides of the story. Yet, giving equal attention to both sides of a conflict that is essentially unequal, means taking sides. The war takes place in Gaza, Palestinian victims outnumber Israeli casualties by at least 100 to one and yet the New York Times publishes an equal number of photos of destruction in Gaza and Israel, therefore producing a false impression of the conflict.
To me, the war and its coverage are best summed up by a fragment starring BBC reporter Bethany Bell. Standing inside Israel, she first told us that some 60 air strikes hit Gaza overnight. We see black smoke behind her. Meanwhile, she continued, 12 Hamas rockets were fired into Israel. One of them hit a kindergarten. The kindergarten, Bell said, was empty.

Peter Speetjens is a Beirut-based journalist

February 3, 2009 0 comments
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Terror.com

by Mohanad Hage Ali February 3, 2009
written by Mohanad Hage Ali

Last November, senior military leaders in the United States took the unusual measure of briefing the president on “a severe and widespread electronic attack on Defense Department computers.” According to a Los Angeles Times’ report, the attack, which was believed to be originating from Russia, targeted combat zone computers and the US central command overseeing operations in Iraq and Afghanistan. Nevertheless, the security services’ primary concern was whether its non-state enemies could acquire the capability to conduct cyber attacks against Western targets.
More than two years earlier, US authorities warned there was a threat, posted on a website affiliated with Al Qaeda, to attack the stock market and banking services online. The threat was apparently issued as revenge for the detentions in Guantanamo Bay. The US Homeland Security Department called it an “aspirational threat”.
The magnitude and consequences of such attacks are best comprehended when the Internet economy’s size is taken into consideration. Internet dealings and transactions today are a vital part of Western economies. According to a University of Texas at Austin study, the Internet economy “supported an additional 650,000 jobs in 1999 as revenues soared to $523.9 billion” in the US alone. The same study, conducted just under a decade ago, noted that even then the Internet economy “directly support[ed] 2.48 million workers, more than the insurance, communications and public utilities industries and twice as many as the airline, chemical and allied products, legal, and real estate industries.” This growth has prompted the Organization for Economic Co-operation and Development (OECD) to ask in a 2008 report, “has the economy become an Internet economy?” The OECD also stated, “increasingly, the largest productivity gains for businesses come from using online networks in some form.”
The online economy is growing to the extent that hacking a single company’s website for a day costs millions of dollars. For instance, BBC news reported in 2004, “three- quarters of UK companies have been hit by security breaches in their computer systems over the past year, costing billions to industry.” It was noted in the same report that “the average computer incident costs large companies $165,000 a time.”
The US warning against Al Qaeda cyber attacks in 2006 held some credibility as the Internet played an increasingly significant role in its operations. The new threat cyberspace poses was also shown when U.K. based extremists used the Internet to recruit other members, including teenagers. Through password protected web forums and chat rooms, they indoctrinated and prepared those recruits to launch suicide operations. Even the explosives used were home prepared according to “recipes” widely distributed on Al Qaeda web forums.
The militants’ success in exploiting the Internet was most apparent in last year’s failed Exeter bombing. Nicky Reilly, a 22-year-old of Irish background, entered the Giraffe restaurant’s toilet in Exeter to assemble his bomb before detonating himself. A slight mistake in his “internet bomb recipe” prompted an early explosion inside the lavatory, which left him with facial injuries. According to the police investigation, militants situated on the Pakistan-Afghanistan border area “groomed” Reilly through online chat rooms to become a suicide bomber. Sitting on his computer for long hours everyday, he watched more than 2,000 Al Qaeda videos, researched possible targets and then downloaded a bomb recipe.
In that same year, the trial of Aabid Hussein Khan’s Bradford terrorist cell exposed the Internet’s extended or unconventional use. This cell, which was plotting to attack the Queen and members of the royal family, not only compiled detailed information about different targets from the Internet, thus lessening the need to physically survey the area, the cell members also allegedly sought recruitment and training from the World Wide Web.
This British online terror saga started right after the Afghanistan and Iraq invasions, with the case of a young Moroccan immigrant named Younis Tsouli — whose online alias was Irhabi 007 — who dazzled the Western intelligence agencies for years before his capture in a tiny West London flat. For two years, Western intelligence services chased the 22 year-old Internet hacker, trying to uncover his real identity. Irhabi 007’s Internet activities involved propaganda, distributing training manuals, instigating others to commit acts of violence, hacking websites and distributing a hacking manual online. He was dubbed “the master” of online attacks, hacking, programming, and digital media design.
According to some reports, Irhabi 007 was making “explosive new use of the Internet,” specifically through websites and password protected forums that “cater for would be Jihadists.” Tsouli disseminated training manuals and propaganda material online, and then began helping radicalized youth to perpetrate attacks.
So far, Internet staged and planned attacks have failed to achieve their goals, but will 2009 be the year cyber terrorism makes its mark?

Mohanad Hage Ali is political editor at al-Hayat newspaper

February 3, 2009 0 comments
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Society

IWC – Gianfranco D‘Attis (Q&A)

by Executive Staff February 3, 2009
written by Executive Staff

IWC brand manager, Gianfranco D’Attis and famed IWC watch designer Kurt Klaus recently made a stop at Cadrans in downtown Beirut to promote their new Vintage line in commemoration of the International Watch Co.’s 140th anniversary. The Swiss company has a long history in the Middle East. Executive Magazine sat down with D’Attis to discuss customers, sales and strategy.

E What is IWC’s best selling model in the Middle East market?
We have a number of watches in our portfolio. The basic watch range includes the Aquatimer, the Ingenieur, the Pilots and the Portofino. That is the basic entry price, from $3,000 to $10,000. Then we have the manufacture pieces, made with precious materials. These are basically the Da Vinci line, the Portuguese and some complications. The best selling line overall in the Middle East, with about 50 percent of commercial turnover, is the Portuguese. The second best selling line, with 25 percent of the market, is the Pilot. Together they make about 75 percent of the turnover, not only in the Middle East, in fact, but worldwide. These are icon products. These are products that are differentiating themselves from the competition, because they are unique.

E How long has IWC had a presence in the Middle East?
IWC has been in the Middle East for over 30 years. Cadrans has already been working with us for 30 years. Richemont bought IWC seven years ago. Then we started integrating their platforms five years ago. So for the last five years we have been aggressive, expanding in the Middle East, increasing brand awareness, investing in marketing, and investing in boutiques and sales staff. The brand has really been developing quite fast in the last three to five years and it is performing extremely well. We have a team of six people in Dubai and we are constantly expanding. Now we are trying to penetrate the Indian market, which is a very strategic market for IWC in the future. As mature markets will be under pressure over the next two years, we believe that emerging markets will be absorbing the pressure and that they will deliver profits. This will help the brand to balance turnover and performance.

E What are the strongest markets for IWC in this region?
The strongest market is obviously the UAE. We have our largest regional distribution there with two boutiques and about five points of sale. The second strongest market is Turkey, because we also manage Turkey from Dubai. Then immediately after Turkey, you have Lebanon, because the Lebanese like IWC. They like it because it is also a strong brand in Europe, because it is understated, it’s chic, it is more or less what the Lebanese are looking for in a watch.

E How many points of sale do you have in Lebanon?
Right now we have two points of sale. We are working with two partners, Cadrans and Atamian. We are also planning to open a boutique sometime in the next 12 months. When Solidere opens its new addition, we will be present there.

E Does IWC keep the number of its points of sale low in order to maintain brand image?
We are actually reducing the number of points of sale and upgrading existing ones to boutiques. We really want to have a selective distribution network. For instance, five years ago we had 1,200 points of sale around the world and we are reducing that to about 800. The strategy is really to make it exclusive, selective and to upgrade the existing network to boutiques.

E Do you foresee a time when IWC watches will only be available in IWC boutiques?
That would be the ideal scenario. But obviously we need strong partners on our side in these special times. IWC is not a retail brand, IWC is a wholesale brand. That is why we need to find the right balance. Retail is for image, wholesale is to find a new customer that may not necessarily want to come down to a boutique. He likely has a special connection to our partner and we may not be able to reach him.

E What was IWC’s profit for 2008?
We do not publish profits or sales numbers. This is strictly forbidden by the group.

E Is IWC a publically traded company?
Richemont is publically traded. IWC is just one brand within this holding company Richemont. They hold brands like Cartier, Montblanc, Vacheron, IWC and Panerai.

E What percentage of totals sales does the Middle East represent for IWC?
We have aggressively developed the share of turnover in the Middle East. We started from nearly zero percent five years ago and today it is between five and 10 percent. When IWC got its start in the region 30 years ago, it had a small but important turnover. We had very personal relations in the Middle East with certain big families. In Oman, we were producing special quantities for the Sultan; in Dubai we were doing something for the sheikh. IWC was a very niche brand for special families in special quantities. So it was an important market, but the turnover was not very significant.

E What do you see as some of the biggest challenges that IWC will face in the near future in light of the ongoing global financial crisis?
Luxury in general will suffer because people are scared for the future. They don’t know when the economy will turn around. We feel that products in the price range of $7,000 to $20,000 will not be greatly affected and products below $5,000 will be much more affected. So this middle segment will be suffering, but the high-end should remain strong.

February 3, 2009 0 comments
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Executive Insights

Talent recruitment for the human capital agenda

by Rabih Abouchakra, Bahjat el-Darwiche & Soon Rabb February 3, 2009
written by Rabih Abouchakra, Bahjat el-Darwiche & Soon Rabb

In today’s economic environment it is easy to focus on a company’s financials and ignore what has for the past two decades been an increasingly challenging priority — talent acquisition. Given the number of companies reducing workforce numbers by the thousands or going out of business, it might even seem that human capital is in oversupply. While the immediate recruitment requirements of many companies may be more easily met these days, human capital issues still account for some of the greatest challenges businesses face. Recent Booz & Company research and experience with multinational clients highlight key challenges faced by human capital leaders.

  • Escalating competitive pressures. These include the demand for new skills and capabilities, ever-higher standards for productivity and a less-benign regulatory environment that increases the need for employee education.
  • Labor market changes. These include an aging workforce, a lack of qualified workers in key industries and professions, and Generation Y workers’ expectations for employment relationships.
  • The changing nature of work. These shifts include greater emphasis on knowledge work, the extinction of the apprenticeship model, a lack of linear career paths and increased demand for immediate results.
  • Competition in a “flatter” world. This is shown in globalization, industry consolidation, collaboration across organizational and geographic boundaries and the need for rapid knowledge capture, dissemination and protection.

While these challenges are common across companies, industries and even countries, knowing how to respond to them has been and will be a source of competitive advantage. These challenges are as critical as ever in Middle Eastern and North African (MENA) countries. The global financial crisis offers organizations in the region the chance to build their talent pool. In a region of unprecedented growth that is experiencing talent shortages, it is crucial to invest in recruitment, nurture leaders, and redesign workforce practices to build capability and competitive advantage. Effective recruitment starts with a forward-looking vision and long- term plan for talent acquisition. For the past decade, finding enough of the right people has been a challenge. A key lesson for human resources is to develop “employee insight” by using employee segmentation. Employee segmentation is the basis for modern human resources and customized career alternatives for a diversified workforce. In the MENA, the primary effort has been to recruit and build capacity. Now, with its variety of talent segments (e.g. skilled expatriates, local workforce, interim employees), using employee segmentation may be an opportunity for companies here to build capacity and capability. Understanding employee segmentation is one strategy. Understanding and effectively using one’s brand is a complementary strategy. Employer brands that attract talent often articulate a clear, shared purpose above the profit motive. Few MENA companies take full advantage of employer branding, but those that do will reap the benefits of attracting and retaining the best people. Forecasting talent needs is essential. Organizations must be prepared to act whenever exceptional people appear — even in economic hard times.
One German industrial company, ThyssenKrupp AG, established a special hiring fund in its technologies business. The budget is dedicated to building the talent pool in that specific business and it is separate from the traditional hiring budget. The imperative is to find the talent, hire them and then decide how to deploy them in the business. In highly competitive talent markets such as the MENA region, strategies that focus on leadership, learning and adaptability will be critical to the human capital agenda, while successful leaders obtain higher levels of employee engagement and retention. The best training and learning programs are closely integrated with the business, driving change, innovation and value. While the learning function should resemble a sophisticated, efficient and cost-effective adult education enterprise with measured outcomes and ROI, the individual also takes an active role in learning. This linkage between individual learning and organizational goals is critical, as individuals begin to ask themselves what they need to learn to have an impact on the bottom line rather than being told by managers and trainers.
Human resource’s capabilities, competencies and focus must be tightly aligned with the company’s business priorities. A business savvy HR function will realize that people are competitive assets and will design a compelling strategy to realize that asset’s value. This strategy habituates high performance in the people who work in every function, region and business unit of the company. Saudi Telecom’s human resources strategy, like its operational strategy, is designed around the needs of customers. Using a shared-services model in which human resources is a strategic partner with the business units, human resources professionals think in terms of providing services. Either they are able to develop the right training for customers inside the company or the business units are allowed to obtain the training they need from outside vendors. Human capital development remains at the forefront of MENA’s development agenda. While the region has not been immune to the financial crisis, MENA organizations may still be able to use the crisis to move from more tactical recruitment efforts to developing and implementing a human capital agenda that builds and develops much needed workforce capability.

Rabih Abouchakra is a partner and Bahjat El-Darwiche and Soon Rabb are principals at Booz & Company

February 3, 2009 0 comments
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Society

A disagreeable diagnosis

by Josh Wood February 2, 2009
written by Josh Wood

During the United Arab Emirate’s economic boom, Abu Dhabi and Dubai sought to bring the best of everything to their country — including healthcare.  With open checkbooks, both the government and private investors sought to make the UAE a regional medical hub. While the development of the healthcare sector has left it with a strong infrastructure, problems continue to confront the industry; the same deep pockets which allowed the country to develop world-class medical centers also resulted in lifestyles that sent the obesity rate (and its associated diseases) skyrocketing, and while the global financial crisis which devastated some of the UAE’s economic sectors was not quite as severe to healthcare, the industry has felt a bit of a pinch.

The UAE’s state news agency reported in December that the budget for state spending on healthcare was set for over $750 million, but the individual governments of each emirate — most notably Abu Dhabi and Dubai — supplemented this budget with additional funds. Today, according to the government, there are 40 hospitals, 115 primary care centers and thousands of private medical clinics in the UAE.

According to the World Health Organization’s (WHO) 2010 World Health Statistics report, there has been a definite trend toward private healthcare in the UAE. Private expenditure as a percentage of total spending on healthcare rose from 23.4 percent to 29.5 percent between the surveyed period of 2000 to 2007. Per capita expenditure on healthcare (taking purchasing power parity into account) stood at $982 in 2007 according to the report, while government spending per capita was $693. This represented 8.9 percent of total spending by the Emirati government, according to the WHO.

Fatally fat

While UAE citizens have a relatively high life expectancy of over 78 years, disease is taking its toll on the general population. Today, cardiovascular disease is the single largest killer in the country, accounting for more than 25 percent of the total deaths of Emirati citizens, according to statistics released by the government in 2010. Some non-governmental estimates place the ratio as high as 40 percent. It is also estimated that one in four Emiratis has diabetes. A December 2010 report released by UnitedHealth Group says that this number could rise to more than one third of the UAE’s national and expatriate population by 2020 if changes are not made and could cost over $8.5 billion.

Such diseases can be attributed to inactive lifestyles coupled with bad eating habits. Obesity — which is a contributing factor to both diabetes and cardiovascular disease — has been on the rise across the UAE, currently edging toward 70 percent of the national population.

The UAE’s Ministry of Health has begun efforts to educate the general population about the dangers of these diseases and has invited international health experts to conferences to discuss the problems. In 2006 the Abu Dhabi investment firm Mubadala Development brought the Imperial College London Diabetes Center to the UAE to further attempt to contain the disease. With such high rates of cardiovascular disease, diabetes and obesity, more money and efforts will be needed to put the lives of UAE citizens and residents on a healthy track.

Economic ailments

In recent years, the UAE was successful in attracting prominent foreign medical centers, such as the Cleveland Clinic, Johns Hopkins and the Minneapolis-based Mayo Clinic. But the aggressive expansion of the sector was not immune from the overall hit the country was dealt by the economic crisis.

In January 2010, the Mayo Clinic — part of Dubai’s $5.3 billion Dubai Healthcare City project — closed up shop. With strains on capital coming in to private healthcare initiatives and population growth lower than it had been, projects such as the Mayo Clinic’s Dubai outpost seemed to no longer be feasible.

Despite still having many brand name medical centers in their home country, many Emiratis still prefer heading abroad for specialized treatment. A December report by the Indian news agency PTI said that patients from the UAE spend $2 billion annually seeking medical care abroad — an amount that could benefit the UAE’s economy if such patients could be swayed to undergo treatment at home.

While medical treatment in the UAE is largely cheaper than it is in, say, North America or Europe, by regional standards it is still quite expensive as lower medical bills are a short flight away in countries like Jordan, Egypt and Lebanon, which deter patients from seeking treatment locally. Given the proliferation of top-notch medical treatment centers in the UAE and its central geographic location, the country could also further promote itself as a medical tourism destination and turn a better profit.

Road to recovery

Despite some cutbacks — such as the closure of the Mayo Clinic — UK Trade & Investment anticipates the UAE’s healthcare industry to boom in the coming years and rise to a total value of $15 billion by 2015.  In December 2010, the Dubai Healthcare Authority announced plans to implement $1 billion worth of healthcare projects over the coming year.

But healthcare spending across the rest of the GCC region remains high and it could be difficult for the UAE to compete with some of its neighbors that were not as adversely affected by the global financial crisis and continue to have excess money to spend.

Saudi Arabia alone anticipates completing 100 new hospitals by 2015, and there are currently $10 billion worth of healthcare projects either planned or underway across the region, as of late 2010. In a 2010 report, Alphen Capital estimated that the Gulf countries will require more than 25,000 additional hospital beds by 2020 to keep up with growing demands and populations.

For the healthcare sector to expand as much as was planned during the height of the UAE’s economic boom, the expatriate population of the country will need to continue to rise — a factor contingent on the yet to be fully reclaimed economic stability and success of the country. With healthcare infrastructure already largely developed, the question now remains as to whether the sector will be able to maintain or push past the status quo.

February 2, 2009 0 comments
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Editorial

As the sky falls, the real stars will shine

by Yasser Akkaoui February 1, 2009
written by Yasser Akkaoui

The Chinese may be calling it the Year of the Ox but in the Middle East — not to mention everywhere in the developed world — it will be the Year of the Real Man, a period in which the new austerity will have no time for fads. Straight talking, in-it-for-the-long-haul, is in; short term, fast buck is well and truly out. 

We are already seeing the wheat being threshed from the chaff; the men separated from the boys. Call it what you will. Quite simply, those who did not plan for the future, who did not factor-in a potential crisis, are paying the price. Those who did and who can endure, who can stick by their staff, their team and their suppliers will strengthen their market share when the economic sun will shine again. The market will respect their resilience in the buffeting winds of the global meltdown.

There have been the inevitable casualties. The rumor mill has been buzzing with speculation as to the number of job losses in the Gulf, especially among the legions of Lebanese expats. There has been an element of “we told you so” and “it wasn’t going to last forever.” But envy aside, what those Lebanese who didn’t indulge the Gulf’s fortunes are failing to grasp is that the experience gained by these people — waiters to CEOs — can be deployed to excellent effect both at home and abroad.

The Lebanese Central Bank should be applauded for issuing a circular to the local banks urging them to make funds available, should returning businessmen wish to plow the experienced gained in the Gulf back into the local economy.

Meanwhile, as the GCC licks its wounds and consolidates, it is surely the time for those pioneering Lebanese, as they have done for over a century, to seek out new opportunities in new, mouth-watering markets such as Libya, Iraq, Sudan and Algeria. These are markets rich in potential and high in risk. In other words: perfect for the hardworking Lebanese who from Brazil to Mali to Jeddah to Dubai have cornered the market in going where others will not. The Gulf will recover and it will prosper but it cannot expect the Lebanese entrepreneur to sit still.

Real men turn loss into investment and disaster into opportunity.

February 1, 2009 0 comments
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Economics & Policy

Opening the lid

by Executive Contributor February 1, 2009
written by Executive Contributor

The road to transparency is seldom traveled by Gulf financial institutions, but the Abu Dhabi Investment Authority’s (ADIA) publication last month of its first financial disclosure since its inception in 1976, entitled the ADIA Review, is perhaps the beginning of a new journey.

ADIA is a sovereign wealth fund (SWF) which we estimate to manage some $400 billion is assets, though the fact that analysts like myself can still only provide ballpark estimates is telling of how far the Review goes, or does not go, in providing transparent and open disclosure.

Despite its shortcomings, however, the publication is a strong indication of a nascent commitment among ADIA’s leadership to good governance, accountability and transparency arrangements, as codified by the so-called “Santiago Principles”, a code of conduct that 26 SWFs signed and pledged to implement in October 2008.

ADIA is one of the biggest members of this increasingly powerful investor group, which, by our estimates collectively control assets of some $2.3 trillion.

For years, SWFs have come under pressure to opportunistically support the domestic and international political objectives of the governments that own them, rather than operate purely on the basis of financial considerations.

When SWFs committed themselves to the Santiago Principles they ceded, in principle, a degree of autonomy to establish policy objectives and governance arrangements. And to some degree at least, ADIA now appears to have engaged the Santiago concept.

ADIA has provided important information about how its leadership perceives its position in the broader global political environment that has been so critical of SWFs lately. This information includes insights into how ADIA perceives the different dimensions of risk it faces and a great deal about the professional quality of its staff and how it selects external investment managers.

But the Review is limited in scope. The Santiago Principles require SWFs to publicly disclose relevant financial information to contribute to stability in international financial markets and enhance trust in recipient countries. Many other SWFs meet this request by providing precise information about the value of assets under management, strategic asset allocation, benchmarks and information about equity holdings.

ADIA, on the other hand, restricted itself to providing rudimentary information about its strategic asset allocation and its long-term performance, in the form of 20 and 30-year annualized rates of return.

Few facts about ADIA’s funding and withdrawal policies are provided. The Review states that the government of Abu Dhabi provides ADIA with funds that are surplus to its budgetary requirements and the withdrawals that ADIA is required to make available to the government have occurred infrequently, depending on commodity price developments.

This is well short of the industry benchmark set by the Santiago Principles, since information about precise funding and withdrawal arrangements, as well as the actual cash flows in and out of the fund, are the norm rather than the exception.

The Review also claims that ADIA carries out its investment program independent of  the government of Abu Dhabi, ostensibly an attempt to reconfirm that ADIA is operating purely on the basis of financial considerations. But this too reveals a missing link in ADIA’s accountability arrangements. If it does not invest in line with the guidelines that the government sets, who else is the leadership of ADIA accountable to?

ADIA’s governance and accountability arrangements are therefore questionable. Members of the ruling family occupy most of the relevant leadership positions at ADIA, very much reflecting the overall governance arrangements of the emirate’s political institutions.

Though the Review might be too weak to build confidence and credibility with regards to ADIA’s investments in Western countries and industries, it should be seen as a good first step down a new path. 

February 1, 2009 0 comments
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Since its first edition emerged on the newsstands in 1999, Executive Magazine has been dedicated to providing its readers with the most up-to-date local and regional business news. Executive is a monthly business magazine that offers readers in-depth analyses on the Lebanese world of commerce, covering all the major sectors – from banking, finance, and insurance to technology, tourism, hospitality, media, and retail.

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