MENA

Dollar burns

by Executive Staff
written by Executive Staff

The first decade of the 21st century will be remembered for its soaring inflation, with TV images from around the globe of people queuing for bread or demonstrating violently against high food prices. In the MENA region, inflation originates from both external and internal factors. While external factors are similar across the region — and essentially imported from the West — internal factors vary between oil producing and non-oil producing nations.

Economists agree that the weak dollar is one of the main reasons fueling MENA inflation; its effect, however, varies from one country to another.

Lebanon’s heavily dollarized economy is obviously adversely affected by the ailing greenback, but its neighbor Jordan is suffering as well. According to Dr. Rasha Manna, head of research at Jordinvest, the Jordanian dinar’s dollar peg and the rising exchange rates have reflected on the country’s debt, estimated at about 70% of GDP. “We have been significantly affected by the weakening dollar due to our particular debt structure of which 30% remains in dollars while, the rest is comprised of various international currencies. Our debt burden is estimated to have increased by 4% in 2007 due to the depreciation of the dollar against the euro,”she said. The current debt structure in Jordan is primarily divided up into Euro (up to 23%),Yen (18%), and the Kuwaiti dinar (14%), with the latter appreciating since Kuwait abandoned its dollar peg. Approximately 10% of Jordan’s debt is held in British pounds.

With the Hashemite currency’s peg to the weak dollar, imports to Jordan are becoming more expensive. Only 5% of Jordan’s imports originate in the US. And while dollar-denominated imports by far exceed this figure — one has to add the 20% of imports made up by oil — the 30% of imports which come from the EU and 40% from Japan are burning holes into the kingdom’s bourses.

In the UAE, SHUAA’s chief economist and strategist Dr. Mahdi Mattar estimates inflation from imports may account for 3% of the total 11% national inflation level.

Among other external factors contributing to inflation are higher commodity prices, especially food. Many countries in the region rely on imports of essential food items such as wheat, rice or sugar. “The demand for food is certainly fueled by the growing needs of large economies such as India and China,” underlined Dr. Louis Hobeika, professor of economics at the American University in Beirut. The high Euro is partly to blame for high inflation in Lebanon, which imports many of its products from Europe. “Lebanese traders have also been used to work for decades with European countries, and it is somewhat difficult for them to adjust their purchasing behavior as they also tend to feel that US products are not much cheaper when transport expenses are taken into consideration,” he adds. This state of affair equally reflects on the UAE markets, where growth in global prices has risen considerably, according to Mattar.

Fuel for rising costs

In Egypt, inflation is taking a cost-push form that relies mostly on internal factors, such as decreasing government subsidies, according to economist Dr. Heba Nasser, Vice President of Cairo University.

Oil prices, which have reached unprecedented levels of $140 a barrel, have strained economies around the world. The MENA region has been affected differently by higher oil prices, as many countries throughout the region boast large natural reserves of ‘black gold’. “Oil producing countries also experience inflation, but high energy prices allow them to subsidize their industries heavily and offset any potential negative effect of the trend, which is therefore less felt by the population,” said Hobeika, who estimates the contribution of oil to price increases in Lebanon to at least 25% of total inflation levels.

The lifting of fuel subsidies in Jordan has been absorbed with difficulty. “The government had been progressively phasing out oil subsidies for some time, before it abolished them completely in February 2008,” Manna reckoned. A recent study by the Jordanian Ministry of Industry and Trade found that fuel prices accounted for only 10% of total production cost in about 90% of Jordanian plants. This figure varies evidently from one industry to another, a typical counter example being cement industries where 40% of expenses can be attributed to oil.

On the local level, internal factors ingrained in the economy are also conducive to higher inflation levels. Hobeika believes that Lebanon’s monopolistic economy weighs heavily on its current health. “Exclusive agencies, which restrict imports of certain brands to a few players, are something of a common sight in our country and consequently hike up inflation,” he underlined, while also pointing out that Lebanon needs to cancel exclusivity contracts in order to join the WTO.

Towering real estate

In the UAE and Jordan, elevated real estate prices have projected inflation to new levels. “The supply bottleneck witnessed in the UAE is one of the main contributors to high inflation,” said Mattar. He said within 18 months, the Dubai real estate sector will stabilize at new levels as new real estate projects are placed on the market for sale, while in Abu Dhabi the supply of residential and office spaces will grow tremendously by 2010. However, he added “the rent caps imposed by the UAE government might be detrimental to the real estate sector as it might discourage or slow investments on the long run.”

In Jordan, housing prices have also increased significantly, growing by some 300% over the past two to three years. The introduction in 2010 of a new rental law will allow for new contracts to undergo yearly appraisals, which will also further exacerbate inflation, of which housing expenses account for about 26%. Dr. Sabra acknowledged that the price of land and real estate development has definitely fueled inflationary trends in Egypt, where official figures reached 12.5 % in May 2008. “Our situation is somehow comparable to Jordan, the only major difference residing in the fact that our wages are much lower than in the Hashemite kingdom,” she added.

Mattar emphasized that high oil prices have certainly generated unprecedented wealth and an excess of liquidity and placed inflationary pressures on Gulf economies.

So how can regional countries cure inflation? Hobeika believes that the global nature of inflation renders the problem quite difficult to solve in light of external factors, which have a trickle-down effect on local economies. “We are faced with two choices on the global level, either increasing supply or lowering demand in sectors contributing to price spikes,” the Lebanese economist admitted. When this is applied to the oil market, increasing supply beyond a certain level may be a daunting, if not impossible, task for oil-producing countries. On the other hand, lowering demand by investing in new technologies might be a viable solution. “One has to keep in mind that if the world economy was in better shape, instead of being plagued down by successive crises — such as the subprime and the more recent Freddie Mac and Fannie Mae debacles — the price of oil would have certainly reached higher levels,” Hobeika said.

When it comes to food shortages, Hobeika believes that much can be done in this regard with the possibility of doubling production levels through improving management of agricultural land and proper irrigation, dovetailed with a sound development of rural areas. “Demand for food items can’t be realistically expected to drop and the new billionaires of this world should maybe start investing in the agro-industrial sector,” he added. He also estimated that raising wages without increasing productivity will only contribute further to inflation.

On the national level, each country in the region has different weapons at its disposal to combat inflation. In Lebanon among the solutions envisioned are moving away from the dollar peg and liberalizing the sector by issuing new regulations and removing exclusive agencies. Encouraging people to invest in Lebanon would allow to increase productivity and reduce the long-term impact of inflation by improving growth levels, and it can be accomplished by improving the political environment and privatizing the economy. “While dollarization was used in the eighties as a powerful tool to master inflation, now it undoubtedly contributes to it. In the next few years, we should maybe envision a system based on a flexible exchange rate. But this, however, needs to be underlined by a restrictive fiscal policy,” said Hobeika. 

Measures adopted by the Jordanian government include decreasing interest rates by less than what the U.S. Federal Reserve recommends. “Local interest rates were lowered by 75 basis points instead of the 325 basis points that is imposed in the USA,” Manna explained. She identified other measures, such as increasing foreign currency reserves, which also, in her opinion, need to be more diversified, as well as controlling fiscal spending. She pointed out that, “An appraisal of the dinar against the dollar could be also feasible. However, lowering inflation without slowing growth is a tricky problem.”

For Mattar, inflation in the UAE could be fought by increasing reserve requirements in order to reduce the national money supply. “This has been already implemented by the government in Saudi Arabia that has moved up reserve requirements of banks from 7% to 9%, and then from 9% to 12 % again last April, after they had remained unchanged for over 23 years,” he added. The UAE has also tackled the international food crisis by buying farms in Pakistan, although such measures aim essentially at securing sources of food and do not actually fight inflation, according to Mattar. He estimated that in order to reign in inflation the UAE will eventually also need to move away from the dollar peg.

Nasser said Egypt needs to encourage industry to increase productivity to fight inflation. Such encouragement must be done while simultaneously attempting to curb demand by modifying people’s purchasing behavior; this effort is currently being undertaken by the local media as well as NGOs. “This effort, when dovetailed with the establishment of a consumer protection authority, can be efficient on the long run,” she noted.

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Editorial

Gross misconduct!

by Yasser Akkaoui
written by Yasser Akkaoui

Lebanon is once again faced with playing the role of a hugely talented country suffocated by a narrow political agenda. The new government has made little attempt to hide the fact that it sees itself as a caretaker entity for a little over nine months, a period during which the various factions that were chosen to make up this carefully calibrated political beast will be setting up their stalls in anticipation of the 2009 elections. The service-based ministries in particular have been distributed tactically, not to contribute to the national good, but to secure votes in marginal districts where a bit of road paving can do wonders. Can there be any greater form of gross misconduct?

As for the new ministers, well, they will probably not be burning with a raging desire to fulfill their mandates and it is unlikely that they will lose any sleep over the long list of obligations and shortcomings that apply, not just to their own, but to every ministry in Lebanon. It is also unlikely that they will be transparent in communicating what needs to be done, for in doing so they run the risk of being judged if and when they fall short.

In the competitive arena of today’s Middle East, Lebanon can no longer get away with being an eccentricity. It has run out of excuses. It is no longer the sunshine state with European glamour and a knack for handling money. The region might crave its talent but it no longer craves its services. Only the cobweb-ridden cliché remains. Lebanon is now an outsider in a region that knows the rules and plays by them. The results are clear for all to see.

The Lebanese government has nine months. During that time it should, at the very least, lay down the foundations for growth. It should help the private sector plant deeper roots, it should identify areas of a creaking public sector that are ripe for privatization, and it should address the rampant inflation and derive ways to cope with rising fuel costs. It should encourage its best and brightest to believe in the future, to believe that it is better to be part of prosperous nation that is itself part of a broader and equally prosperous Middle East rather than a country rife with sectarian suspicion.

We of course will be monitoring events closely.

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By Invitation

Private equity slow but secure through first half of 2008

by Imad Ghandour
written by Imad Ghandour

The first half of 2008 was a non-event for private equity with very little to cheer about, except for those skillful exits that everyone seems to have mustered. No great fund announcements to be heard of — the largest new fund announced was Gulf Capital Fund II at $500 million, and the largest fund closing was NBD Sana Capital, also valued at the $500 million mark.

And there were no billion dollar deals: the largest deal closed was Intaj Capital’s purchase of a majority stake at an announced $188 million transaction size. As a matter of fact, only 12 investments were made across MENA in first half of 2008, down from 33 during the same period in 2007.

But there are many happy investors reaping the fruit of their patience: 12 announced exits in the first half, including the maestro exit of Egyptian Fertilizers Company at $2.5 billion in one year and the $432 million IPO of Depa.

In a low after a long high
There need not be any worries however, private equity is not going into mass liquidation stage. It is merely a pause after a three year sprint.

Since 2005, the private equity industry was doubling in size every year. Based on the Gulf Venture Capital Association’s report, the annual growth in funds under management has been increasing by 70% annually, and investments have been increasing by 129%.

The beginning of 2008 was a pause for reflection amidst gigantic events, in the GCC and beyond. Very close to home, the political tension around the Gulf reminded everyone how exposed the GCC economies are to political risk as one missile crossing the Gulf may turn the prospects of the GCC upside down. Witness the performance of the stock markets in the first half of this year, which declined by 11%, as a barometer for investors’ sentiment.

Inflation is another worry. At a macroeconomic level it is a threat to growth, as governments are challenged to balance growth and fiscal expansion with spiraling inflation. At the micro level, mounting inflation is putting pressure on companies’ earnings as salaries, raw material, and services are rising unchecked. For example, the air transport sector was particularly hit, and budget airlines (many are backed by private equity funds) are scaling back their operations. As a consequence of an anti-inflationary policy, revaluation of GCC currencies may further negatively impact companies that earn revenue in foreign currencies like tourism, transportation, exports, and oil services.

Farther afield, but with gigantic rippling effect, the credit crunch is casting an ever growing darker shadow on global economic prospects. The crisis within the US and European banking system has now shifted slowly but surely into the real economy. Higher interest rates to leverage deals coupled with dimmer economic prospects have ground the private equity deal making machine to a halt. Mega deals, an almost a daily event in 2006 and 2007, are a rare and shy species nowadays. The attractiveness of private equity as a viable investment class (at a global level) has been put in doubt.

Foundation still standing strong
Yet the fundamentals that led to the rapid rise of private equity back in 2005 are even stronger. Economic prospects have actually improved as oil prices doubled since last year. The impact of the dramatic rise in oil revenue will be felt in the real economy in one or two years as governments start spending the additional oil windfall and national oil companies’ budgets balloon even further. (For example, Aramco is the second biggest spender in Saudi Arabia after the government with a budget exceeding $35 billion). All this will translate into liquidity ready to be employed in newly established PE funds and brisk earning growth.

Inflation is not expected to run out of control because governments have moved it to the top of their agenda given its social and political implications. However, global and local factors will keep inflation at high levels in the short term. With the economic system back to relative stability under new inflation parameters, earnings are expected to rise faster than inflation. Recent research from UBS analyzing the inflationary period after 1973 confirms this conclusion.

The recent exits reassure investors that private equity is not a one-way street, and that hefty returns await them. With most exits achieving spectacular returns exceeding 30%, private equity is earning its designation as an alternative investment class. The MSCI Arabian market index, on the other hand, has only increased by 11% over the last 18 months!
The music will go on… except if someone decides to wage another holy war.

Imad Ghandour is the Chairman of Information & Statistics Committee —Gulf Venture Capital Association

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Banking & Finance

IPO Watch – Mining capital

by Executive Staff
written by Executive Staff

Commodities have driven the early summer buzz in international markets, from heated debates over new potential oil price highs and China’s expansion in international mining to merger games at the top of the global mining industry. The mining theme also dominated the month of July in the Middle East through the $2.47 billion initial public offering of the Saudi Arabian Mining Company, better known as Maaden.

Reaching the primary market more than two years after the Saudi government first announced its intentions to sell a 50% stake in the company, the Maaden IPO was 2.4 times covered by subscription demand. The amount sought in the offering was the same as in media reports in early 2007 and the allocation of shares was tilted heavily in favor of retail buyers, making the IPO appear as an example of wealth redistribution from Saudi authorities to the citizens and residents eligible for subscribing.

The Maaden flotation was the region’s largest mining IPO ever and the Arab world’s third-largest privatization by IPO, after the $5 billion sale of DP World in the UAE and the 2003 privatization of Saudi Telecom which netted the Saudi government $2.7 billion.

The second major July offering was that of UAE-based engineering contractor Drake & Scull International. Its $332.7 million IPO was oversubscribed more than 101 times, making it the public offering with the highest demand relative to the offering size in the year to date and the second highest in the past 12 months. The company, which is specialized in mechanical, engineering and plumbing contracting, floated 55% of its capital by issuing over 1.1 billion shares. It said proceeds from the IPO will be used for expansion of its business and acquisition of companies that match its expertise.

Jordan saw two smaller primary offerings which closed in July, the $7 million IPO of Al Israa for Islamic Finance and Investment and the $4.9 million IPO of Amwaj Properties. The offerings by the two firms, whose business focuses are explained by their names, reported subscription coverage of 3.3 and 15.3 times, respectively.

Meanwhile in North Africa, International Investment Bank said that the IPO of Artes, the exclusive distributor of Renault, Nissan and Dacia in Tunisia, was 11 times oversubscribed. Although retail investors are the largest recipients in these IPOs, international investors are increasing their participation and subscriptions in IPOs as more of the GCC countries allow foreign ownership.

In a quick look back to the first half of 2008, the number of IPOs in the past six months in the MENA region has reached 23 deals with a combined value of around $9 billion, according to Zawya’s IPO Monitor. Comparing this to the BRIC countries for example, one will find that Russia has closed one IPO this year so far with a mere value of $470 million. In China around $6 billion were raised in IPOs in the first half, down a whopping 60% on the same period last year. Brazil floats raised $4.6 billion, a decline of 54%. In India, primary issues were down 11% when compared to the same period last year, raising a just $4.5 billion.

Looking forward, July saw several new IPO announcements. Most noteworthy is that of the Saudi-based Arab Supply and Trading Corporation or Astra, which will float 30% of its shares to raise around $825 million. Astra is offering 22,235,294 shares to the public from July 26 to August 4. Also in Saudi Arabia, Methanol Chemicals Co., or Chemanol, plans to sell 50% of its shares in an IPO in August. The company is seeking to raise $300 million by offering 60.3 million shares through the IPO which will run from August 11 to August 20. The Jeddah-based Knowledge Economic City said it will float 30% of its shares on Saudi Stock Exchange in late 2008 and has already appointed NCB Capital and Swicorp as Joint Financial Advisors.

Out of Tunisia came what is touted as the largest IPO in the country, that of Poulina Group Holding (PGH), which is floating 10% of its capital via a capital increase. The company is seeking to raise around $85.6 million by floating more than 16.6 million shares on the Tunis Stock Exchange. The company’s principal activities are in the poultry, agribusiness and service sectors. The IPO will be launched from July 24 until August 6.

Back in the GCC, the newly-established Oman Merchant Bank (OMB) announced that it will offer 40% of its capital to the public by year end. OMB has a capital of $130 million and it did not disclose the amount it seeks to raise. In the Levant, Amman-based International Cards Company (ICC) said it will offer 39% or 7 million shares to the public on July 27. The credit card issuer seeks to raise around $41.9 million.

The flood of IPOs of young companies does not only demonstrate the success of the region’s equity markets but it also shows the industrious nature of the region’s entrepreneurial players and their will to make their countries a more prosperous and successful place to live and work. Much of the liquidity generated from high oil prices is now being invested in the region and much less is going abroad. Local business leaders have finally seen the benefits of investing in oneself or in one’s country and this enlightenment, analysts say, will only lead to even more prosperous times and many more mega IPOs.

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By Invitation

Doha cracks open the books for a free press

by Richard J. Roth
written by Richard J. Roth

Across the years some have argued that the most important factor needed to ensure that people are free — politically, intellectually and creatively free, to be entrepreneurs, inventors and discoverers — is education. Others have said it is journalism. Those of us in journalism education have a double responsibility and a double opportunity.

Right now we at Northwestern University have that double opportunity in Doha’s Education City, to which we were invited by the Qatar Foundation for Education, Science and Community Development.

When we accepted the Qatar Foundation’s invitation to bring Northwestern University’s Medill School of Journalism to the Region, there were more than a few skeptics. They told us that an American journalism school could not practice here what it preaches there, reminding us that the media here are owned or licensed by governments, that women are often abused here and gay people persecuted, that rich men here often keep prostitutes in secret suites and that the royal family might “suggest” the grades we give family members. I was shocked by those notions, mostly because I had hoped that once I left the United States those things would be behind me; in the US radio and television is licensed by the government, there are special shelters established for all the abused women, gays have always been persecuted, even the governor of New York had high- priced prostitutes at his disposal and it is not unheard of in the US for a faculty member to hear from some poobah trying to influence grades, especially for a student athlete.

Still, I know things here will be different, even difficult. I am not naïve. I have been heartened, however, by what I have heard and seen: I heard with my own ears Qatar’s First Lady, Sheikha Mozah Bint Nazzer Al-Missned, chairperson of the Foundation, say that a free press is the best assurance of the kind of civil society that she dreams of for Qatar and all the Middle East. I heard Abdulla bin Ali Al-Thani, the Foundation’s vice president for education, say he believes bringing Northwestern and its brand of journalism here “will promote a maturing of our society into one where everyone can have a voice and everyone is accountable. A vibrant, healthy media scene will bring about greater transparency and accountability, and these are hallmarks of successful, participative societies. They are not qualities for which our region is well known internationally, but they are essential to the implementation of Her Highness’ vision of releasing and developing human potential for the common good.” Privately, Dr. Abdulla assured me that if Her Highness Sheikha Mozah did not want genuine journalism here she surely would not have invited the best US journalism school.

That’s what they say. But here’s also what they’ve done: written freedom of the press into the constitution; created the Arab Foundation for Democracy with a $10 million endowment from the emir to encourage the development of a civil society and freedom of the press; created the Doha Debates to promote free speech; launched Al Jazeera television and now they’re advertising for a staff for the Doha Centre for Media Freedom, which will have a strategic alliance with Reporters Without Borders.

That said, we have our work cut out for us. Despite what the emir and the sheikha have done in Qatar, the local press still seems like it’s from another era, with grip-and-grin pictures of the emir on the front page daily, though I must say that in just one year I have seen improvements. We are mindful, though, that with just 20 students in our first class of undergraduates, it will be a while before Northwestern has here the impact it has long had in the US. (Let me say, to plant an idea, that of the 20 or so students we hope to enroll each year, not all will be Qataris, though the Qataris who meet our admissions standards will have their tuition paid by the Qatar government. Students with other passports will need some financial support.)

But to achieve our goals outside the US we won’t wait just for those 20 youngsters we enroll each year to get into newsrooms, first as interns and then as cub reporters. In cooperation with the Qatar Foundation, we intend also to offer here the kind of executive education we are known for in the States, and maybe some “continuing education” for working journalists not yet at the executive level. Many media executives from the Middle East and North Africa already know us through our Media Management Center and the IREX (International Research and Exchange Board) programs we have on the Northwestern University campus in Evanston, Illinois. We want to bring those programs here. Also, through Northwestern’s Kellogg School of Management and the Qatar Foundation we are considering more general executive management and marketing programs for those who aren’t necessarily in the media. The details are still being worked out, but Northwestern University — and especially those of us on the University’s Doha campus — feel the responsibility to use our research and our faculty to help improve leadership capabilities, develop strategies for growth through innovation and do everything else our double responsibility and double opportunity mandate of us.

Richard J. Roth is a professor and the senior associate dean responsible for the journalism program at Northwestern University’s first international campus in Doha, Qatar

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Levant

Restaurants – Beirut’s whet appetite

by Executive Staff
written by Executive Staff

The resilience of the Lebanese has become legendary, and each war confirms that by the end of it people will sweep off the rubble and return to business as usual. Even tourists seem to believe as much. On the other hand, even though tourists keep on returning, the Lebanese themselves are leaving their homeland for more stable countries. And Lebanese entrepreneurs are not only selling their knowledge abroad, they are investing there as well.

Through the ordeal of the past 18 months, where blockaded downtown Beirut became a ghost town, some businesses stayed open, confirming the Lebanese resilience and entrepreneurial spirit. However, even for the bold ones patience may have a limit.

One would be forgiven for having felt rather schizophrenic on May 22. On that day downtown Beirut metamorphosed from what seemed like a sad refugee camp with more tents than refugees into a booming area where tourists and locals shopped, shared coffee tables and smoked narghiles — all in less than 24 hours. “When they took the tents down I went one evening there and saw the terrace full, the inside of the restaurant full, all the old customers, you know, my heart grew,” said Sami Hochar, general manager of Catertainment, the company that owns Lina’s Sandwiches.

Cooking on a roller coaster
A staple of Lebanese creativity that went as far as Paris, Lina’s had reason to celebrate the end of the 18-month occupation of downtown Beirut. Throughout those months, the downtown branch had accumulated losses of about $50,000, a sum it will take the restaurant another six months to recover. The July War with Israel is classified by Hochar as “a catastrophe — we had 300 customers a week”.

But after those thirty days of war, downtown quickly recovered and by September 2006 the number of clients had climbed back to 2,500 per week. But this was not to last. By December 2006, that number dropped to 750 customers a week.

Of course, the problems downtown had started even before the 2006 War, with the assassination of ex-Prime Minister Rafik Hariri. “If you compare recent numbers with 2004, it has never been as good again. At that time we used to get around 5,000 customers a week,” Hochar said.

When he saw the tents downtown, Hochar thought the occupation was going to last “one month, six weeks at most. I never imagined that any Lebanese party would accept such situation where the economy of the country was in danger, families were in danger, losing their jobs, their money. I thought nobody would ever accept such a thing.”

That disbelief was shared by Jean Claude Ghosn, managing partner of Ghia Holding, owner of Duo. Hope, or miscalculation, was one of the things that kept his restaurant open. “We kept Duo open because we didn’t know downtown was going to be closed for eighteen months. Everyone was saying it was going to be one month, two, maximum three months,” Ghosn averred. Known for being full for lunch on a daily basis, over the 18 months of paralysis Duo accumulated a loss of about $900,000. The holding company had already closed another restaurant in downtown, two months after the tents came. “We were losing a lot of money with Al Bakawat, as it was not on the main road and customers had to cross checkpoints to access the restaurant,” Ghosn explained. With that closure alone, 32 employees lost their jobs. In Duo, with some effort Ghosn managed to keep most of the staff, having to let go only 15 out of 45. But, he said, “the remaining got a lower salary, because they worked fewer hours.”

Success abroad was another reason that Duo could not close. With a Duo restaurant already operating in Dubai and two other opening soon in Qatar and Riyadh, Ghosn could not close the flagship of his franchise. “We cannot open there and close here, it is not fair,” he said.

La Posta, an Italian restaurant that shares the same street with Duo, was equally damaged.

“With the occupation of downtown by protesters, our turnover fell suddenly by 80% and 95% compared to 2004”, said General Manager Michel Ferneini. “In other words, in the last period of the occupation the monthly turnover was what we used to make in a single weekend in 2004.”

Empty seats
Deprived of foreigners, the restaurants were also empty of Lebanese. “Tourists? Not even ‘tourists’ from Verdun or Achrafieh used to come,” Ferneini pointed out. “In the last period our guests were mainly people working in the downtown area.” At Duo, the 400 covers a day became 25 during downtown’s occupation, “counting the staff and ourselves”, according to Ghosn.

Hochar, who refused to close his bar in Gemmayzeh during the 2006 War, knows the problem well. “We stayed open, we refused to close. We had two or three people at the bar — I was one of them.” The problem with downtown, as opposed to the war with Israel, was the length. With a deadlock that did not seem to have an end, restaurants did not even need to fire — workers started to leave on their own accord.

“We did not fire anyone. Some were relocated, and some left to other countries,” said Hochar. “In the last three years we did not fire a single employee,” Ferneini concurred. “Some of them travelled abroad, and not because they were afraid of losing their job but because they lacked confidence in the country.”

The drop in the quality of the service is noticeable. For Maya Bekhazi, a young entrepreneur who owns Tartuffo and is a partner in at least four different restaurants, including the landmark Beirut Cellar, “the biggest problem we have now is the export of our human resources.” Sharp and meticulous, Bekhazi has been hired as consultant by a big hotel chain, and she knows the importance of highly trained staff: “It’s been very tough to replace people. We always bring new personnel, we train them, and then they find offers outside.” Ferneini agrees. “Finding new collaborators is a hard task. There is a huge demand while the offer in all positions is rare, largely unprofessional and unqualified,” he said.

Bekhazi acknowledges that the salaries offered abroad are higher, often three times as much, but the Lebanese wished they could come back even for lower pay. “I always get calls from Lebanese who used to work for us wanting to come back, even for less money. The only thing they want is stability. They are young and ambitious, they want to set up families, they want to save some money, that is their concern,” she said.

Sometimes, these employees end up working for a company founded or created by a Lebanese — but located outside Lebanon. La Posta, Duo and Lina’s are all opening branches or franchises abroad, even as far as India. Inside the country, the owners make sure they keep strategies to swerve the odds. “We are trying to make sure our eggs are not all in one single basket”, explained Maroun Daou, operations director of Ghia Holding.

The basket, in Ghia Holding’s case, is the Green Line, or the imaginary border that has been dividing Beirut into East and West since the time of the Civil War. “If you think about it, all our restaurants are on the Green Line, from Abdel Wahab to Paladar to Shah to Duo, all on the separation line. I am not afraid of being in downtown, but I prefer to stay outside, like ABC, Achrafieh, in the mountains, maybe even in Dbayyeh in the future, to diversify as much as possible”, said Ghosn. Lina’s, which is diversifying its locations as well, is opening a branch in Saida, even though it will not be able to sell alcohol.

Beirut’s downtown has already shown it is probably as resilient as the Lebanese. On the first Saturday after the tent city was removed, Lina’s clients went from 100 to 700. Duo will register a profit of $40,000 in June. La Posta also expects the first year of profit-earning after three years of losses. But all entrepreneurs seem rather cautious about the situation. “Again we are surviving, we are reopening, and this is due to the Lebanese individual, not the government or the parties,” Hochar said. “But then, how long will it last? The kids are leaving, smart people are leaving, big companies are leaving. I always give the example of my children. One of them left already and the second will leave next year.”

Yet hope is staying. “We are hopeful,” Ghosn averred. “We don’t believe much anymore, but we don’t have another choice.” Maya Bekhazi shared what seems to be, in a rather Lebanese way, a paradoxically optimistic cynicism: “I can’t afford to be very realistic, let’s put it this way — I just have to be very positive, because if I want to measure the risk I will just stop all my business in Lebanon.”

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Levant

Technology – Cedar triumph in cyberspace

by Executive Staff
written by Executive Staff

The world’s most popular internet applications, including Yahoo, Google, Facebook and YouTube, share several interesting characteristics. Nearly all were developed by students enrolled in American universities and nearly all were aided by an American venture capital injection to successfully enter the market. Lebanese-born Elie Khoury and Jad Jounan have followed more or less the same path, yet with one major difference: they developed their Woopra program in Lebanon. Against all odds, some may argue, as the Land of the Cedars can hardly be described as an IT incubator.

Both Khoury and Jounan graduated from the Lebanese American University in Byblos in 2007 with a degree in Computer Science and Computer Engineering, respectively. They spent many hours in class, but they spent many more nights working late on Woopra, a live tracking and analytics service that aims to send market leader Google Analytics into oblivion.

“When we felt the application was ready to be launched,” Khoury said, “we made the strategic decision to seek a partner who could help us with financing, marketing and the general business structure.” That partner became John Pozadzides, mainly because of his experience as director and vice president of the multinationals SAVVIS and Cable & Wireless.

It was said in Lebanon that the entrepreneurs had sold their brainchild for $5 million, yet Khoury rapidly dismissed that as a rumor. “We will not be selling Woopra at this early stage,” he said. “We are still the owners. I cannot enter into too many details at this moment, as the program has only just been launched. All I can say is that we have a very decent amount of funds, compared to other start-up projects like Facebook or YouTube.”

First splash on the web
Woopra was first presented at the 2008 Dallas WordCamp event in March. The program immediately received rave reviews and, according to Khoury, tens of thousands of bloggers and webmasters have since signed up. Now there are numerous tracking and analytics programs that, with a delay of several hours, offer data such as the number of visits to a website and the average time spent on it.

Woopra however, offers far more detail, allowing the user to see the exact path a visitor follows after entering a site. What’s more, the program does so in real time, offers a direct chat option and, perhaps most importantly, is extremely user-friendly.

Khoury built his first website in 2003 at a time when a program called Hit Counters was quite common. “I then started learning about other tracking and analytics services and discovered success measuring methods other than just ‘number of hits per day’,” Khoury explained. “By 2005, I realized that everything on the web was moving toward socializing and social networking. Everything, except my analytics services. Google Analytics still only offers numbers and statistics. That wasn’t enough for me. I wanted to know more about who is viewing what on my ‘virtual property’. Who’s stumbling on it? How did they know about it? Was it possible to get in contact with them and perhaps even guide them?”

Having the idea is one thing. Realizing the idea is something else. Developing Woopra was a painstaking process that required passion, patience, and long hours of work, while friends went out enjoying themselves.

Programming for the high- speed millionaire

The common, if somewhat cliché, image of the self-made millionaire has long been that of the newspaper boy becoming a media mogul. As we have entered the digital era, however, that has increasingly been replaced by the young whiz kid who, working from a student dorm or garage, launched the next big thing in computer or Internet technology.
No doubt the best known IT entrepreneur is Bill Gates, who set up Microsoft in 1975 as a 20-year-old. He did so with his then 22-year-old friend Paul Allen. Today both rank among the world’s richest men. Many more aspiring entrepreneurs followed in their footsteps, nearly all of them students.
Stanford University students Jerry Yang and David Filo in 1994 founded the Internet search engine Yahoo. Within a year of its launch the site had received a million visits and the founders became aware of its commercial potential. In 1995 Sequoia Capital injected two rounds of venture capital, while Yahoo in 1996 launched a public offering of shares bringing in over $33 million. In 2008, the site attracted some 1.5 billion visitors, prompting Microsoft to offer $44.6 billion to buy the company, yet the bid was kindly turned down.
Today in their thirties, Larry Page and Sergey Brin were Stanford University students when they developed the search engine Google in the mid-1990s. Having secured an initial $1 million from family, friends and some investors, they launched Google from a garage in September 1998. The first public offering of shares in 2004 brought in nearly $1.7 billion, which gave the firm a market capitalization of over $23 billion.
Facebook was developed by Harvard University student Mark Zuckerberg. While it was originally meant as an online “who’s who” at Harvard, Zuckerberg soon realized that the site’s potential reached far beyond campus life. Some $40 million worth of cash injections by venture capital firms in 2004 allowed the site to grow into the worldwide phenomenon it is today. Microsoft in 2007 bought a tiny stake in the company for $246 million. Following the acquisition of MySpace by Rupert Murdoch’s NewsCorp, the air was heavy with rumors that Facebook would be sold in 2008 for no less than $8 billion. The deal has yet to materialize.
The online-auction site eBay was founded in California in 1995 by the then 28-year-old French computer programmer Pierre Omidvar. The site received its first $5 million capital injection from Benchmark Capital in 1997 and one year later the first public offering of eBay shares took place. In March 2008, Forbes Magazine considered Omidvar to be the 120th-richest person in the world. Last but not least, as an example of how fast things can go: YouTube was established by three young students in 2005 and bought by Google a year later for $1.6 billion.

“We opened an office in Byblos in 2007,” said Khoury. “That’s basically where I lived for a year. For months we worked non-stop, often more than 15 hours per day. Sometimes, we would finish work at 5am and join our friends for breakfast when they came back from a night out in Batroun. It didn’t really bother us, but I must admit our social life was totally screwed up.”

While Lebanon takes pride in that fact that two of its sons have developed a program that managed to make heads turn in America’s high-tech-heaven, many Lebanese feel it is a shame that the program could not have been further developed and commercialized in Lebanon. The questions arise: Could the university have done more? Or could Lebanon have done more?

“I don’t think it is the task of a university to offer support for a project like Woopra,” said Khoury. “The main role of the LAU was teaching us the basics, discipline and methodology. A couple of teachers really supported us, especially my supervisor Dr. Munjid Musallem. What Lebanese universities lack is the ability to make entrepreneurs. They always prepare you to work in a company. Our universities are generally producing employees, instead of creating long term inspirational projects.”

Khoury admitted that Lebanon does not have a great IT climate, but he said Lebanon is perhaps the best country on earth to develop web-based software. “We have the worst internet connection in the Middle East, which is terrible, yet this helped us to tackle the worst case scenarios and debug our code easier,” he said. “This is not a compliment. It is a shame really, that at times we had to use a dial-up modem because all the alternatives were down for days. We had major problems rolling updates. It used to take 4 to 6 hours to roll an update, while in the US it takes less than five minutes. The government has promised the ADSL lines for 3 years, yet we are still not able to set up an ADSL account in Byblos.”

Lebanon’s internet lag
The complaints about Lebanon’s digital capacities are well known and have been around for quite some time. Although the country in 1996 was among the first Arab countries to introduce the internet, a decade later it ranked among the least developed internet nations in the world. In fact, according to a 2006 EU-funded research report, in terms of international bandwidth per capita Lebanon ranked just above countries such as Ivory Coast, Syria and Iraq, while it had lost the race with countries such as Egypt and Jordan.

Due to the country’s limited and outdated infrastructure, as well as the high cost of telecom supplies and the lack of a proper regulatory environment, Lebanon was not an attractive destination for potential investors, concluded the EU consultancy team. Apart from the introduction of a handful of ADSL lines — mainly in Beirut, and much later than initially announced — not much has changed since.

Dr. Munjid Musallem, a PhD graduate from Texas University who has taught a number of IT courses at LAU Byblos since 1994, shed further light on the activities of Khoury and Jounan. He recalled Khoury first coming into his office in 2004, when he decided to shift from computer engineering to computer science.

“Throughout his first semester, Elie told me about his ideas that would later shape up to become Woopra,” said Musallem. “Woopra was Elie’s brainchild and his primary obsession. No one could have stopped him from pursuing his Woopra. Side discussions about Woopra were regular and, naturally, it was the subject of Elie’s final graduation capstone project.”

According to Musallem, Jad Jounan joined Khoury at a latter stage, but he proved to be instrumental. While Khoury was the designer with all the innovative concepts and direction, Jounan had a deep understanding of software system architectural design. “Jad clearly stood out when he presented the tradeoffs of client-server versus multi-tier and peer-to-peer design, which is very important in the software architectures to which Woopra subscribes,” Musallem said. “In short, I consider myself the lucky teacher of two software gurus.”

Regarding the role of the university in developing Woopra, Musallem believes that the LAU played its role in terms of technical preparation. Turning a concept into a product however, is not the task of a university, but requires an entrepreneurial effort. “The same happened with Google, Yahoo, Mosaic (the predecessor of Netscape) and many other products,” he said.

He agreed that it is a pity Woopra will not be entirely developed in Lebanon. “But realistically, some critical technologies do not take off until US-based organizations give it their blessing and join in,” he continued. “There is much more technical expertise, vision, and entrepreneurial support in the USA than in any other place. The Database industry (Oracle, SQL-Server, DB2) is almost entirely located in the US, even though many innovative database ideas have been emerging in Europe for a very long time.”

It seems however, that Khoury and Jounan have not forgotten their roots and Woopra may not entirely depart from Lebanese soil. In fact, the high-tech duo aims to start part of the development operation in Byblos, which would provide much-needed jobs and offer an opportunity for other young students to gain practical experience.

“Our business plan has not been finalized,” Khoury said. “We have a couple of drafts that we are trying to merge but we cannot reveal any further details for marketing and business reasons. At this stage, Jad and I will continue development to keep Woopra ahead of the competition, while moving back and forth between Lebanon and the US.”

Even if Woopra is not developed in Lebanon, at least by developing the program Khoury and Jounan have shown that despite some 18 months of political bickering, riots, internal warfare and a lousy IT infrastructure, Lebanon is still somehow able to produce creative minds with the will to succeed.

In that sense, Woopra is not just a welcome story of success, but also one of hope.

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Millions applaud Zain’s African call

by Michael Karam
written by Michael Karam

It is fair to say that most of the 50,000 concert-goers that rocked up to London’s Hyde Park in late June to wish former South African President and Nobel Prize winner, Nelson Mandela, a happy 90th birthday had never before seen the symbol of one of the concerts main sponsors. While the Mercedes star was a no brainer — even a Kazakh sheep farmer knows that one — the Zain Group’s mystical “swirl” might have proved problematic for cheery Londoners yet to experience the relentless march of what is arguably the most dynamic, daring, caring and innovative telecom company in the Middle East and Africa.

That the brand is not immediately recognized elsewhere is probably not of immediate concern to the Zain Group CEO Dr Saad Al-Barrak — known affectionately throughout the company as the “Doctor.” Formerly MTC, Zain only unveiled its new identity less than a year ago, initially to unite MTC’s five mobile phone operations in Sudan, Kuwait, Jordan, Bahrain and eventually Iraq. (In Lebanon, where 650,000 Lebanese use a Zain line in the guise of mtc touch, the brand will not be rolled out as long as the company only runs the network for the Lebanese government.)

But Al-Barrak is not known for sentimentality when it comes to effecting change, and his steely ambition is to propel Zain to the very forefront of global consciousness — it is no coincidence that the Mandela concert was broadcast live all over the world — in the presence of other blue chip names. Using his ACE — accelerate, consolidate and expand — strategy, the charismatic CEO who took over the then MTC-Vodafone in 2002, wants to take Zain into the top 10 global telecom companies by 2011 and eventually into the 100 leading global brands.

This in itself would be a mighty achievement for a Kuwait- based company that only six years ago was a one trick pony with 650,000 Kuwaiti customers. Since then, Al-Barrak has taken the operation into 22 countries on two continents, serving 50 million customers. In 2007, Zain posted revenues of $5.9 billion, and the first half of 2008 notched up a robust $3.5 billion. In terms of geographic presence, it is the fourth largest telecom company in the world.

In line with the consolidate part of the ACE acronym, on August 1 all the African operations, which had previously operated under the Celtel banner, officially became Zain. Al-Barrak’s corporate wheels are now beginning to mesh, working as one finely-oiled mechanism, linking customers — he does not like the word subscriber — from Baghdad to Kano. This mammoth transcontinental branding operation was an emotional milestone for those who had seen Celtel change — and in some cases save — the lives of millions of Africans.

Sponsoring the Hyde Park concert may have been a canny PR move, but the reality is that Mandela and Zain have much in common. It was a message that Al-Barrak could deliver with confidence. “Nelson Mandela has shaped modern Africa,” he said after presenting the beloved South African leader with a gold model of a traditional Arab Dhow. “His contribution is well known and stands as an example to those who are embroiled in fighting oppression and injustice in the same way Zain, through its subsidiary Celtel and the innovative introduction of the historic One Network system, has changed the face of this great continent forever.”

It is no exaggeration. There was a time, not so long ago when, if a young man from the Congo wanted to talk to his mother in his rural village, he had to make a two-day roundtrip on foot. Similarly, if a Nigerian businessman wanted to arrange a meeting with a colleague on the other side of Lagos, he would have to send his driver with a note suggesting a time. The driver would have to battle the notorious urban gridlock just to return with a note suggesting an alternative time. In the event, it would take at least two trips to confirm the meeting. Finally, a plumber in Dakar might have spent all day making house calls before returning to a pile of messages, which might take him three takes to reply to.

Yes, Africa was frustrating, but it was also filled with opportunity. It was a sleeping giant and, despite the nightly diet of civil war and famine on TV screens across the world, Celtel was forging ahead, establishing and operating networks in countries where there were few roads and even less land lines and where Celtel’s enterprising executives were forced to live, sometimes in zones of conflict, for several months in hotels that had no running water or windows.

But the tenacity paid off. Once word got out, African consumers would, in some cases literally, batter down doors to get their hands on a new mobile phone. On occasions, the local police had to be called to control crowds of over-enthusiastic customers. Sales targets in the thousands were recast in the tens or hundreds of thousands before being upgraded to the millions.

Celtel then went one step further by unveiling its One Network, the world’s first borderless phone system that linked countries without crippling customers with an extortionate roaming tariff system. In doing this it revolutionized the way Africans communicated on a social and economic level. Even the EU wanted to know how it could be duplicated.

Celtel was founded in Europe by Mo Ibrahim, a Sudanese, who had been a senior executive at UK mobile operator BT Cellnet before going it alone. Against all odds, he convinced skeptical international bankers to invest in his dream, and believe in his position as a man who operated “between cultures,” a status that allowed him to translate what was happening for those outside the continent.

He assembled a multinational team and insisted that Africans work in countries other than their own, while at the same time convincing them all to work for a common goal. Celtel executives were sent to the London Business School to sharpen their skills, while at shopfloor level the company became one of Africa’s major job providers. It was a prime place to work and it paid well. “When I arrived, everyone came to work on a bicycle or a motorbike,” recalled one employee. “When I left, the car park was full of cars.”
Since then, and its acquisition by Zain in April 2005, through strategic partners, most notably Ericsson, the Earth Institute and the GSM Association Development Fund, the company has revved up the CSR initiatives and intervened to make real and dramatic changes to the ways Africans live.

In March 2008, Zain and Ericsson were part of an operation that will eventually allow the 200,000 fishermen who ply their trade on Lake Victoria to use mobile phones on what is the world’s second largest inland lake, by upgrading existing infrastructure and building an additional 21 radio sites to provide mobile coverage up to 20 kilometers into the lake (covering 90% of the fishing zones) and reduce the estimated 5,000 annual deaths from accidents and piracy. In Kenya, Tanzania and Uganda, Zain, also with Ericsson but this time including the Earth Institute, has delivered mobile telephony to 400,000 people in rural villages.

Celtel will always have a place in African telecom history; under Al-Barrak and wearing a new brand, it is now part of Zain’s global campaign, one that will not only serve bottom line ambitions but also show that communication should be a right, not a privilege.

Michael Karam is Associate Editor-in-Chief of Executive

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The law unto themselves

by Peter Speetjens
written by Peter Speetjens

“All animals are equal, yet some animals are more equal than others,” George Orwell famously wrote in his political satire Animal Farm, in which pigs rule over all other animals, using dogs as their foot soldiers. The novel has not lost an inch of its value in today’s “new world order.”

On July 14, the International Criminal Court (ICC) prosecutor Luis Moreno-Ocampo accused Sudanese president Omar Bashir of genocide, crimes against humanity and war crimes in Darfur. While every sane person wishes a rapid end to the tragedy that includes mass murder, rape and some 2.5 million people displaced, international prosecution of Sudan’s sitting head of state may bring more harm than good.

Legal action may not only jeopardize the UN peacekeeping operation in Sudan, but is likely to end all hopes for a negotiated settlement of the conflict. More importantly, the prosecution of Bashir may very well bury the ICC before it was even properly born.

Established by the 1998 Rome Statute, the ICC in The Hague currently has 106 member states. With the exception of Jordan, the Middle East is not represented among the signatories — a status quo unlikely to change any time soon. In order for the ICC prosecutor to investigate crimes it has to be be asked to do so by a member state or the United Nations Security Council (UNSC). Such was the case in 2005 when the UNSC adopted Resolution 1593, which referred the Darfur dossier to the ICC prosecutor.

Ironically, three out of five permanent UNSC members (Russia, China and the US) have not signed the Rome Statute and thus do not recognize the ICC’s jurisdiction. Hence the rather awkward situation has emerged that three nations refer a fourth to an international court, which none of them recognize, all the while referring to an international treaty none of them have signed.

As a consequence of this legal oddity, in Resolution 1593 the UNSC recognizes that “states not party to the Rome Statute have no obligation under the Statute,” yet ordered the Sudanese government to fully cooperate with the ICC investigation. The UNSC also determined that the ICC investigation will not be paid for by the UN, but by states who are signatories to the Rome Statute. As that does not include most permanent member states the UNSC added, “and states that wish to contribute voluntarily.”

The procedure only gains in ridicule, knowing that the driving force behind Resolution 1593 is the US, although from the start Washington has tried to torpedo the ICC. The Clinton administration hesitantly signed the Rome Statute, much to the dislike of its Republican successor, which has developed a severe allergy to the faintest of international flavors. The Bush administration could have simply not ratified the Rome Statute, yet in May 2002 it in fact decided to un-sign the treaty.

The US claims to be concerned with the fate of individual American peacekeepers around the globe, as they run the risk to be prosecuted “on political grounds,” even though the ICC is only authorized to judge “big” crimes, such as genocide and war crimes. According to journalist Jim Lobe, the US went on to lobby for a UNSC resolution that would exempt all American nationals from ICC jurisdiction.

The US did so by — among other measures — threatening to veto the renewal of the UN peacekeeping operation in the Balkan. Under pressure of mainly the EU, however, the US had to settle for a compromise. The UNSC adopted Resolution 1422, which exempts UN peacekeepers from prosecution, thus creating another legal anomaly: the international community has an international court, yet its own soldiers do not fall under the court’s jurisdiction.

To be absolutely certain that no American soldier will ever be tried by the ICC, Washington then adopted the American Service-Members Protection Act, which goes as far as to authorize the US President to use military force to free any US service member held by the court. And thus the legislation is also known as the “The Hague Invasion Act”

Ever since, the US has continued its opposition to the ICC by persuading third nations to sign bilateral agreements to not surrender or transfer US nationals to the ICC. On a diplomatic level, it pushes for a greater and preferably permanent role for the UNSC, which would mean that Washington could veto any ICC prosecution that does not conform with its or its allies’ interests. China and Russia will arguably be in favor of such an agreement, as they enjoy the same veto right.

Consequently, in sharp contrast with the nature of the Rome Statute, which aims to offer a system of justice for all victims of the world’s worst crimes, the ICC threatens to become a political toy in the hands of the happy few.

 Peter Speetjens is a Beirut-based journalist.

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…before oil meant terrorism

by Norbert Schiller
written by Norbert Schiller

I recently made contact with a very old friend of mine living in Switzerland. We had not seen one another for almost 18 years. In fact, the last time I saw him was just before the 1991 US-led invasion of Iraq when, after having covered the build-up to the conflict, I was replaced to go on holidays. Upon hearing I was about to leave Iraq my Swiss friend offered both my wife and I the use of his family’s ski hut in the Swiss Alps. After our vacation we returned to the Middle East and even though I regularly returned to Switzerland I never again had contact with him until now.

This past spring I decided to take my son on a trip to Switzerland in order that I may reunite with relatives and friends that I have not seen in many years. I was hesitant, showing up after such a long spell, so as a way of breaking the ice I sent out small gifts along with my contacts and waited for responses. I was fortunate that I had a number of published books under my belt so I just wrote a nice note on the cover pages and sent them to all those with whom I wanted to be in contact again.

No sooner had my Swiss friend received the book he immediately sent me an email and from then our relationship was back on track. His missive posed the obvious question, “Where have you disappeared for so long?” Before I could respond he had sent a follow- up email with a bit more sarcasm, suggesting I had “joined the likes of Hamas, Hizbullah and al- Qaeda.” I then went on to write him a lengthy reply apologizing for my long abscence and explained to him what I had been doing and where I had been living for the last 18 years, and that I hoped that we could get together again. Just out of politeness I asked if there was anything he wanted from Dubai. He replied with the same sarcasm and said “Yes, bring as much petroleum as you can carry,” and then added, “but leave the terrorists behind!”

He was not alone with that response. When we finally arrived in Switzerland and were staying with other friends the topic of discussion, when speaking about the Middle East, always centered on terrorism and the price of oil. It was like the two subjects were inseparable.

However, this had not always been the case. I remember when I was living in Egypt in the early 1990s, during one of the most volatile times when home-grown Islamist terror groups were bent on overthrowing the government of Hosni Mubarak and replacing it with one based on sharia, many of my Swiss friends visited me with little or no concern for the political tensions that were rattling the country. Even though tourists were targets of the fundamentalist, the friends that visited were more interested in the ancient wonders that Egypt had to offer than of being shot at in the streets of Luxor. Their curiosity of the past has now been replaced with questions like, “aren’t you afraid?” or “isn’t it dangerous living there?”

What’s even funnier is when these questions are asked by my long lost Swiss friend who during his free time jumps off cliffs with paragliders for kicks looking for thermals as he flies high among the Alps.

Unfortunately, the state of the world today is a far cry from what it was 18 years ago. It seems that many of the same crises we faced back then never went away, but instead intensified. Take Iraq for example. When I covered the first US-led war in Iraq my Swiss relatives were more concerned on how the conflict was affecting the people of Iraq and how more should be done by Western nations to alleviate the suffering of ordinary Iraqis than of the long term dangers of terrorism that could arise from such conflicts. The term ‘terrorism’ was hardly ever talked about and gasoline prices, even though higher than in America, were not something that the Swiss grumbled about.

The friends and family I have in Switzerland are not typically Swiss (if one can still use that phrase). They are artists, musicians, and architects who for the most part were the ones that pushed for change when Switzerland was still clinging to its World War II isolationist values. They were the ones who traveled extensively, living abroad and in some cases marrying spouses from different parts of the world. They are the open-minded Swiss, the ones interested in the world around them and now the ones with the most to loose if the country reverts back to its old ways.

There is an unspoken bond between the Arab world and Switzerland that has developed over the last few decades. Switzerland (in particular the area surrounding the Lake of Geneva) is one of the top destinations for the Gulf’s super-rich. It’s here where the Emiratis, Qataris and others send their children to be educated and where many spend their holidays.

Maybe the Swiss should try and use their influence with their wealthy guests and see if they can’t help in lowering the price of oil or stemming the rise of terror groups. Then friends like mine may look at the Arab world in a more positive light rather than the way they see it now.

Norbert Schiller is a Dubai-based photo-journalist and writer

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