MENA

Cleansing the banks

by Executive Staff
written by Executive Staff

Since 9/11 the issue of combating money laundering and terrorist financing has taken on greater importance for the banking and financial sectors, forcing institutions to shake up their administrative divisions to comply with regulations as well as apply initiatives like ‘know your customer’ at the branch level. It’s been a costly and time consuming process, but with the MENA region a focus of international anti money laundering (AML) and counter terrorism financing (CTF) initiatives, central banks and financial institutions were left with little choice.

The USA’s Patriot Act has been the main driver, sections 311 and 314 in particular, calling for: “Special measures for jurisdictions, financial institutions, or international transactions of primary money laundering concern,” and “cooperative efforts to deter money laundering.” The seriousness of these requirements cannot be downplayed.

Obliged to obey

Unless MENA banks comply, they will be unable to have a representative bank or depository in the US, and other day-to-day operations, such as letters of credit, face heightened suspicion if not downright refusal. Furthermore, failure to comply with the Patriot Act and the OECD’s Financial Action Task Force’s 40 Recommendations on money laundering (ML) plus 9 Special Recommendations on terrorist financing (TF) can blacklist a country and its banks, as the Commercial Bank of Syria and Iranian banks currently face. Additionally, the consequences of non-compliance are not just operation and reputation related but also financial, with Arab Bank fined $24 million in 2005 by US banking regulators for failing to implement AML controls at its New York branch.

The benefits of implementing AML and CTF compliance certainly outweigh the risks, but are nonetheless costing institutions a pretty penny, whether installing new software, employing and training staff, or building up a compliance division. Middle Eastern banks are cagey about releasing such figures, but for an idea of the costs involved, a Pricewaterhouse Coopers report in Australia estimated the cost of AML/CTF compliance for a financial institution at $48 million to $96 million.

A recent survey by KPMG found that from around the globe, the regions that recorded the highest increase in costs of AML compliance were, “unsurprisingly,” North America and the Middle East/Africa. “This reflects the significant legal and regulatory changes in the US, and the wider impact of the extra-territorial provision of US law around the world,” the report noted. Middle East/Africa banks’ average percentage increase in AML investment in 2001-2004 was 68%, and in 2004-2007 an estimated 70%.

In terms of cost, topping the list was enhanced transaction monitoring, greater provision of training, sanctions compliance, remediation of ‘know your customer’ documentation, and transaction ‘look-back’ reviews.

Need for more regulation

The region has been fairly successful in curbing money laundering and terrorist financing, at least according to official accounts, with the Middle East North Africa-Financial Action Task Force (MENA-FATF), a regional body based in Bahrain, claiming a 90% decline since the body was set up in late 2004.

But tackling ML and TF is a slippery business, as heads of financial intelligence units and compliance officers unabashedly make clear. Indeed, ML and TF is considered to occur more in major financial centers, such as London and Frankfurt, where there is greater safety in numbers, than in the smaller and more risk associated markets of parts of the Middle East.

The countries in the MENA region that have warranted censure, Iran and Syria, are arguably lower in the money laundering stakes than the likes of Dubai, and in terms of terrorist financing, Saudi Arabia.

But the matter is politically tinged (see Islamic Banks and TF article in the Islamic Banking and Finance Special Report), as a private sector dialogue with the US government attended by all the region’s major banks in Cairo a few years ago highlighted when there was a heated discussion about what constitutes a terrorist group. The 5% that were in disagreement concerned Hamas and Hizbullah, two groups at the top of US concerns with TF that also enjoy popular support around the Middle East, including Saudi Arabia, a known financial backer of Hamas.

Politics aside, banks are making noticeable progress in tackling ML and TF, but there is still reluctance amongst Middle Eastern banks to voluntarily adopt higher AML standards in line with global policies as it would put them at a competitive disadvantage. This was reflected in the declining importance senior management placed on AML issues in the KPMG survey, with 88% of respondents in 2004 citing AML as a high profile issue, but by 2007 only 54%.

There is optimism however, with 84% of respondents from banks in the UAE expressing the view that AML regulations should be increased. Indeed, although MENA-FATF has been carrying out country evaluations, to improve AML and CTF in the region commercial and retail banks need to be encouraged to do more, for their reputation as much as curbing money laundering and terrorist financing.

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Authoring Israel’s chronicle

by Peter Speetjens
written by Peter Speetjens

History is a funny thing. It is like a piece of clay that changes shape depending on the hands that hold it. After a war, it is generally first picked up by the ones who won. They like to tell tales of heroes and bravery. Those who lost will see things quite differently, yet generally do not have a voice.
In the documentary The Fog of War (2004), former US Secretary of Defense Robert McNamara claimed that had the US not won WWII, the country would have been prosecuted for war crimes, because of the massive bombing campaign on Japanese cities.
On May 15 the world commemorated 60 years of Israel and 60 years of the Palestinian Nakba (Catastrophe). These are of course twin events, intertwined like a Gordian knot, yet when speaking to the Knesset on Israel’s latest anniversary, US President George W. Bush proved hopelessly one-sided in his Bible-fuelled admiration for the Jewish state, while mentioning the Palestinians only once.
Having set the tone by calling Ariel Sharon “a man of peace, a friend,” Bush argued that Israeli independence was founded on “the natural right of the Jewish people to be masters of their own fate” and “the redemption of an ancient promise given to Abraham and Moses and David.”
Israeli MPs awarded Bush with a standing ovation, yet both friends and foes must have shivered hearing his sermon-like speech. Now, of course the Jewish people have a right to self-determination. Who could disagree with that? However, one’s right ends where the other’s begins, and who could argue that deportation and confiscating land and property are an acceptable part of a people’s path to self-determination?
Illustrating his status of a born-again Christian, Bush’s claim that Israel’s right to exist is God-given is a direct reference to the Torah and Old Testament. With it he not only delighted Israeli nationals and an estimated 90 million evangelicals within the US, but probably also Osama Bin Laden and anyone else eager to take the world back to the Crusader era.
Golda Meir, for one, would have been pleased, having herself once said: “This country exists as the accomplishment of a promise made by God Himself. It would be absurd to call its legitimacy into account.” Who would dare argue with God?
In his speech Bush went on to compare the foundation of the US to that of Jewish state. “When William Bradford stepped off the Mayflower in 1620, he quoted the words of Jeremiah: ‘Come let us declare in Zion the word of God.’ The founders of my country saw a new promised land and bestowed upon their towns names like Bethlehem and New Canaan.”
There are indeed many striking similarities between the US and Israel. Both are built by colonists, God-fearing “farmer-fighters” in search of a better future and a better life. In many ways both succeeded, yet they only did so at the expense of the native population, a reality both nations rather ignore.
Israel’s history has been largely written by the Zionist victors who were greatly inspired by the tale of David and Goliath. In short: tiny little Israel was forced into a battle with a sea of armed Arabs. Against all odds, it won. Meanwhile, the local inhabitants had fled, as they were told by their leaders, and thus Israel miraculously ended up with twice as much land as it was given in the UN partition plan.
This is still being taught in Israeli schools today. Only last year, the Israeli Ministry of Education allowed the word “Nakba” to be mentioned in schoolbooks, yet solely in Israeli Arab ones. Israel’s Jewish children continue to be fed “the miracle of 1948” even though since the 1980s the Zionist version of events has largely been destroyed by a new generation of Israeli historians, who based their conclusions on declassified Israeli sources.
Take Benny Morris, who has shown that most Palestinian did not leave because their leaders had told them so, but because they were forced at the barrel end of a Zionist gun. Avi Shlaim shattered the prevailing view that Israel always wanted peace, while the Arabs were always unwilling to negotiate.
Ilan Pappe showed that the Jews in 1948 were better armed than the Palestinians and in fact executed a strategy known as “Plan D” that aimed at surrounding villages and deporting its inhabitants. Thousands of people were executed on the spot. According to Pappe, it is a classic example of ethnic cleansing, not much different from what happened in Kosovo and Bosnia in the 1990s.
If there is one thing to celebrate about 60 years of Israel, it is the fact that the country has a relatively free intellectual climate able to give birth to academics such as Morris, Shlaim and Pappe who dare to confront Israeli society with its painful hidden past.
 

­Peter Speetjens is a Beirut-based journalist.

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Capitalist Culture

Diplomacy – Venice of the Gulf

by Michael Young
written by Michael Young

One of the more interesting stories in the Gulf in the past decade or more has been the expanding, paradoxical role of Qatar. When the emirate hosted the Lebanese dialogue talks in May, this was only its latest demonstration of a policy of counterpoint that has either pleased or infuriated those used to more predictable behavior from Arab states.
The dialogue helped one understand Qatar’s strange ability to place itself at the nexus point of contradictory regional interests. Why, many observers wondered, had the March 14 parliamentary majority agreed to the interchange with the opposition under the auspices of a regime with close ties to Syria and Iran, which has financed reconstruction in Hizbullah-controlled areas? Simply put, there was no one else. Tension between Saudi Arabia and Egypt on one hand and Syria and Iran on the other meant that the Saudis, traditional mediators in inter-Arab affairs, were unable to play that role in Lebanon. Egypt, in turn, had its own problems with Damascus and was anyway represented more or less by the Arab League secretary general, Amr Moussa. Jordan and the North African states were too preoccupied with other matters to intervene. So Qatar filled the gap.
In many ways, Qatar is the Venice of the Middle East. Not for the picturesque waterways or singing gondoliers; but because Qatar, like the Venice of the Renaissance, is a place constantly juggling and preserving a balance between its most improbable relationships, all the while protecting itself, increasing its profits, and enhancing its regional role.
While Doha has good relations with Syria and Iran, as well as Hizbullah, it has managed to do this while hosting the largest American military base in the Middle East, maintaining contacts with Israel, preserving more ambiguous relationships with militant Sunni Islamists, protecting itself on both the Arab nationalist and Islamist sides through its Al-Jazeera satellite TV station, and, more recently, working to paper over its previous rivalry with Saudi Arabia (partly by toning down criticism of the kingdom on Al-Jazeera).
Before the Lebanese dialogue in Doha, Qatari policies in Lebanon provoked much anger from March 14. In some ways the reaction was justified: Qatar sided openly with those most opposed to the government. However, at a broader level, Qatar is interesting because it has taken the lead in shaping what can only be described as a post-ideological approach to Arab politics. Certainly, most Arab states long ago gave up on ideological consistency, and Arab nationalist or Islamist regimes have, mostly, turned their ideological pretensions into little more than instruments to buttress dictatorships. But Qatar has taken this a step further, so that the emirate can openly ignore the most fundamental of Arab benchmarks, the isolation of Israel, while providing political and financial sustenance to Israel’s bitterest foes.
Is this something positive? In one way it is. Pragmatism is an ingredient that has long been in short supply in the modern Arab world. The region is more often defined by polarization, by its stubborn divisions, than by efforts to transcend differences and deal with all sides simultaneously. Pragmatism can also be an essential element of capitalist culture, where the market, whether the market of politics, economics, or ideas, is basically allowed to develop unfettered, free of preconception.
But a capitalist culture, and the pragmatism underlining it, becomes self-defeating when it bolsters autocracy. Take the case of Iran or Hizbullah. That Qatar seeks to deal with both to its advantage is understandable; but if Iran or Hizbullah were ever to impose their will on Qatar, or on Arab states behaving like the emirate, the latitude for that pragmatism would collapse. Would a hegemonic Iran in the Gulf, for example, allow Qatar to continue to serve as a headquarters for U.S. power in the region? A Syrian return to Lebanon, while it might not disturb officials in Doha, could significantly strengthen those regional forces with an interest in obstructing Qatar’s open ways.
In other words, by basing its political actions purely on self-interest, a post-ideological state like Qatar might find itself helping unleash those forces in the Middle East that suffocate the interesting possibilities in a post-ideological state. The same would doubtless apply if pressure came from, let’s say, the United States, except that there are limits to what the U.S. can do. For example, despite its hostility to Al-Jazeera, Washington has understood that it cannot much change the station’s tone. In late 2001, the then-U.S. secretary of state, Colin Powell, tried, and was promptly condemned at home for this.
Gulf politics are so personalized that it may be difficult to reach the conclusion that Qatar represents the way of the future — or a way of the future. The possibility always remains that when leaders change, so do a state’s policies. However, the tightrope act the emirate has pursued in recent years is working for the moment. Not everyone is happy, but it may be a model that Gulf states begin adopting, perhaps to their detriment. Perhaps not.

Michael Young

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The Horn of too many bulls

by Paul Cochrane
written by Paul Cochrane

One word sums up the Horn of Africa’s regional importance: geostrategic. Over the last two months, several developments have highlighted how intricately linked the Middle East is, and wants to be, with the countries on the other side of the Red Sea. There are the usual three suspects: business, politics and the “war on terror,” plus a wildcard, piracy.

The big business news is that Osama bin Laden’s brother, Tawfik, wants to build a $22 billion Africa-Arab bridge to link Djibouti with Yemen. The 28.5-kilometer project would span the narrowest point across the Red Sea, at the Bab al Mandab, “the Gate of Tears” — an appropriate name, especially given the situation in the vicinity and all the piracy off the Somali coast.

Indeed, piracy has dramatically increased since the Islamic Courts Union (ICU) was toppled by the US-backed Ethiopian invasion of Somalia in December 2006. Last year there were 31 attacks, and so far this year 23 attacks by Somali pirates on sea-going vessels, including the 47-day hijacking of a Russia bound icebreaker, the Svitzer Korsakov. A $1.6 million ransom was allegedly paid out.
Bin Laden’s Bridge, as it could be dubbed, will potentially bring more stability to the region and its sea routes — after all, an estimated 3.3 million barrels of oil are shipped through the Bab al Mandab every day. The bridge certainly intends to boost traffic between the two continents, and act as an entry point for pilgrims to Mecca. But the ongoing situation in Somalia presents concern for any parties involved in the troubled Horn, including Qatar.

This is the big international politics story: Ethiopia breaking diplomatic ties with Qatar over the emirate’s alleged funding of the al-Shebab movement in Somalia, the military wing of the ICU and a recent addition to the US State Department’s list of terrorist organizations.

Doha-based Al Jazeera’s sympathetic coverage of an anti-Ethiopian rebel group, the Ogaden National Liberation Front (ONLF), also rankled Addis Ababa, especially given Qatar’s diplomatic ties with Ethiopia’s other nemesis and ONLF supporter, Eritrea.

A week after the diplomatic spat — Doha denies any involvement with Al-Shebab — a US air strike killed the top leader of the movement, Aden Hashi Ayro.

Whether Qatar has any involvement with these groups or not, Doha is not the only Middle Eastern player in the mix, with a UN arms embargo monitoring group reporting in late 2006 that Egypt, Iran, Libya, Saudi Arabia, Syria, Yemen and Lebanon’s Hizbullah were all supporting warring factions in Somalia. The US meanwhile has a military base in Djibouti, 100 military advisors in Ethiopia, recently donated $97 million to Ethiopia in recognition of its “strategic importance,” and Special Forces are reportedly operating within Somalia. This melee thus includes countries on side with the US-led “war on terror,” seemingly on side with the “war on terror’, and those that are on the complete other side against the war on terror.

Somalia is Africa’s equivalent of Lebanon.

The irony of all this is that the activities of the US and its allies in the region have made the situation worse than before the ICU was overthrown. Ethiopia, for its own ends as well as Washington’s, has waged a brutal war on Somalia. Half the population of Mogadishu has fled, a humanitarian crisis is underway and Amnesty International last month accused Ethiopian troops of widespread atrocities against Somalis, including slitting people’s throats, gouging out eyes and gang-raping women. Somalia’s disintegration is also generating further support for Islamic movements.

Furthermore, Somalia’s regression back to warlord-run days under the Transitional Federal Government (TFG) is bad for regional business.
According to the Mombasa-based Seafarers’ Assistance Programme, most of the Somali pirates are linked to the TFG, which has little control of the country and its territorial waters.  In the six months the ICU were in power, piracy on the Somali high seas was reportedly down, but from 2007 the distance vessels were advised to keep away from the coast was increased from 50 nautical miles to 200. Although that is not even enough, with a Spanish luxury yacht hijacked in international waters in early April, the second European vessel to be overrun by pirates in a fortnight.

For such an important shipping route it would be to the advantage of most players involved, and certainly for the free flow of goods and energy, to better police the area around the Gate of Tears.

One solution is to put African Union troops on the ground in Somalia instead of the 8,000 Ethiopians currently there, as called for in UN Resolution 1725, and international monitoring off the coast to ward off illegal fishing as well as piracy.
Construction of Bin Laden’s Bridge would certainly need plenty of security, and a more stable Horn would help this African theater of the “war on terror” from becoming yet another disasterous tragedy with far-reaching geostrategic implications.

PAUL COCHRANE is a Beirut-based freelance journalist. He was recently in Ethiopia.

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The ‘Axis’ taking Bush for a spin

by Claude Salhani
written by Claude Salhani

By now we are well familiar with what President George W. Bush labeled the new “Axis of Evil” — communist North Korea, socialist-leaning (Baathist) Syria and Islamist Iran. Each one has expansionist ambitions of varying degrees, though some are more grandiose in aspiration than others. North Korea and Iran want to dominate the world, while Syria will settle for considerably less.

The North Koreans want to turn the world into a vast Godless worker’s paradise, similar to the Stalinist Garden of Eden that is the northern part of the Korean peninsula — only perhaps one where the comrades aren’t starving half the time and trying to escape to South Korea or even to China the other half. However, Kim Jong-il, the megalomaniacal leader of the North, would probably be satisfied if he could occupy the South, thus reuniting the two Koreas and in the process double his clout, his ego and his people’s misery.

The ruling mullahs governing the Islamic Republic of Iran have somewhat of a similar philosophy: they too would like to dominate the world. However, the main difference with the non-believers in North Korea is that the Iranians want to impose their religious diktat on the rest of the world. The other major difference between the North Koreans and the Iranians is that the latter have been slightly more successful in exporting their revolution. The North Korean expansionist desire was stopped at the 38th parallel; in contrast, Iran’s mullahs have made inroads in the Gaza Strip by supplying Hamas with all the guns and money it needs to disrupt Bush’s efforts at peace-making in the Holy Land.

And in Lebanon, Iran’s and Syria’s proxy militia, Hezbollah, has demonstrated that it can, if it so wishes, take over the country by military force, or in any case, at least great swaths of the country. Of course whether the Shiite militia can then retain the territory it occupies is a completely different story. This Hezbollah found out the hard way when it tried to go after the Druze in the Chouf.

As for the third spoke in the new “Axis of Evil”, Syria, its territorial ambitions are far more modest than those of either North Korea or Iran: Syria only wants what is rightfully hers, the Golan Heights, the strategic plateau overlooking the northern Galilee which was taken militarily by Israel in the 1967 War and remains under Israeli occupation to this day.

Oh yes, Syria wants Lebanon too.

And here’s where the story begins to get somewhat complicated (if it wasn’t already) due to the fact that a great many Lebanese are opposed to the idea of Syrian domination. The Bush administration supports the notion of a free and independent Lebanon and has invested in backing Fouad Siniora’s government and the March 14 Movement. So the defeat of pro-government forces by the Syrian and Iranian-backed Hezbollah in early May in the fiercest exchange of internal violence Lebanon has experienced since the end of the civil war in 1990 can be seen as a defeat for Bush’s democracy spreading policy in the Middle East.

Hezbollah’s attempted coup also frightened Sunni powerhouses such as Saudi Arabia and Egypt who rightfully perceived the action as an attempt by Tehran to extend its political power base and influence in the region. Hezbollah’s victory comes as a second slap across the face of the U.S. president from his Iranian and Syrian foes. The first blow came when Hamas took over Gaza.

This leaves the U.S. administration pondering what course of action it can take. Part of the conundrum facing the administration is amplified by the fact that it continues to refuse to engage either Syria or Iran in talks, while these two countries seem to be pulling all the strings in Lebanon today.

This is where President Bush’s new counter-axis-of-evil comes into play with the American president turning to his Arab allies for assistance.

Enter Saudi Arabia, Egypt and Jordan, three moderate Muslim nations who are getting nervous over Iran’s rising influence. The recent successes of the Islamic republic in the Gaza Strip and in Lebanon have revived fears particularly among the Saudis, prompting the Saudi king to assume greater responsibility in regional matters.

As one Saudi, who is well connected to the intelligence community in the desert kingdom, said to me when the fighting broke out in Beirut: “Don’t forget the critical Saudi role, which is now even more central than the role of the U.S. and France in the region!”

Saudi Arabia’s role in the Middle East will be all that more crucial as the November U.S. presidential elections approaches and American politicians become completely absorbed by domestic politics, turning a blind eye on the rest of the world.

Claude Salhani is editor of the Middle East Times

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Do as I say, not as I nuke

by John Dagge
written by John Dagge

The Nuclear Non-Proliferation Treaty (NPT) is under threat. We know this because the only country to have ever used nuclear weapons (twice) told us last month. The warning came at the end of a two-week meeting of the 106 NPT member nations in Geneva in early May. A statement from the five sanctioned nuclear powers — the United States, United Kingdom, Russia, France and China — laid responsibility for the threat of increased nuclear proliferation squarely on Iran and North Korea. Yet a quick look at the record shows those most hysterically calling for an international effort to ‘shore-up’ the NPT have long worked to undermine the world’s premier weapons control agreement — at least when it comes to their own obligations.

Although the 1968 Nuclear Non-Proliferation Treaty is generally understood in the West as giving the United States the right to decide who can and who can not have nuclear technology, the document’s exact wording is a little more complicated. At the heart of the agreement is a quid pro quo arrangement, one the West (primarily the US) has long failed to uphold. In return for forgoing nuclear weapons, nuclear power for civilian use is to be made available to all non-nuclear signatories. And yes, this does include Iran.

On top of this, under Article VI of the NPT, the five recognized nuclear states are obligated “to pursue negotiations in good faith on effective measures relating to cessation of the nuclear arms race at an early date and to nuclear disarmament, and on a treaty on general and complete disarmament under strict and effective international control.” This requirement was strengthened via a 1996 International Court of Justice ruling which unequivocally stated nuclear powers must disarm. It was further reinforced at the NPT Five-Year-Review in 2000 when delegations from 180 countries (including the US, then under Bill Clinton) agreed on a 13-step program to implement Article VI.

Yet this most essential element for a workable NPT has been delayed, ignored and outright breeched by Western powers for years. The Bush administration in particular has demonstrated a unique determination to ensure NPT obligations apply to everyone but the United States. This was clearly displayed in 2002 with the release of the US Nuclear Posture Review. In that document America reaffirms the ongoing role nuclear weapons will play indefinitely in her defense policy, outlines the research and development of a number of new tactical nuclear weapons such as bunker busting bombs and, for the first time, shifts the use of nuclear weapons from deterrence to first use, a radical departure in military policy which received little press attention. All of which effectively ends a US commitment to the NPT.

Moves by the United States to reduce its nuclear arsenal also need to be taken with a large grain of salt. In another little publicized but extreme shift from convention thinking on disarmament, the Bush administration has done away with the principle of irreversibility in terms of reducing its nuclear weapons stockpile. While the average person may understand disarmament to mean actually destroying your nuclear weapons, the legal eagles of the Bush administration have ruled this clause simply means putting them on standby. Under the 2002 Moscow Treaty — a key agreement the White House cites as evidence it takes its Article VI obligations seriously — the US is not required to destroy its weapons. Rather, they simply must not be “operationally deployed”, meaning a large number will be maintained in a “responsive force” capable of redeployment within weeks or months.

Furthermore, the NPT is only one of many overlapping pieces of legislation which work together to control the world’s most destructive weapons. Its main supporting pillar is the Comprehensive Test Ban Treaty, an agreement which prohibits nuclear test explosions (or any other) and one which America has steadfastly refused to ratify for more than 10 years. The other major piece of complementary legislation is the negotiation of a treaty banning the production of any further fissile material, the fuel for nuclear weapons. Again, the conclusion of such an agreement has been stymied by Washington. In November 2004, the UN Committee on Disarmament voted in favor of a verifiable fissile materials cut-off treaty. The result was 147 in favor and one against. No prizes for guessing who opposed. Likewise, US support for the nuclear programs of Pakistan, India and Israel makes its near daily hubris against Iran ridiculously hypocritical.

The US is right to assert the NPT is under threat. International Atomic Energy Agency director general Mohamed ElBaradei summed the treaty’s main challenges as follows: “We must abandon the unworkable notion that it is morally reprehensible for some countries to pursue weapons of mass destruction yet morally acceptable for others to rely on them for security and indeed to continue to refine their capacities and postulate plans for their use … We have come to a fork in the road: either there must be a demonstrated commitment to move toward nuclear disarmament, or we should resign ourselves to the fact that other countries will pursue a more dangerous parity through proliferation.”

John Dagge is a freelance journalist based in Syria.

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America reaps seeds it sows

by Riad Al-Khouri
written by Riad Al-Khouri

Political scientists, along with other specialists as well as laypersons, have spent the last seven years grappling with the implications for international relations of the attacks of 11 September 2001 and their aftermath. The impact of 9/11 around the world, and on the Middle East in particular, has been enormous. The effects on development, democracy, and human rights are vast, with sharp change and conflict increasingly characterizing Western relations with Muslim countries. As a subset of this phenomenon, ties between the Arab world and the West also shifted.

However, although 9/11 is a turning point, there is no consensus on its roots or implications. As an antidote to the sterile contention shrouding the event, the rigorous work of Dan Tschirgi (pronounced as if combining the two French words “cher” and “guy”), professor of political science at the American University of Cairo, provides sober analysis.

Turning Point puts into a proper context the implications of 9/11. Flying in the face of the puerile shortcuts that so many in the West have taken during the past few years, Tschirgi’s book includes original insightful cases of the global challenge of asymmetric warfare. Applying his theory of “Marginalized Violent Internal Conflict” to three cases, Tschirgi elucidates the roots of insurgency through the struggles of underdogs to preserve their identities in an unfriendly world. He demonstrates the dynamics through which the oppressed in modern times struggle against tyrannical states by looking at Mexico’s Zapatista conflict, the struggle of Egypt’s authorities against the Gamaa al-Islamiyya, and the Nigerian government’s fight against the Ogoni people in the Niger Delta. In doing so, he raises many issues related to the Middle East and American policy toward the area.

Tschirgi’s thesis is that 9/11 was not unique, but an understandable — though deplorable — reaction to Arab marginalization and Western threats to regional identity. As a corollary, he debunks the “exceptionalist” approach to the Arab world (the presumption that Western social science fails to fathom the Arabs). Tschirgi also suggests two broad policy recommendations: that the US has no duty to support Israeli expansionism, and that an American withdrawal from Iraq must come as early as possible.

With a new US administration looming, we may now be looking at a post-post-9/11 era. It has become one of the clichés of the current American presidential election campaign that the economic crisis has replaced the Iraq war as a main issue. In fact, the two are indirectly related. Just as sloppy corporate governance in the banking sector caused the subprime crisis, poor governance in Washington unleashed American hubris and greed, which lead into the Iraqi swamp.

Harmony within and among societies suffers because of a resurgence of fundamentalism and its antithetical aggression, Western or otherwise. All are losers in this situation. The danger raised by the terrorist threat is as real today as it was in September 2001 and indeed before. However, the American rampage in Iraq and elsewhere around the world is equally dangerous, and indeed interacts with real or imagined threats of terrorism in a vicious circle. The solution would thus seem to lie in the re-engineering of America to allow it to regain the moral high ground it occupied during parts of the 20th century.

This is clearly a tall order; in any case, Tschirgi’s balanced scholarly work does not delve into such issues, nor does he have final answers — no serious social scientist ever has. However, he sets the stage for policymakers or laypersons to address important questions rationally: Where are the US and the Arab world going from here? Have the major challenges changed? Are new priorities emerging? In this way, Turning Point generates healthy debate about policy alternatives for other scholars to build on — and policy players to ponder: McCain, Obama, and Hillary, please take note. At a time when dabblers too often dominate the discussion of contemporary world affairs, this thoughtful work from an established American scholar with decades of experience in the complexities he analyzes is refreshing.

In this grim new world, our duty is to engage peacefully with potential or actual adversaries. Modern technology means that war and other forms of physical violence have become luxuries we can no longer afford. For example, for the US to talk to Iran or Syria, instead of blustering and vituperating, is literally a question of world war or peace. The alternative is to refuse to listen to the other side, a crime of which the Middle East is as guilty as the West. In such mess, works of the caliber of Turning Point are welcome.

Riad al Khouri is a visiting scholar at the Carnegie Middle East Center, and Senior Fellow of the William Davidson Institute, University of Michigan.

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The generous virtue in vanity

by Paula Schmitt
written by Paula Schmitt

The amount of wealth in the Middle East is quite visible, and when it comes to individual wealth, it is more evident than practically anywhere in the world. It translates into a disproportionate number of people driving Hummers, smoking expensive cigars, having the largest aquarium, the largest shopping mall, the most expensive hotel, the tallest this, the longest that.

It is not without reason that Arabs are often associated with extravagance and bad taste. I once visited a house in Lebanon where the toilets feature faucets made of gold. Yet with so much wealth transformed into visible signs of itself, not much of it has been used to fight poverty, illiteracy and disease. In a study yet to be published, the Arab world is said to have at least 22% of its population living on less than a dollar a day. If we include the population living on less than $2, the percentage doubles. I myself come from Brazil, a country where poverty is a national shame, and where hunger is indefensible amidst so many gifts of nature — which brings me to a story about Ayrton Senna, the Brazilian Formula One driver.

Ayrton Senna was the perfect icon: beautiful, rich, successful, his whole persona helped advertise and sell many luxury goods and other products. Many in Brazil wanted to be Ayrton Senna, or possess something endorsed by him. Yes, humans emulate. His participation in ads raised the sale of many products, showing the power of mimetism, or the urge to imitate and thus be associated with.

But when Senna died in a tragic accident, Brazilians found out something else about him that until then few people knew: Senna was a philanthropist. A large chunk of his money was donated to fight poverty, promote education, help orphans. After his death, his sister decided to continue his silent work and created the Ayrton Senna Foundation. With visibility, and fanfare, the foundation grew exponentially and now helps many more people than when Senna was alive. That is what brings me to the following statement: Senna could have been an inspiration not only for the consumption of expensive watches, he could have made people emulate him in his goodness.

But there is a certain taboo about advertising one’s goodness. And in the Middle East people like to cite the hadith that says that the right hand should give while the left should not know it. The Koran, however, does not condemn publicity of one’s contributions. It encourages charity and alms giving several times, and only once does it say that giving in silence is better (“If you give alms openly, it is well, and if you hide it and give it to the poor, it is better for you”).

Yet, human beings are vain by nature. And by that same nature they like to emulate those they look up to. Why should one be proud of a gold watch, an expensive car, a luxury brand pair of shoes, and not of one’s goodness? Haven’t we by mistake inverted our values? Why is it that people seem to feel no qualms about showing off signs of wealth, amidst so many needy people, and at the same time keep mute about goodness? If Prophet Muhammad condemned showing off, even goodness, what would he have said about showing off money and extravagance?

I say give, and tell. Give the example. Inspire. Let us have the Ayrton Sennas make people want to be like them in everything — not only the gold watches, but in their kindness. Let the women who want to have Angelina Jolie’s lips and shoes imitate her in her generosity (Jolie is said to donate 1/3 of her money to charity. She had considered joining the UN as a refugee officer but realised she would help much more by just continuing to work in the movie industry and donating part of her money to the causes she believes in). Publicising charity is as inspiring as advertising one’s favourite brands, so why should we fail to do one while not hesitating in doing the other?

It is for that reason that I particularly praise Sheikh Mohammed Bin Rashid Al Maktoum and his campaign Dubai Cares. Instead of just fasting during the day, and compensating the hunger at night, Sheikh Mohammed Bin Rashid Al Maktoum had another of his ambitious ideas, this time helping poor children get an education. With TV ads that would compare the price of an expensive bag and how many kids could study with that amount of money, the campaign raised almost half a billion dollars which were at the end matched by Sheikh Al Maktoum, totalling just short of a billion.

Now that is a competition the world would love to see: who gives more. Giving, along with its publicity, is very inspiring. After Bill Gates donated $25.9 billion to charity, Warren Buffet, not to be outdone, beat Gates by pledging the donation of $37 billion.

Rochefoucauld was right when he said that “Virtue would not go to such lengths if vanity did not keep her company.” Knowing that humans are vain, and that in the age of spectacle exhibitionism is inevitable, we could only wish that the things that make us vain and proud also make the world a better place.

 
Paula schmitt is Middle East corrispondent for RFI and Rolling Stone Brazil

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Pharmaceuticals – An unsure prescription

by Executive Staff
written by Executive Staff
 
At a small pharmacy tucked into the Beirut neighborhood of Tariq al-Jdideh, a pharmacist recently had to deal with a rather vexing problem: he was running out of drugs. As an example he pointed to an empty box of Vastarel, a medication imported from France and used by patients with heart conditions, or who have suffered strokes, to protect their arteries and improve circulation. It is also a chronic use medication, meaning patients need to maintain a regular supply for a treatment that is long-term.

The pharmacist said the health of patients who come to him regularly for Vastarel would be threatened should they not have access to their medication, yet he’d been unable to order in new supplies of the drug from his wholesaler or the importer.

Instead, he had to go outside Beirut to buy the medication his patients needed at the pharmacy of a friend, who, running a larger operation than himself, carried more of the drug in stock — a segregate supply both pharmacists were depending on to last them through this drought. He added that a psychotropic drug called Leponex — used to treat schizophrenia and ordered directly, per prescription, from the importer — was completely unavailable on the market, forcing him to look in the Palestinian refugee camps for an illegally smuggled version to treat his patients.

“The importers either have the drugs in their warehouses and they are not selling them, or they are just not ordering more of the drugs in,” the pharmacist said. The dropping value of the US dollar has meant drug importers in Lebanon — where the local currency is pegged to the dollar — have had to pay more to bring in the drugs priced in euros or Swiss francs, which account for roughly 45% of the some 3,500 imported drugs sold in Lebanon.

Shrinking margins

The shelf price of drugs is controlled by the Ministry of Health, and the pharmacist remarked that the minister has stalled in signing a new set of price increases, the result being that the importers’ margins were being squeezed between the higher cost of their product and a static selling price.

Importers, however, have exclusive rights to each of the products they import — for example there is, by law, only one company allowed to bring Vastarel into the country — and as such, the pharmacist said importers were cutting supplies to the Lebanese market in an attempt to leverage the Minister of Health into signing the price increase.

The importers, though, deny this is the case. “There is not a single medicine missing in the market due to the prices,” said Armand Phares, president of the Lebanese Pharmaceutical Importers Association, a syndicate with 37 members constituting 90% of all pharmaceutical importers in Lebanon. To prove his point during an interview he had his assistant run a check, and within 15 minutes she replied that at the three standard pharmacies she’d called — in the neighborhoods of Gemmayze, Badaro and Verdun — Vasteral was on the shelf and available for sale.

As for Leponex, Phares explained the importer was suffering an “exceptional shortage of stock” — originating outside the country — but that the drug would be available again shortly.

The importers’ exclusive rights over a product, adds Phares, enable an “unbroken chain of traceability” from the manufacturer to the consumer, ensuring quality control, though “parallel imports” of products into Lebanon make that exclusivity actually not so exclusive, meaning importers cannot leverage their market positions.

This does not mean all is well in the pharmaceutical business these days, said Phares, noting while there is a system to cope with the rapid currency fluctuations of late, the problem, according to him, is that the system is not being applied properly.

The Lebanese government’s Pricing Decision #306/1 from June 3, 2005, lays out the pricing policy like this: when a foreign manufacturer gets registered to export a drug to Lebanon, the Ministry of Health dictates that the price the manufacturer charges the Lebanese importer must be lower than (1) the ex-factory price in the country of origin, (2) the import price of the same brand in seven selected Middle Eastern countries, (3) the median ex-factory price in seven selected European countries, and (4) the import price of similar products already available in Lebanon.

Once the product is in Lebanon, the ministry also dictates the markup each party can tack onto the product on its way to the consumer, with the importers adding 8-10% when they sell it to pharmacist, who then tags on 24-30% when he puts it on his shelf, with margins decreasing percentage-wise the more expensive the drugs are.

Currencies fluctuate, however, and if, over a two-week period, the average exchange rate between the Lebanese Lira and the currency in which a pharmaceutical is imported (i.e. euro or CHF) moves up or down by more than 3%, the Minister of Health is supposed to apply this change — called the ‘price indicator’ — to the shelf price of the product.

Where the problem starts

Phares said the problem comes from a tendency the Minister of Health has shown to sign price decreases immediately into effect while delaying for weeks signing price increases, resulting in reduced profits for importers when they need to spend more to replace the same stock of drugs coming from Europe, for example, while also not being able to charge more in selling to the pharmacies.

Delayed price rises also have a tendency to spur pharmacies to try and buy more than their usual order of product, said Phares, since pharmacists know that if a certain product will cost more tomorrow, if they can buy today they will make profit on the difference, with the more unscrupulous pharmacists able to increase profits even more by withholding selling a product in anticipation of a price increase.

Even given this situation, importers must still supply the market normally, said Phares, although “normally doesn’t mean stupidly.”

Saleh Dbeibo, president of the Order of Pharmacists in Lebanon, which oversees the 1,900 or so pharmacies in the country, remarked that what happens in situations of delayed price increases is that “importers will ration the distribution, and then there will be some deficiency in the market,” and when this happens smaller pharmacies are the first to feel the impact because they carry very little in reserve stock.

“Whenever they sell an item, they directly buy another one, so a rationing period would be harmful for them and they feel it quickly. But big pharmacies that have a bigger stock and capital, they keep going,” said Dbeibo, adding that “… in this period you will lose your client if you don’t secure his medication.”

Dbeibo notes that a very small number of importers may even stop distribution altogether, and although this is illegal, both he and Phares pointed out that, since it is exceedingly difficult to definitively show where along the supply chain the drugs are being withheld, charges are almost never brought to trial. Both men also agree that although at times there may be less quantities of medications on the shelves, “there was no period when people couldn’t find their medicine [somewhere],” according to Dbeibo.

To put the issue in context, the annual imported value of pharmaceuticals arriving to Lebanon is some $425 million, translating into $650 million in pharmaceutical sales in the country, though about 10% of the market is considered public sector, which buys at less than market prices, and another 20% is reimbursed in some form or another by government and agencies.

Although the Minister of Health was out of the country and unavailable for comment, Dr. Walid Amar, Director General of the Ministry of Health, was able to take EXECUTIVE’s questions. He stated that the ministry is well aware of the situation and at no time have consumers and patients in Lebanon been affected or suffered a loss of supply. The minister signs the price decreases immediately, said Amar, because it is beneficial for the citizens of Lebanon, while he delays on the price increases in order to see if there might be some further change in the currency exchange market.

Tackling the costs of drugs

“I’m sure this would affect negatively the importer … but they seem to be capable to afford this situation for a short few days — the time that the market adapts to the rapid change,” Amar averred. He also pointed out that while imports from Europe have become more expensive, those from the US and other dollar-linked countries have remained stable, questioning why importers have not used this as an incentive “to push them to seek other sources for drugs.”

In illuminating the impact of the high cost of pharmaceuticals on some of the less fortunate Lebanese, Amar pointed out that the Lebanese government, through the YMCA, currently supports the chronic medication cost for 140,000 citizens, to the tune of US$5 million dollars ($3 million from government, $2 million from NGOs), while also underwriting $35 million worth of medications for 12,000 critically ill Lebanese, suffering with diseases such as cancer, multiple sclerosis or major schizophrenia.

Thus, while the margins of importers and supplies of drugs in pharmacies might be paramount to operations in the pharmaceutical industry, the most tangible impact of the rising cost of pharmaceuticals in Lebanon can be found in the people these businesses are meant to serve — the Lebanese who have to pay for and use these drugs in order to live, which perhaps, should be the motivation for all parties involved in the business.

 

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World economics on the Sinai

by Norbert Schiller
written by Norbert Schiller

The theme of this year’s World Economic Forum – Middle East, which just ended in the Egyptian Red Sea resort of Sharm el-Sheikh, was “Learning from the Future.” Prominent business leaders, media representatives, educators, and politicians, including 12 world leaders, descended on the tip of the Sinai to engage in three days of meetings, lectures, and workshops.

The Forum, founded by Prof. Klaus Schwab in 1971 was established to gather influential leaders together for the sole purpose of improving the state of the world “by engaging leaders in partnerships to shape global, regional and industry agendas.” The need for the Economic World Forum seems more relevant today than when it was first established in the early 1970s.

When one thinks about it, the Sinai Peninsula is the perfect venue to host such a forum. According to Judaeo-Christian tradition, it was here that Moses received the Ten Commandments. Whether one believes in the higher authority from whence these laws came or not, most societies are partly governed by them.

In many ways, the Sinai Peninsula is more than just a venue for biblical miracles; its stunning beauty spans from its high mountains to below the surface of the sea. Many  plants and animals inhabiting this peninsula are only found here. Shortly after the peace deal was signed between Israel and Egypt, a group of environmentalists had their own agenda for the Sinai: they sent out a petition to make that the entire peninsula would be turned into a world protectorate. In the end, only seven areas were given protectorate status, notably Ras Mohammed at the very tip of Sinai and Saint Catherine’s heritage area.

While driving down to the Forum I couldn’t help but reflect back to the first time I visited Sinai in the early 1980s. At that time, the Israelis had already given most of the peninsula back to the Egyptians, but the signs of the former enemies’ turbulent relationship could be seen everywhere. Gutted half- buried tanks and transport vehicles littered the sand on either side of the road; weathered signs written in Hebrew flapped in the wind and markers that warned people of mines dotted the landscape. The only people who ventured into the Sinai were divers in search of untapped reefs and mountaineers with their sights on another summit.

Sinai has come a long way, as now it is one of the top destinations in the world for tourists and every two years plays host to the World Economic Forum – Middle East.

From the first day, the Forum looked like it was going to be consumed with the Israeli-Palestinian peace process. Fresh from witnessing the 60th anniversary celebrations in Israel, U.S. President George Bush immediately went on the offensive, praising countries around the world like Poland, the Philippines, Korea, Chile and Indonesia for their ability to overcome tyrannical regimes and become thriving democracies. He also praised the achievements of many countries in the Middle East for opening up their markets, practicing free trade, and giving women an equal voice.

But his overall message was that there was still much that needed to be done, particularly when it came to political reforms and giving the voices of opposition the freedom to speak. For the most part, the first half of his speech was received positively. However, when he went on to address the Palestinian-Israeli peace process and terrorism there was nothing new, just more of the same well-rehearsed rhetoric he has repeated so many times in the past. He made his usual reference to the leaderships of both Iran and Syria referring to them as “spoilers”. Both Egypt’s President Hosni Mubarak and King Abdullah of Jordan echoed Bush’s call for a comprehensive peace deal leading me to believe this would be the overriding theme of the forum.

However, away from the big political speeches the forum was taking on another dimension, that of the lessons which can be learned from the future. It was refreshing to hear discussions on what to do about the rising cost of oil and the effects it has on the region and beyond. Also, there was this underlining current of wanting change and looking to renewable clean energy as an alternative in the near future. Even business representatives from the Gulf countries, whose booming economies are fueled by the high cost of energy, were positive in their approach to seeking out alternative, cleaner sources of energy.

Another topic that dominated many of the discussions was education. The idea that still too many young are left behind due to lack of access to decent schooling was at the forefront of many of the seminars. And the notion that both business leaders and politicians must work together to insure that the skills they learn today will match the jobs that will be needed in the future was one of the positive conclusions of the Forum. In the closing session, a number of students were brought in to sit on the panel with the big guns including Schwab, Egyptian Prime Minister Ahmed Nazif, Wikipedia founder Jimmy Wales, and female Member of the Japanese House of Representatives Yuriko Koike. The move to include students with such high-profile leaders was a sign of the changing times and the pressing need to listen to what the next generation has to say.
During the closing session Schwab made sure to include the entire panel in the discussion. When he asked Amira Abdel-Aziz, a masters student at Cairo University, to comment she turned to her own Prime Minister and said, “The relationship between government and people has to change … We have to look at the people as the highest authority.”

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

 

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