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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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Society

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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The Buzz

Retail – Kidsville comes to town

by Executive Staff
written by Executive Staff

These days, while driving north of Beirut on the highway towards Jounieh and Byblos, one encounters a big, blue structure on the side of the road, on the exact spot where the ABC store used to be. Written on the outside, in lettering so bold that one could easily overlook the department store’s logo, it proclaims “Kidsville — the largest kingdom just for kids!

” Behind the blue cover is ABC Dbayye’s transmogrification from an ugly duckling into a pretty swan.

When the Lebanese retail company was faced with the fact that its oldest store was showing the wear and tear of long years in service and was in dire need of an overhaul, it had two alternatives: tearing down and re-building from scratch or renovating while keeping the store running.

As Ron Fadel, Vice President Leasing at ABC, explained, “we could not close the whole store for a year of renovation,” and thus only the second option was a viable one. The first part to be redone was the basement, which — re-invented as “Kidsville” — was opened again to the public in March 2008. Currently, both second and third floors are closed, and once they are re-opened in October of this year, the first and ground floors follow suit. Fadel expects all works to have been completed “by the end of 2009, beginning of 2010.”

The Kidsville concept, combining a plethora of retail aspects for children – clothing, shoes, jewelry, school supplies, toys, and even a child optician — in one space, is “the first of its kind in the region,” according to Fadel. Initially, he said, “we started with a much smaller Kids Wear section. But we soon felt, talking to potential talents, that there was a possibility to make a landmark for children in Lebanon and the region.”

Now, the children’s section covers the whole ground floor, totaling 8,000 square meters, and hosts 100 different brands, aiming to “offer everything that a Lebanese can currently have on the market.” Apart from apparel and school supplies, ABC is also in talks with local partners to open a children’s bookstore in Kidsville.

ABC, in its re-modeling of the Dbayye store, is consciously sticking to its roots as a department store, being open for the mall concept — many different stores under one roof — but trying to maintain as much of the old-style concept of grouping merchandise by type and not brand. As Fadel pointed out, this concept’s roots are not just in the European-style department stores like Galeries Lafayette, Harrod’s, and KaDeWe, but also in the region’s own historical retail space, the suq, where sellers of like wares — the coppersmiths, the carpenters, the spice salesmen — were, and are, always found together.

This is also observable in the ABC Ashrafieh Mall in Beirut, in which the company’s own department store occupies a major part. The concept seems to have found a positive resonance abroad, as ABC is getting offers to open up its trademark department stores in malls throughout the region and, indeed, just inaugurated its first venture abroad — a 4,200 square meter department store inside a mall in Amman, Jordan.

Asked about the future of malls and the current discussion about a time when the region will be “malled out”, Fadel answered that “It depends on the customer. Some want to go to a specific brand, to be in a specific brand environment. Others want the opposite — to be in an environment where they have the choice of many brands for the same goods. Both approaches are working. Both are here and will stay.”

ABC’s own plans echo those of many Lebanese businesses: regional expansion is on the drafting boards. Having weathered the last years of war and political crisis, during which the company has, nevertheless, managed to increase its revenues, the current focus is on the renovation of the Dbayye store, which will see its size almost double from 18,000 to 32,000 square meters, but the sights are already set further a field.

According to Fadel, the primary target area is the Levant — Lebanon, Syria, Jordan — but in five to ten years “ABC could be a company with several malls and department stores in more than three countries.”

 

 

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Editorial

Seven times destroyed, seven times rebuilt

by Yasser Akkaoui
written by Yasser Akkaoui

Last month’s so-called election of a Lebanese President must have seemed to international onlookers an event drenched in degradation, an example of both how low Lebanon’s politicians have sunk and allowed themselves to be manipulated by those who claimed to be their friends — and those the politicians vowed to fight because they sought to destroy Lebanon’s national integrity and kill its leaders.

A more intriguing question begs what actually happened in Doha between the power broking Qataris and Saudis? We have heard the rumors of the night flights in private jets to hammer out a regional accord, but what is certain is that a deal was made. We don’t know the details but the result was that our MPs, like chastised schoolboys, were reduced to obediently writing a name on slip of paper and casting it into the ballot box under the watchful star of the head monitors of the international top table.

Lebanon will bounce back, it always does. Already the tourism ministry is bullish about how many visitors will jet into Beirut the summer season — though we should be satisfied if we get half the 1.6 million visitors predicted to stroll, shop and eat in the recently liberated BCD — and the Beirut Stock Exchange rattled into action even as the tents in Downtown were being dismantled.

Meanwhile, across the Middle East, Iranian leader Mahmoud Ahmadinajad, one of the players that helped shape Lebanon’s shameful sell-out, is sitting pretty after this latest round of real-life Risk. In four years his economic “policy” has been shaped around the twin-pronged approach of insulting the US and the West, hinting at apocalyptic conflict and raising the price of crude oil. It is a rough-and-ready economic policy but one that has seen Iran once again cast as the world’s most menacing nation and its GDP rocket to $300 billion from $123 billion in 2003. There is little sophisticated economics: No labor economics, no sustainable development initiatives, just posturing and revenues.

Has this hurt his enemies? Not as much as you would think. Yes, the major economies are feeling the pinch but the US government in particular is using the illusion of an Iranian threat to secure vital research and development funding for alternative energy sources. Preparing for the next revolution, courtesy of a revolutionary. It makes you think.

But back to Beirut — sept fois détruite et sept fois reconstruite, she is older than all of us and will still be here when we are gone. Beirut will endure. We just hope the powerbrokers of the region will let us show the region what we can do and make our capital proud of our achievements, as much as we are proud of hers.

Yasser Akkaoui, Editor-in-chief

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Society

Environment – Crude without a culprit

by Executive Staff
written by Executive Staff
 
Sometime during the evening of Saturday, March 22, pipes from the Holcim cement factory in Chekka began leaking oil into the Mediterranean. Between one and two tons of oil entered the sea in the industrial area of Koura, just south of Tripoli. Holcim teams worked through the Easter holiday to clean the spill, and by Monday morning, the beach and the sea that were immediately contaminated in Chekka was cleaned.

Holcim, the NGO IndyAct and local residents all agree on the chronology of the oil spill and subsequent cleaning in Chekka. Yet that same weekend, residents of Anfeh, a fishing village a few kilometers north of Chekka, discovered a huge amount of oil had spilled onto their beaches, only two months after local teams with international support finished cleaning the remains of the 2006 War’s oil spill. Well over a month has passed, the beaches of Anfeh remain covered in black oil and Holcim, IndyAct, locals and the Lebanese government fight a protracted battle to identify the polluter and hold him responsible for cleaning costs.

Dana Obeid, a member of IndyAct, said that the organization became aware of the oil spill over the Easter weekend, and went to Anfeh to assess the damage on the following Tuesday. According to Obeid, IndyAct found that residents who live in the immediate vicinity of the beach were forced to leave their homes — sometimes for as long as five or six days — to avoid the overwhelming smell, made stronger by spring winds. Fishermen were unable to take their boats into the waters for up to two weeks. The large Phoenician walls built into a small cliff overlooking the ocean were threatened by the oil. The public beach was rendered unusable.

Polluting the economy

The village depends largely on the sea for its income and thus is in a difficult position as the summer season begins. Faysal Touma, a local fisherman, said the damage was worse than what the village saw after the July War. “Here we fish in shallow waters, and these were the areas most affected.” Another local fisherman, Bassam Fares, agreed. “The boury and crabs that used to flourish here have almost completely disappeared. Restaurants that used to call and order fish in the morning know that we have nothing and have stopped calling.”

The oil spill could not have come at a worse time for fishermen. “We still don’t know the full effect of the damage because spawning season begins this month. We won’t know how much the oil spill has affected fishing until we see how many eggs hatch this year, and then how that will affect next year’s spawn,” Touma said.

The strong spring tides have also pushed layers upon layers of debris onto the beach, making the area contaminated almost a meter thick in some places. Finally, as the days get warmer, the sun is melting the oil that had filled the crevices in the rocks along the coastline and dried on the rocky beach, meaning that it is now creeping back into the sea.
 

 
The town’s proximity to the Holcim factory and the winds that push the tide north immediately led IndyAct to see a link between the Chekka accident and the damage in Anfeh. Obeid said that IndyAct was in contact with Holcim the same day they went to survey the incident, but that the company immediately denied responsibility for the Anfeh spill and said that their responsibility had ended once the Chekka cleanup had been completed.

Issam Salameh, communications spokesperson of Holcim in Lebanon, maintains that it would have been impossible for the Holcim oil to reach Anfeh, because of the quick and “vigilant” response of Holcim teams as soon as the leak began.

“We began cleaning immediately when we saw the leak on Saturday, and we monitored the leak until everything was clean. If the fuel had spread, we would have noticed it and cleaned it immediately,” he said, noting Holcim’s interest in recovering as much oil as possible, as the leaked fuel is filtered directly back into the factory’s systems for continued use.

Salameh said although 200 to 400 square meters of water were covered by the oil, the environmental damage was limited. “Oil does not dissolve in water, and when it first enters water, it floats on the surface, so it never actually mixes with the water.”

Over the course of the cleanup, Holcim determined high temperatures caused quick melting of large amounts of ice, overloading the pipes in the factory and causing the leak. Salameh said Holcim is examining the cause of the leak in more detail in order to take corrective action, which should be in place within the year.

As the beaches of Anfeh sat black, the story gained press coverage and the attention of the government. A joint government committee from the Ministries of Environment and Transport visited Anfeh, taking fuel samples along the beach and the Holcim plant to determine if the two samples match, which should determine definitively whether the oil was Holcim’s.

No one held responsible

More than a month has passed since the sampling and no results have been announced yet. A Ministry of Environment official said it is normal that the identification process is long, as the matching process, known as fingerprinting, is quite complex. He said he hoped to have results within the next several weeks, but did not seem urgently concerned about the environmental damage.

“This area was hit very hard by the oil spill during the July War,” he said. “Because the cleaning was only finished two months ago, the environmental damage was already done.”

The ministry also stressed that entities other than Holcim may have caused the spill. The official said “eyewitnesses reported seeing an industrial tanker off the coast of Anfeh that weekend. This tanker may also have leaked fuel, and the two oil spills could be a simple coincidence.” This ‘other tanker’, however, remains unidentified. The ministry source said the government would only begin to look for the mystery vessel if the tests showed that the oil in Anfeh did not originate at the Holcim factory.

Obeid, however, noted that the chances of two factories in the same region having an oil spill of similar amounts in such close proximity at the same time are slim. She also pointed to the fact that the Holcim factories have had similar accidents causing oil spills twice in the last six years.

Once the results of the government study are announced, the responsible party will bear the costs of cleaning the Anfeh beach. Confident the oil did not originate from Holcim’s factories, Salameh said his company had cooperated fully with investigators and would clean the beach if ordered to by the ministry.

The cleaning process will, however, be labor-intensive. The Anfeh beach is very rocky, which means that cleaning efforts will have to include manual scrubbing of rocks before high-pressure water hoses can be used. Moreover, the affected stretch of coast is surrounded by homes, which will impair access to the beach. Tony Chamoun, the director of the PROMAR company that cleaned the Anfeh beaches following the July War, estimates that cleaning would take between 30 and 45 days and would cost at least $200,000.

The Anfeh spill reveals bigger problems in Lebanon’s environmental laws, specifically in the Koura region. As Habib Maalouf of the Lebanese Environmental Party said, “There is always a high risk of environmental damage in this region because of the many ports and factories.” Yet despite this ever-present risk, the government has no strategy in place to deal with oil spills, instead dealing with cases on an ad hoc basis.

The Ministry of the Environment defended this strategy, saying flexibility made it easier to respond appropriately to individual incidents and enforce laws requiring polluters pay for environmental damage they cause. Yet Maalouf said this legal principle is poorly enforced and leads to poor clean up of environmental damage.

IndyAct is calling for the beach to be cleaned immediately and for Holcim to pay compensation to the local fishermen. But as Holcim and IndyAct await the results of the government’s tests, local residents are anxious for action.

“We want to be able to use our beach. We want to be able to go back to work. We want someone to be held responsible, and we want to make sure that this won’t happen again,” Touma said. “People keep coming here to take pictures, to talk to us and to take samples, but when is anyone finally going to do something?”
 

 

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Lebanon

Bank stability – Strongholds of commerce

by Executive Staff
written by Executive Staff

In recent years, Lebanon’s banking sector has played a pivotal role in supporting local economy. In spite of repetitive security crises and heightened tensions, the financial industry has been able to navigate through tricky waters — rendered uncertain by Lebanon’s political situation — while at the same time contributing to the resilience of the economy.

“The banking sector assets are larger than the actual Lebanese economy. In most countries, deposits amount to once or twice the national income, while in Lebanon, it is as much as three times,” said economist Marwan Iskandar. Commercial banks’ assets hover at $85.1 billion, while the GDP is only $24 billion. The economist attributes this unusual situation to the large number of expatriates — estimated at about 40% of the total population — making yearly transfers to their families in Lebanon.

Iskandar believes this year’s remittances have reached as much as $7 billion. “This figure actually exceeds the central bank’s last official figures, as it includes the further wave of emigration Lebanon has faced in the last two years, the undeclared cash brought in by Lebanese into their home country as well as the riches witnessed in the Gulf, where many Lebanese are residing. One has to also to include in the estimates Iran’s aid to Hizbullah,” he underlined. Iskandar also included the steady aid flow received by Lebanon from Paris III as an important factor contributing to Lebanese resilience, with inflows estimated at about $1.5 billion last year only.

In the opinion of Nassib Ghobril, head economist at Bank Byblos, Lebanese commercial banks have also contributed to the stability of exchange rate, a cornerstone of the Lebanese economic resilience. “To stabilize the Lebanese exchange rate, the Banque du Liban (Central Bank) has relied on resources constituted by deposits of commercial banks, which are bound by the law to place with the BDL 50% of their reserves in foreign currency and 25% in Lebanese pounds, both amounting to $20.5 billion,” Ghobril pointed out.
Lebanese commercial banks have supported the economy by purchasing a significant part of the country’s public debt. When in the 1990s commercial banks initially subscribed to Treasury Bills issued by the BDL, they were primarily concerned with Lebanon’s economic stability. “By issuing certificates of deposits with long maturities on numerous occasions, and more particularly during phases of political instability such as the assassination of prime minister Rafik Hariri, banks have relieved pressures on the Lebanese pound and attracted capital,” Ghobril said.

Multiple approaches

However, the approach of banks towards public debt banks has been far from monolithic. While some banks have been reluctant to subscribe to new debt emissions, others have simply renewed subscription. A third category of banks still adopts an aggressive stance and purchases government bonds. As Ghobril highlighted, “Commercial banks would naturally like to see debt to GDP ratios decline but this can only be achieved by implementing the reforms envisioned by the Paris III conference, an impossible exercise in the absence of political consensus.”

Lebanon’s donors’ implicit guarantee that they will support the Land of the Cedars in difficult time has helped to alleviate some of tension on the local level. Lebanese investors are also dedicated to their banking sector and have proven numerous times that they will not exit the market at the first shock, as has been the case in some South American countries. “The internal debt does not really represent a real risk for banks as the central bank can always turn to printing money, although it comes with an inflationary price,” Iskandar explained.

Regardless of the internal debt’s weight on Lebanese banks, their expansion abroad has positively affected the BDL’s resources, helping its deposits to steadily grow, and promoted investors’ confidence. This has reflected indirectly on the flow of remittances into the country “as senders feel assured their transfers will not witness any significant erosion in value,” declared Ghobril. Most Lebanese banks have followed an aggressive expansion strategy. “Seven of the ten largest Lebanese institutions have set up shop in Syria, while others have opened in Jordan, Egypt, Sudan, Algeria, and Saudi Arabia,” Iskandar said.

Iskandar also observed that about 30% revenues of the two largest banks — Audi and BLOM — stem from outside Lebanon, as featured on their balance sheets. “The sector has established its competence on the regional level and been able to maintain its credibility despite the local dire situation,” Iskandar underlined, adding however that growth of the sector is lower than what is hinted by indicators if one removes accumulation of interest. “Another significant indicator showing relatively lower growth of the banking sector than what figures may boast lies in number of bank employees that has remained constant in the last few years,” he added. Ghobril argues, however, that falling interest rates in recent years have proven deposits are growing at a faster rate than interest accumulation.

Contrary to popular belief, commercial banks have continued extending loans to small and medium enterprises and the private sector in general, in spite of higher risks on the local market associated with political volatility. “Loans to the private sectors amounted to some $18.5 billion last year and credit growth has been partly fueled by rising competition among banks,” Ghobril emphasized.
As the largest Lebanese employer, the banking sector’s some 16,000 workforce also boasts higher salaries than other industries.

The resilience of the sector does not, however, necessarily imply that it operates independently from the rest of the economy. “On the contrary, the banking sector is exposed to all Lebanese industries and reaches into all classes of the local population,” highlighted Ghobril. Investor’s commitment to the industry has helped the sector maintain some of its buoyancy in addition to the BDL’s efforts.

“Lebanese banks have been able to stay away from the subprime crisis and avoid any significant losses,” Iskandar added. Ghobril believes that rules and policies adopted by the BDL have allowed commercial banks to maintain their credibility and stay in line with international regulations. “In addition, the Central Bank has protected its depositors and their funds as well as encouraged the consolidation of the sector, earning it the 41st place among developing countries on the IMF autonomous index,” Ghobril said.

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