Comment

The silent Right

by Peter Speetjens
written by Peter Speetjens

Politicians and media were quick to dismiss the recent elections in Iran as being undemocratic, and rightfully so, seeing the fact that the mullah-led regime carefully handpicked the candidates it thought suitable for the people to choose from. Not surprisingly, some 1,700 reformists were barred from taking part.

Seeing the overwhelming attention was given to the Iranian take on democracy, it is striking to see how little we heard about similar practices in other countries in the region. Take Egypt. With an eye on the upcoming municipal elections, the Mubarak regime thought it best to pre-select candidates. From a total of 10,000 political hopefuls mostly associated to the Muslim Brotherhood, only 60 were allowed to register, while some 700 were detained.

Ever since 1981, when the state of emergency was introduced, the Egyptian authorities routinely arrest political opponents, or prevent them from participating otherwise. Likewise, who has heard anything about the 2007 parliamentary elections in Jordan?

Nothing ever happens in Jordan, seems to be the credo among newsmakers, which remains a self-fulfilling prophecy, as long as journalists and editors fail to even scratch the kingdom’s seemingly tranquil surface. And yet, it’s common knowledge that it’s extremely difficult to found a political party in Jordan, while the electoral process is designed in such a way that the country’s tribal provinces keep the upper hand over the urban majority, which is predominantly of Palestinian descent.

According to global watchdog Human Rights Watch (HRW), the Jordanian elections were characterized by nothing less than “outright fraud”. HRW furthermore criticized restrictions on freedom of speech, public gatherings and the country’s NGO law. In response, the Jordanian government did not do itself any favors by stating that the reason for banning demonstrations was “to ensure the safety of participants.”

In its 2008 World Report, HRW went on to say that in 2007 “too many governments, including Jordan, Nigeria, Russia and Thailand, acted as if simply holding a vote is enough to prove a nation is democratic,” while “the US and Europe ignored evidence of manipulated elections, particularly when the results were favorable to their administration.”

The deafening silence regarding democracy and human rights in Iran, Syria and other ‘rogue states’ is all the more remarkable among the more conservative members of the international press corps, as they were the main cheerleaders of the US-led invasion of Iraq, proudly presenting it as the beginning of a democratic blossoming in the region. Skeptics of this rather rosy picture were swept aside by labeling them as “(extreme) leftists,” who have become “anti-

American”, ever since the free market model became the world’s dominant force. So, British author Nick Cohen argued in his book “What’s Left?” that the left had lost its soul. Once it mounted the barricades in defense of human rights and secularism, yet now it sides with countries such as Cuba and Venezuela, and Islamist groups like Hizbullah and Hamas. In their urge to be anti-American, anti-Western even, the left is ready to embrace anyone, so Cohen and many others argue.

Now, this is hardly the place to deal with such thorny issues once and for all, yet a few question marks must be raised. Firstly, it is hardly fair and frankly rather ridiculous to nullify criticism of American foreign policy by making a matter of anti-Americanism. True of not, the claim that the search for weapons of mass destruction was primarily an excuse to invade Iraq, has nothing to do with some kind of metaphysical hatred of all things American, which includes everything from freedom and democracy to Elvis Presley, Hollywood blockbusters and the Rocky Mountains.

Note that Israeli conservatives do exactly the same thing, when arguing that criticism of the Zionist state is nothing but a veiled form of anti-Semitism, i.e. a deep hatred of anything Jewish. Noam Chomsky argues that this type of reasoning stems directly from the lexicon of totalitarianism. Soviet dissidents were accused of hating their country, because of their criticism of state policies, as for the totalitarian mind “the State is identified with the country, its culture, and its people.”

Secondly, the fact that the left is, hesitantly, willing to engage with groups as Hamas, Hizbullah or the Muslim Brotherhood is not so much due to an abandoning of secular values, but born of a deep awareness that one cannot have it both ways.

One cannot force elections upon Gaza and then ignore the end result when some 80% of the population votes for a party not of your liking. One cannot criticize Syria and Iran for human rights violations without ever raising a finger regarding similar practices in countries that happen to be US allies. One cannot criticize people for somehow engaging Islamists, while Saudi Arabia is among the main US allies in the region. That has nothing to do freedom or democracy. That is just a matter of plain and simple hypocrisy.

Peter Speetjens is a Beirut-based journalist.

 

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Banking & Finance

Syria – Banked by Lebanon

by Executive Staff
written by Executive Staff
 
Dark, heavy storm clouds continue to linger over the heads of many bankers worldwide, troubled by the subprime market crisis, fraud, financial havens and the plunging dollar. Lebanese banks have weathered this fiscal hurricane so far, although dark clouds in the otherwise clear skies over Beirut are dampening the sector’s dynamism.

But while the West wakes up to yet another financial scandal and Beirut’s political impasse drags on, Lebanese banks in Syria have been having a field day since the sector was liberalized in 2001 and the Lebanese pin stripes moved into Damascus.

“Generally speaking all private banks have improved — improved assets, number of branches, liabilities, deposits and turnover — and all have made profit,” said Georges Sayegh, General Manager of Bank of Syria and Overseas, BLOM Bank’s Syrian arm.

Indeed, private banks accounted for over a third of all private sector deposits at the end of 2007, according to the Central Bank of Syria. This has surged from 2004, when the first private banks entered with a 4% share of deposits, and in private sector loans, from 3% in 2004 to 16% in 2007.

Lebanese banks are at the forefront of Syria’s fledgling private banking sector, with Bank Audi Syria, Banque BEMO Saudi-Fransi, Bank of Syria and Overseas (BSO), and Byblos Bank Syria already well established. They are to be joined by Fransabank, Banque Libano-Francaise and the Bank of Beirut.

“The banking sector looks nothing like it did four or even two years ago,” said Bassil Hamwi, Deputy Chairman and General Manager of Bank Audi Syria. “There is a lot more flexibility in the private sector, and we are just at the beginning.”

The sector has certainly come a long way since the decision to open it up was made, amid concerns over the motivation of private banks in a socialist economy.

“I had a role in drafting the law in 2000, and discussion at the table and in society was that private banks would come and take our money. There was not a clear understanding of banks or motivations, but this has improved, and banks’ motivation is more or less clear,” said Hamwi. “The environment is very conducive to banking, and it is increasingly so and the reason for so much interest.”

The initial teething problems common to all liberalizing economies were faced in the first few years of operations, between 2004 and 2006, while the Central Bank has completed 21 out of 30 steps of its financial reform plan.

“As we weren’t the first bank to have opened, the key obstacles were faced by the first entrants at the start, but gradually things are smoothing out, one due to the Central Bank governor being very open and that he listens,” said Semaan Bassil, Vice Chairman and General Manager of Byblos Bank. “Sometimes they study [laws and regulations] for too long, but do make decisions, although we’d like it faster.”
 

Branching out

All the Lebanese banks are rapidly rolling out their presence in Syria. Bank Audi Syria has 10 branches, BEMO 20 branches, and BSO 10 branches with 19 slated by year’s end and plans to double the number in the next five years. Byblos Bank Syria has six branches with plans for 20 in the next three years, Fransabank Syria will have two to three branches by the end of the third quarter, and Banque Libano-Francaise’s Bank Al-Sharq plans to have 12-13 branches by 2011.

Such rapid expansion is due to the country’s low banking penetration, with only one branch for 300,000 people, according to Hamwi. “A huge number have no access to banks, and don’t see them enough,” he said.

However, with Syria’s real estate market undergoing a boom, finding suitable locations is proving to be a problem. “It’s difficult to find adequate real estate and prices are quite unbelievable, more expensive than the seafront in Solidere in Beirut,” said Walid Raphael, Deputy General Manager of Banque Libano-Francaise.

Syria’s real estate boom is generating demand for mortgages though, with Byblos the first to offer such services last year, and other banks getting in on the act. Bank Audi Syria is to offer a housing loan within the next four months as a “show-case product.”

“There is huge pent-up demand for housing loans,” said Hamwi. Introducing mortgages has not been a straightforward process however.

“The challenge is not the type of services, but infrastructure,” said Bassil. “To get a mortgage you need to present a bill that the building was legal, but many build outside of regulations, so can’t present a clean bill. Potential borrowers also go to government agencies for paper work, and such bureaucrats have not faced such requests before, so infrastructure and mentality are going to change.”

Banks did not venture into retail banking at first, initially focusing on commercial banking, but that is changing as the sector has developed.

“Retail takes time, otherwise we could have had retail products from the first month, but a cookie cutter approach to meet a huge number of people is not an easy process,” said Hamwi.

The banking sector has, after all, started from a low base, with strong demand for all personal loans, as well as a low base in terms of average income, which is around $150 a month.

“We would be able to sell more loans if disposable income was higher and [there was] more transparency from companies. People in Syria often have a second or third job which they do not declare and thus cannot be easily taking into consideration these revenues versus the available consumer loans we are selling,” said Bassil.

Overly liquid

The challenges in ironing out bureaucracy and other related issues with banking services pale in comparison to the high liquidity of the banks due to the lack of a government debt market.

“Banks are flooded with deposits, but the problem is what to do with it. Some banks are even discouraging people from putting in deposits,” said Dr. Nabil Sukkar, Managing Director of the Syrian Consulting Bureau for Development and Investment.

The issue has become increasingly acute over the past year as private sector deposits with the Central Bank have surged, more than doubling in the case of certain banks. Bank Audi Syria’s deposits, for instance, were $42.96 million in December 2006, and $87.93 million by September 2007.

The Central Bank has repeatedly said over the past few years that it plans to issue treasury bills, but just like the stock market was intended to launch in the first quarter of 2008, no one has an idea when this will happen.

Banks do know what kind of return they would like to see on their deposits, with the interest rate currently set at 0% at the Central Bank.

“It is treated like a checking account,” said Hamwi. “We would like a government debt market that reflects sovereign risk. My guess is a minimum of 2.5% to 5%.” Sayegh at BSO suggested 3-4%.

“We need to have treasury bills and they know that,” said Bassil, referring to the Central Bank. “All depends on the market and interest rates. I’d be more cautious about setting the ideal rate, it depends on supply and demand at a specific time, and on the bank, whether it is more or less liquid, and this depends on the lending opportunities linked to foreign investments, economic and political prospects, as well as bureaucracy and red tape for channeling these investments.”

Banks also want the labor law to be more flexible, amendments made to leasing laws, the establishment of a central credit agency, and for foreign exchange laws to be altered for electronic cards.

“Constraints are in issuing electronic cards, as you can’t transfer funds abroad,” said Muhammed Khaled, Retail Marketing Manager at BSO. “It’s an issue for international Visa cards, only linked to transfer accounts, so you are limited to a minority of people that have funds.”

A further issue is the lack of an electronic banking regulator, with most banks using Lebanon’s Creditcard Services Company (CSC), which is on the state-run Commercial Bank of Syria’s network, the rival to the state-run Real Estate Bank network. There are currently some 250 ATMs in Syria, which could reach 500 to 600 by year’s end, according to Khaled. Lebanese banks are also facing pressing human resources issues.

“Lebanese banks face three challenges : one, the brain drain in Lebanon so fewer good people are available and we need the best to set up and manage branches; two, the cost of expatriates; and three, the psychological barrier for some of the highly qualified Lebanese to come and work in Syria,” said Bassil. “There is a high need for expertise, so the Gulf and Lebanon are competing, and the costs are high.”

Free Zones and Extreme Views

The scramble by Lebanese banks over the past few years to get licenses has been recently compounded by the government’s decision to close banks in Syria’s six free zones, which were opened prior to liberalizing the banking sector. Some other banks, such as SGBL, will have to close completely.

Others, such as Banque Libano-Francaise, which is in the final stages of receiving a license for its Bank Al-Sharq, will have to move operations, as will Fransabank, which finished its IPO in March heavily oversubscribed, offering 36% and raising $14 million.

Lebanese banks have been able to retain majority control despite Syria’s requirement that private banks are 51% Syrian owned, through Syrian investors already linked to the Lebanese mother bank. For instance, 10% of Fransabank Syria is in the hands of the Saade Group, and 5% with Ahmed Shehabi from Aleppo, said Nadim Moujaes, Deputy General Manger for Strategy and Development at Fransabank.

For Bank Al-Sharq, which is to offer a 20% IPO, “the signature holders are all shareholders in Banque Libano-Francaise, so we will be in control of this entity,” said Raphael. There is a draft law on the table, however, to increase foreign percentage ownership to 60%, as well as raise capital requirements to $100 million. But such an approach is putting off international banks from entering Syria.

“Go ask a European bank to give a percentage and they won’t accept, but the Lebanese will,” said Sayegh.

Bassil said the expected new high capital requirement may be a penalty for banks and shareholders. “Our French shareholders in the insurance venture, for example, said Syria needs more capital in the future as the economy picks up and the projects start taking place, but why today? From day one, not gradually, say in two to four years. Syria is still growing gradually, and so the challenge is not capital but the ability to deploy it in feasible projects,” he said.

Syria’s status as a ‘rogue state’ in the eyes of Washington is also having its effect on Lebanese and private banks, with bankers believing there is widespread aversion in the Western banking community to deal with Syria, and a reason no big players have entered.

Some banks in Europe have taken an “extreme view” in not dealing with Syria, said Hamwi, citing a leading German bank, while Bassil mentioned “global political issues.”

“I cannot call them major obstacles but there are some banks overseas, whether Arab or Western, that have refused to accept deposits from Syria. Also letters of credit,” said Bassil. “Some banks overseas don’t deal with Syria at all, and don’t want to touch Syria as it becomes a reputation issue — human rights and that they may support non-acceptable states or armed groups. So today the political pressure on Syria is not yet a major issue but could be a potential threat if things get increasingly difficult.”

For the time being, Lebanese banks are enjoying Syria’s clear skies while hoping regulatory issues will be sorted out and treasury bills will be offered sooner rather than later.

 

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Comment

Growing US-Syrian trade

by John Dagge
written by John Dagge

Strolling through Syria’s fashionable shopping districts, it is increasingly difficult to notice that the country is subject to a heavy raft of US sanctions. American icons like KFC, iPod, Ford and GAP are all increasingly available to a public hungry for foreign goods. A glance at the Syrian-US trade sheet only adds to the confusion. Bilateral trade between the two countries grew by 7% last year to hit $471.9 million, with American exports — targeted by sanctions — surging a massive 61% to $361.4 million.
 

Indeed, since George W. Bush became president, US exports to Syria have more than doubled. Over the same period, US imports from Syria — not banned under any sanctions regime — have fallen from $158.7 million in 2000 to $110.5 million in 2007. Syrian-US trade is also certain to be higher than official figures show, given that Syrian traders can easily source American goods through regional countries like Lebanon and Dubai.

The United State’s trade embargo becomes all the more questionable when US-Syrian trade volume is compared with that of Damascus’ high profile ally Iran, a relationship producing ever more angst among key regional and international players. For all the hype of the Syrian-

Iranian economic relationship, trade volume between Damascus and Tehran stood at just $200 million last year, less than half the volume of US-Syrian trade. Even US-

Iranian trade eclipsed the Damascus-Tehran trade volume, weighing in at $318.8 million, with the US importing around $173.2 million of goods from the Islamic Republic, only slightly less than Syria.

All this from an administration which holds isolating Syria as a main tenant of its Middle East policy. Not that it hasn’t tried. Since taking office Bush has unleashed a constant barrage of trade sanctions aimed at putting an economic choke on Damascus. The latest (and most personal) hit came in February when the Bush administration moved to freeze the assets of Rami Makhlouf, Syria’s highest profile businessman and cousin to President Bashar al-Assad.

The charges against Syria are well known. Damascus’ support for groups Washington deems terrorist organizations but which Damascus holds as national liberation movements — Hizbullah, Hamas and Islamic Jihad — has ensured its continued appearance on the State Department’s State Sponsors of Terrorism list. Damascus’ role in the latest Lebanese political deadlock is also drawing heavy fire, while her alleged pursuit of weapons of mass destruction and efforts to destabilize Iraq are obligatory footnotes to any White House press release concerning Syria.

Whatever one’s point of view regarding the validity of such charges, it is clear that economic sanctions have failed to produce any substantial change in Syria’s foreign policy. In Iraq, Palestine and Lebanon, the Syrian playbook remains the same. Furthermore, Washington has long admitted its economic embargo is not working. At a congressional subcommittee convened to discuss the effectiveness of the Syrian Accountability and Lebanese Sovereignty Restoration Act in early 2006, four panelists — including Ted Kattouf, former advisor to the US ambassador to Syria, and David Schenker, former adviser to Defense Secretary Donald Rumsfeld — were asked to rate on a one to ten scale the effectiveness of sanctions in changing Syrian behavior. The average answer was four.

Indeed, clear cases exist where sanctions are producing the opposite of their intended goals. The SyriaPol website, designed to measure Syrian attitudes towards governance, economic and democratic reform and the Syrian-

Israeli peace process, was blocked from view in Syria in 2006 — not by the Syrian government but by the American web hosting company which sold the site its domain name because it was asked not to conduct business with any Syrian individuals. The irony of a website dedicated to promoting democratic debate in Syria being blocked because of sanctions supposedly aimed at brining about such change is not lost on many.

Washington’s insistence on economic sanctions has also come at a time of unique possibility in Syria, with the country’s economic opening yielding numerous opportunities for low level engagement with Syria via the private sector. But instead of American businessmen engaging with their Syrian counterparts and, inevitably, explaining and personalizing the United States in a country rife with misconceptions regarding America, Iranian counterparts are taking their place. The role America’s private sector could be playing in creating common ground and shared interests between the US and Syria — groundwork that would no doubt be useful in resolving many of the region’s ills — has been wasted.

The Bush administration’s latest move — freezing the assets the country’s leading businessman Rami Makhlouf — only serves to muddy the waters. Makhlouf is extremely unlikely to have any business interests in the States; the owner of Syria’s largest mobile phone company Syriatel told a Reuter’s journalist he “did not have a penny” invested in America. All of which is known by the Bush administration. The latest measure is best explained as an attempt to cement a hostile US-Syrian relationship long after Bush and his band of brothers have rolled out of the White House. Salt the fields and poison the well on the way out. Unfortunately, it may well be one of the Bush presidency’s few successful moves.
 

John Dagge is a freelance journalist based in Damascus.

 

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Lebanon

Education – Still a lot to learn

by Executive Staff
written by Executive Staff
 
Lebanon is a country that puts a great deal of value on education, where the Lebanese take exceptional pride in their trilingual skills and their ability to adapt in any environment — irrefutable proof of the quality of their education.

However, despite being the second-largest item, after defense, on the national budget (11% in 2005), 96% primary school enrollment and 90% youth literacy rates, the public education sector in Lebanon is plagued by inequalities and high dropout rates, as much as 23% at the intermediate level according to a World Bank report.

High Dropout, Low Result
Most experts agree that the quality of education in Lebanon is not commensurate with the level of investment. Primary education completion rates in Lebanon are lower than in Jordan, Egypt, Algeria and Tunisia, countries with significantly lower GNI per capita.
Dropout rates are also disturbingly high. Between 2001 and 2006 enrollment in elementary public schools dropped by 12% and enrollment in the intermediate cycle dropped by 6% during the same period. During the 2003/2004 academic year, 19% of children dropped out at the elementary level, 23% at the intermediate level and a further 11% at the secondary level.
There is no tangible study on the reasons for students dropping out of school although many reasons may be attributable to it. On the side of pure economics, Lebanese public schools are not completely free, registration and books having to be paid for. In certain areas, especially rural, it may be more viable to employ the children rather than send them to school, which points to a disillusionment with public schooling in particular and a lack of awareness about education in general.
A representative from Rearden Educational, a regional firm that specializes in education consultancy, noted that parents take their children out of schools because they see more advantages to them working than continuing their education. “No awareness is made of the importance of education,” he said. “Sure, there will be short-term economic repercussions to losing a part of your potential workforce, but what they don’t see is that the long-term effects are more beneficial.”
Other experts agree. There is a general disenchantment with the future, they say, a lack of hope in general, prompting these students to seek work rather than continue their schooling.
Lebanon’s performance on the international assessment arena gives no cause for joy either. In international comparative tests of mathematics and science achievement (TIMMS), Lebanon was outperformed in science by Morocco, Egypt, Iran, and Jordan. In mathematics, its students performed well below the international average and, “when adjusted for level of income, significantly below expectations.”

An Inefficient, Inadequate Sector
The problems cannot be attributed to a lack of personnel, however. Indeed, there are too many teachers in Lebanon. A quick glance at the expenditure outlays in the education sector shows that 82% of the budget is used for salaries. In the last 30 years, the number of teachers has increased by 111% while the number of students has only increased by 25%. The education sector employs around 9% of the total labor force, which translates into a student/teacher ratio of 17:1 at the primary level and 8:1 at the secondary level, well above international averages.
Educational establishments are also inefficiently used, with almost a quarter of all schools having less than 100 students.
This inefficient use of resources can be traced straight back to the source. The Ministry of Education and Higher Education (MEHE) itself continues to operate as three separate sub-sectors – general, vocational and higher education – despite their official unification under one ministry in 2000. According to the World Bank, these directorates do not have an integrated vision or a strategic development plan, thus creating gaps and duplications in organizational design, and are manned by a “disproportionate number of unqualified, temporary, or contract staff.”

Who’s Teaching Whom What?
The public education system in Lebanon is creating a vicious circle. Most students attending public schools tend to come from the poorer, more disadvantaged sections of the population. A survey of the total number of general education schools by region in 2005/2006 shows that most public schools are located in the most economically disadvantaged areas of the North and the Bekaa.
Teaching the most disadvantaged segments of the population is an unqualified teaching force: 43% of permanent and 36% of contractual teachers have adequate academic diplomas in subject matters they teach. Hiring and retaining highly-qualified teachers is a challenge, especially in view the low salary base teachers receive (starting at around $560 for teachers with an undergraduate degree, even less for those with vocational training). This means that pretty much any teacher, given the opportunity to move into the private sector locally or in the Gulf countries where salaries tend to be a little higher, does so.
In addition, the Lebanese curriculum, last updated in 1999, does not conform to new standards of teaching that are currently being adopted in most countries in the region. Schools are not properly equipped to provide students with a modern education.
Of the 1,399 public schools in the country, 35% do not have computers and more than 50% have less than 10 computers. More than 96% of schools do not have LCD projectors, Internet availability or a website. The result is a graduating labor force unable to compete on the national job front, let alone the international scene. A sad state of affairs for a country once touted as a potential informatics and technological hub in the region, and for a section of the population that is already at the lower end of the scale.
“Lebanon is as far as can be from innovative teaching methods and technological teaching,” says Rearden. “Even if the material is physically there, which it is not, no one is trained, or receives the training, to use it.”

What to do?
In order to address these deficiencies in the Lebanese public education system, the ministry has formulated an Education Sector Reform Strategy Action Plan for 2007-2009 with the following objectives:

  • Ensure equitable access to education services for all students
  • Ensure a universal and better quality basic education for all
  • Enhance the efficiency, effectiveness and competence level of the teaching workforce
  • Develop and align curricula with global and ICT trends, job opportunities and labor requirements

What Lebanon can learn from the Singapore model

In the mid-1960s, Singapore, a tiny nation with four ethnic groups and devoid of natural resources, embarked on an educational reform program under the banner “Thinking Schools, Learning Nation”, with the aim to produce a competitive labor force able to compete in the global market and in industries increasingly relying on Information Technology. The main pillars of the program included:
– Decentralizing of the educational system to allow schools to reply to local needs
– Creative thinking rather than rote learning as a cornerstone of the educational system
– Attract and retain qualified personnel in educational institutions
– Massive introduction of computers and technology in the classroom
– Ability-based merit system allowing students to be streamlined into university, technical or vocational education based on their ability.
Although not without their critics, the results have been impressive: school dropout rates were down to 4% in secondary sections in the late 1990s from 19% twenty years before, and in primary schools to less than half the 11% of the 1980s; per capita income grew to almost $27,000 from $530 in 1965. And to top it all off, Singapore has consistently ranked highest in international assessment tests since 1995.

This plan seeks to enforce the law on compulsory education at the intermediate level, provide at-risk students with the needed support, to implement a professional development and continuous training program for teachers, a content-enhancing curriculum, career counseling services based on the capabilities and needs of students as well as the needs of the labor market and available opportunities, implement an ICT literacy program in all public schools, and the diversification of higher education to adapt curricula to global and ICT trends.
These initiatives are all highly commendable but beg the question: how did the public education sector came into this state of being in the first place? Years of civil conflict, neglect and aborted reform programs have not offered the sector a promising future. Viewing the current state of a stumped government and continual political bickering, it is unlikely that the Strategy Action Plan for 2007-2009 will be seen through to its conclusion.
“There are no ingredients for reform, no financial incentives, no professional development,” explains Rearden. “Unfortunately, for us the position of the Minister of Education is a highly-politicized one. Ministers in general lack the experience and the ability to carry through a reform program.”
This is also unfortunate for the disadvantaged student receiving a disadvantaged education, as this attempt at a reform initiative is not the first to be stalled and most likely, will not be the last. “Not much has happened to public education in Lebanon since the 1960s,” said Rearden, “except that it has stayed firmly rooted there.”
Sources close to the ministry, however, disagree that the plan is not moving. They argue that several changes have already been implemented and that the Education Sector Strategy document was sent to the Council of Ministers in September 2007 for endorsement.

Show Me The Money
There is no shortage of assistance to the Lebanese educational sector, although exact figures are difficult to come by. Following the Summer 2006 war, aid and soft loans from the World Bank and the European Union, American-based IT companies and several Arab countries poured in to rebuild damaged schools, reform the system and create a networking system in schools.
The problem is not the money, say experts, but how it is disbursed. Aid also tends to be in the form of technical assistance, the drawing up of networking plans, teacher training sessions or, as in the case of the World Bank loan, assistance with a reform program.
“Some critics say it would be better if the money was going to, and distributed by, NGOs rather than the government, for the fact that NGOs just pay where there is a need, whereas in the government, it ends up going through this whole system and payment becomes a whole delaying issue.”
The government will have to work very hard to push through a successful educational reform program and revamp the image of the public school system as being an inadequate, free-for-all institution. In the meantime, it is the future of a whole population that hangs in the balance. For the sake of Lebanon, one should hope it succeeds.

 

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Lebanon

Energy – Stifling Solar, Waffling Wind

by Executive Staff
written by Executive Staff
 
In theory, Lebanon is well positioned to take advantage of renewable energy technologies. Its sunny climate would allow for the widespread use of solar thermal collectors to heat water and its varied geography provides several prime areas for wind farms. A developed renewable energy infrastructure in Lebanon could bring millions of dollars to Lebanon through the Kyoto Protocol’s carbon trading system, and yet Lebanon lags drastically behind its European and Arab neighbors in renewable energy production and lacks a national renewable energy strategy.

Lebanon currently imports 99% of its energy needs from countries rich in oil and gas. Skyrocketing oil prices in recent years without subsequent rises in electricity costs have pushed the country’s government-owned energy provider, Electricité du Liban (EDL), further into deficit while the service quality has worsened. Indeed, in 2007 EDL reported a record-high $1.2 billion shortfall, while power cuts extended to every region in Lebanon, sometimes for as long as 18 hours per day.

Yet despite EDL’s poor performance, the initiatives that have been launched to tap Lebanon’s renewable energy potential have been almost uniformly small in scale, largely because of the technical difficulties and disincentives that bar non-governmental organizations from entering the market. Most notably, EDL actually sells electricity well below market cost, which discourages renewable energy initiatives. Additionally, according to Wael Hmaidan, the executive director of environmental NGO IndyAct, “there is a huge waste of electricity in Lebanon due to inefficiency and low levels of awareness.”
 

Need for regulation to adapt

Equally importantly, Lebanon lacks a functioning feed-in law that would allow private entities to produce electricity by renewable technologies and then sell it to EDL by connecting directly to the national power grid. Leaders in renewable energy technology, such as Germany and Japan, have laws that compensate private citizens for providing energy to national grids, in addition to the tax breaks that individuals and companies receive to offset the start-up costs of switching to renewable energy.

The learning curve of renewable energy

It is often private citizens who bring renewable energy to Lebanon, and the windmill that currently stands on a cooperative game and agricultural farm in Qab Elias, a village in the eastern Bekaa, is one such example.

This windmill came to Lebanon from an academic laboratory in the Netherlands in the late 1990s. Realizing that it would need extensive work before becoming operational in Lebanon, the Dutch research center sold the windmill to the Lebanese farm at an attractive price. The hope was that the technology developed at Qab Elias would then serve as a prototype for other farms in less-developed countries looking to produce wind energy.

As such, a team of Lebanese engineers, agricultural experts and renewable energy enthusiasts, led by Ramzi Abi Said, worked to convert the windmill for independent electricity production, rather than to be plugged onto the national electricity grid, as it was originally designed. In doing so, they also reduced the amount of electricity that would be produced from 1000 volts DC to 380 volts AC. At that time, such conversions were still in their infancy, and it was the first time that such engineering was undertaken in Lebanon.

Despite the project’s novelty and the team’s efforts to involve state actors, no national government authority ever came to observe the windmill. Likewise, even academic institutions that initially had expressed interest in examining the windmill’s conversion and use never launched a formal study.

The windmill now channels electricity directly to underground pumps that serve to irrigate the farm. Yet the team soon learned that Qab Elias was not the ideal place in Lebanon for creating wind energy. Since consistent wind speeds of 8 meters per second are needed to produce electricity, it is only operational during the summer months in the early morning and for approximately 4-5 hours in the afternoon.

Even with its limited use, Abi Said stressed the importance of the Qab Elias windmill. “The experiences we gained and the mistakes that we learned from gave us the know-how to further develop the technology in Lebanon.”

Technically speaking, Lebanon does, in fact, have a feed-in law, but it stipulates that a regulatory council must be created to monitor non-governmental bodies supplying electricity to the grid. Yet this never happened. The Ministry of Energy was temporarily given the power to regulate private energy production, but its mandate expired in November 2007, before any real progress was made. It thus remains illegal for any entity other than EDL to supply energy to the national grid.

In the absence of a government program to promote renewable energies, the private sector and local NGOs, in cooperation with international partners, have taken the initiative to develop Lebanon’s renewable energy potential.

Ahmed Houri, a professor of chemistry at Lebanese American University (LAU), cautions that any renewable energy solutions must be economically effective in order to be adopted by consumers or pursued by the private sector, especially without a government incentive program. The most cost-effective and technologically mature options are thus solar thermal collectors to heat water and wind power, which are both already in wide use in countries whose climate and geography resemble Lebanon’s. For example by 1999 in neighboring Cyprus, 92% of homes heated their water through solar technology, whereas Houri found that in 2003 only 2.8% of Lebanese household were equipped with such technology.

According to Jean-Paul Sfeir, the owner of Solarnet, a company that installs solar thermal collectors, since 2005 demand in Lebanon has exploded. Since then his business has expanded by more than 30% each year, and will likely grow significantly faster this year – perhaps by as much as 70%. Private homes, large apartment buildings, hotels, hospitals, orphanages and convents have all expressed interest in converting to solar power to heat their water.

Sfeir credits this recent growth to the maturing Lebanese market and the high price of fuel. “By 2005, Lebanese companies installing solar water heaters had been operating for several years and had perfected their skills. At the same time, the high price of oil on the global market pushed people to explore renewable energy technologies,” Sfeir said.

Yet despite the recent solar technology boom, Lebanon still lags far behind its neighbors. Without government mandates and incentives for solar water heaters that exist in other Mediterranean countries, high installation costs mean that solar technology remains a luxury. A solar water heater typically costs between $1,000 and $2,000 to install, putting them out of reach for most Lebanese families.

Improving access without government

The private and NGO sectors have, however, played a major role in making solar water heaters accessible to middle and low-income households. Banks, including the Crédit Libanais and the Lebanese-Canadian Bank have offered low-interest loans for water heaters, and HSBC is currently giving solar

water heaters to customers with new home loans. International donors have made renewable energy a cornerstone of their development programs in Lebanon, with the Chinese, German and Spanish governments all partnering with local municipalities and NGO’s to bring solar energy to poor communities, including those that were most affected by the July War. The Salah Ghandour Hospital in Bint Jbeil, for example, now heats its water through solar technology.

While households and businesses are limited to solar water heaters, the private sector is seeking to capitalize on the carbon-trading market created by the Kyoto Protocol, which requires industrialized countries to cut their emissions by 5.2% below 1990 levels by 2012. Rather than limit their emissions domestically, countries can buy carbon credits by sponsoring a renewable energy project in the developing world. Although still relatively immature, carbon trading was a $40 billion industry in 2007 and is expected to grow to $63 billion this year.

Sustainable Energy Systems (SES) is the Beirut-based Middle Eastern partner of EcoSecurities, an Irish company that trades carbon credits. EcoSecurities allows industrialized countries to buy carbon credits from its portfolio of 400 renewable energy projects in 27 countries rather than sponsoring individual projects in developing countries whose precise annual results are unpredictable. Such projects include electricity production by wind farms or biomass generation. These projects can create jobs in developing countries and significantly reduce their energy costs, all while improving their environment.

The process for presenting such a project to the United Nations for approval is extremely laborious. SES thus submits applications for renewable energy projects on behalf of national governments, managing the UN bureaucracy and using its resources to complete third party reviews of projects more quickly. “There are so many new projects that just waiting for project review by the Designated Operational Entity (DOE) can take six to eight months,” said Salah Tabbara, SES’ general manager. “But because we have so many projects around the world, we have a certain priority with the DOEs and can often have our projects reviewed in between four weeks and three months.” Several projects have already been submitted to the Lebanese Ministry of Environment for approval, but none has moved forward because of the country’s continuing political crisis.

Political deadlock stalling growth

The government’s current paralysis has also affected other private sector initiatives. Lebanon Winds is prepared to invest approximately $100 million in a wind farm in Akkar that could produce 2% of Lebanon’s total electricity at low, stable prices. Although it has signed a memorandum of understanding with the government, it cannot sign a purchase agreement with EDL until the current political crisis is resolved. “Our principle obstacles to beginning production are administrative,” said the company’s Robert Debbas.

Even with the enthusiasm of the private sector and international donors for renewable energy, Ali Darwish, director of the environmental NGO Greenline, is “almost certain that this is all a lot of fuss about nothing.” Until there is direct governmental intervention, projects will remain small in scale and isolated in location. And even though international donors are excited to fund renewable energy projects in Lebanon, they are often unwilling to pressure the government to change its energy policies substantially. “NGOs can lobby, can build initiatives and can apply pressure to make things move,” says Darwish. “But at the end of the day, NGOs cannot replace the government.”

 

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Lebanon

Agriculture – Organic growing pains

by Executive Staff
written by Executive Staff
 
For almost a decade, global demand for organic products has seen a steady increase. According to UN figures, in 2006 the global organic market stood at nearly $40 billion, making up 2% of food retails. By 2012 it is expected to reach $70 billion. Organic produce is usually 20-50% more expensive than non-organic, yet despite this, since the late 1990s the organic market has achieved exponential growth of about 20-25% a year. The increased demand for organic produce has enabled some local farmers to increase their incomes nine-fold.

In Lebanon, organic farming has seen growth inline with the general global increase; however, the 2006 Summer War dramatically slowed it. According to the Association for Lebanese Organic Agriculture (ALOA), 10% of organic farms in Lebanon were contaminated by cluster bombs and the general follow-on effects of the war, such as lost harvest and incapacity to prepare land for the next season, have only just subsided in 2008. Consumption of organic products has also been hurt through the current political deadlock, the general economic slowdown and a severe lack of awareness and understanding of what ‘organic’ actually means.
 

How to define organic?

In Lebanon, organic processing is mostly focused on the production of foods typically used in Lebanese cuisine, such as olive oil, oregano mix, orange blossom water, and traditional Lebanese jams and recipes. One of the main obstacles to the growth of organic produce is the confusion that reigns among the public over the definition of organic.

People commonly confuse baladi products, which are locally grown, with being organic, and supermarkets in Lebanon often put organic products near diet products, leading many people equating the two.

Souk el-Tayeb, a weekly farmers market in central Beirut, is often thought of as being an organic market. However, Kamal Mouzawak, one of the market’s organizers, is at pains to stress that this is not the case. “People don’t understand what organic means. It is not just ‘clean’. For food it has a certification process.” He went on to state that at Souk el-Tayeb there is a clear separation between the 15 certified organic and the 32 local non-certified producers. Organic produce has to comply with a strict set of rules and regulations and something can only be called organic if it has the required certification.

Organic farming can best be described as a holistic approach that aims at producing food within an environment ecologically balanced between the soil, the plants and the animals, and not simply as replacing synthetic pesticides and fertilizers for organic ones. As much as possible, organic farmers must try and rely on crop rotation, green manure, compost, biological pest control and so on. For a product to be called or certified ‘organic’ the whole cycle must be organic.

 

 
For instance, to make organic apricot jam one cannot just use organic apricots but the other ingredients and even the packaging must be organic. Also for a farm to be organic it must not only ensure that it uses organic techniques but that the land next to the farm is free from contamination and the chemicals it uses are not seeping into the organic farmland.

The significant hurdle to organic production in Lebanon is that the foundations of organic products lay in the concept of its strict rules and regulation that are embodied in the process of certification. Yet, in Lebanon, due to the current political deadlock, the necessary laws have not been passed to ensure that certification is placed within the framework of the law. Lebanon does have two local certifiers, Libancert and IMC, that are re-certified by international organic bodies. But without the requirement of certification being enshrined in law, legally in Lebanon anyone can call themselves organic. Roula Fares, general manager of LibanCert, said that, “many farmers are calling themselves ‘organic’ because they think reducing the amount of pesticides and fertilizers they are using makes them organic.”

Training farmers to understand what an organic approach to agriculture involves has been an essential part of the effort by civil society groups that are eager to see organic farming grow in Lebanon. Rami Zriek, professor of agriculture at AUB and one of the first to help develop the organic sector in Lebanon, said that one of the problems of organic farming in Lebanon was the fact that it was not born by the farmers but parachuted in by well-meaning individuals. The repercussions of this are that many of the farmers are not committed to organic farming beyond an economic rationale, putting organic sector at the mercy of the market.

But problems exist at an even more basic level. As a report by the Ministry of Environment states, the majority of farmers in Lebanon lack basic agricultural training and the high rates of illiteracy among them have also made effective communication and training difficult.

The need for capacity building

Many of the local and international civil society organizations have established workshops and various other training programs to provide training for the more knowledge-intensive methods of organic farming. But Corinne Deek, of the German Heinrich Böll Foundation, said that in reality the only farmers that can move towards organic agriculture are the relatively well educated, ‘elite’ ones. As she said, “Organic farming needs significant capacity building but no one is doing it.”

Others object to this point of view, and particularly Zriek who strongly disagrees with the idea that it is hard to train local farmers into becoming organic growers. His argument is that there is a traditional body of knowledge, passed down from generation to generation, that can still be drawn on to help farmers become organic, and that the report by the Ministry of Agriculture should be taken with a pinch of salt. “Farmers [in Lebanon] are highly trainable and workable. Skills and training are not the limiting factors to organic farming in Lebanon, but marketing [is].”

Organic produce in Lebanon is no doubt still a niche market. According to Rania Touma, president of the ALOA and general manager of Healthy Basket, although there are no exact figures, organic produce accounts for less than 1% of the current market for food produce in Lebanon. Healthy Basket sells much of its produce on the basis of a Community Supported Agriculture (CSA). The CSA aims to create a strong bond between producer and consumer, with the central idea being that the consumers purchase a share of the farmers harvest at the beginning of the season.

At Healthy Basket, 50% of their produce is sold on the basis of CSA in which customers pay a month in advance for four weekly baskets of produce. Zriek, however, thinks that there is problem with this system for Lebanese customers in that, with organic farming, the farmer can only produce a limited array of produce and not all year round, whereas Lebanese customers want all the produce every week.

Zriek added that in Europe and the United States, the CSA concept includes the consumer going to the farms and picking up the produce, helping to establish a bond between the consumer and producer that the industry relies upon, but in Lebanon the tendency is for people to want their goods delivered directly to their door. Healthy Basket overcame these local demands by engaging different farmers in different locations to obtain a wider array of produce and to ensure that, as much as possible, produce is available all year round. In a local twist, the ubiquitous Lebanese scooter service was adapted for the delivery of organic produce to the customer’s door.

Competition in the region

However, organic producers have not managed to convince the hospitality sector to go organic and many Lebanese customers cannot accept that some produce will not be available all year round or are unwilling to pay the extra premium for organic products.

In 2005/06 Healthy Basket had begun to export some of its goods, but strong organic markets in Saudi Arabia, Morocco and Egypt pushed out Lebanese produce. Touma explained that, compared to the rest of the region, in Lebanon production is expensive because there is little subsidy from the government, and during the initial years, organic produce is very costly to develop.

However, Zriek pointed at an essential difference between the regional organic agriculture sectors, saying that “Lebanon is lucky in that its citizens eat the products that are produced here, as opposed to Morocco and Egypt where the best produce is exported to Europe and elsewhere,” resulting in a situation where despite having well-developed organic agriculture and high quality produce most of Egypt’s and Morocco’s citizens eat sub-standard produce. “Exporting high value crops and importing low value is not the philosophy of organic agriculture.”

Organic agriculture as a philosophy has also often been talked about in terms of reducing rural poverty, the vulnerability of rural woman and increasing food security. World Vision, a Christian relief and development organization, began two large organic farming projects in Lebanon at a cost of $14 million. According to the organization, these projects are “a response to the struggling agricultural sector in Lebanon because it creates sustainable job opportunities for struggling Lebanese farmers and improved incomes for their families, as well as for others involved in the harvesting, processing, marketing and sale of high quality organic produce and products.” World Vision claims that around 700 farmers have participated in the projects and 18,000 people have directly benefited from the program. Although many cynics wonder how organic farming, being as knowledge-intensive an industry as it is, can help the poor, Zriek is among those who concur with the World Vision approach and its benefits, and claims that the very ethos to organic farming is poverty alleviation.

He dreams of a day when the whole of Lebanon will be completely organic but warns that this can only ever be realized if the government takes a more active role. “Currently only civil society is putting its mind to achieving this dream and this is not enough.” But in Lebanon, dreams are rarely realized through government. It is through the dynamic and resourceful private and civil society sectors that the country has survived and thrived. If organic agriculture is to prosper in Lebanon and go beyond global trends, then the civil society groups must create a second awakening for Lebanese consumers and convince them of its benefits.

 

 

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Lebanon

Beirut Stock Exchange – Struggling for momentum

by Executive Staff
written by Executive Staff
 
When the Beirut Stock exchange reopened in 1995 there were high hopes that it would regain its position as a center of Middle East trading. The bourse was originally established in 1920, second only in the region to the Cairo and Alexandria exchanges of Egypt. As a consequence of the tumultuous civil war years it was forced to close in 1983, during which time other regional bourses grew strongly, particularly fuelled by oil wealth in the GCC, and they have largely outstripped Beirut’s former reputation. Although the market cap of the BSE grew from $8.3 billion at year-end 2006 to $10.9 billion by year-end 2007, it still lags far behind the likes of Kuwait Stock Exchange with a market cap in excess of $70 billion.

The BSE does have some solidly performing stocks, but is still struggling to gather momentum, with only 11 listed companies. Even at this, Solidere alone represents a large proportion, accounting for 34.7% of market capitalization on December 31, 2007, and 65.1% of market share by value transactions over 2007. However, Fadi Osseiran, chairman of Blominvest Bank that runs the Beirut Blom Index, explained that the banking sector is now beginning to match Solidere, with the two taking a roughly 40-40 split of value transactions. He hastened to add, though, that Solidere’s two listed instruments are still by far the single largest component of the BSE, followed by Bank Audi, something that will not change until there are new listings.
 

Attracting more IPOs

Unfortunately, few see the climate as particularly favorable for initial public offerings (IPOs). In 2005 the Ministry of Finance and the BSE commissioned a study on how to encourage companies to list and identified 50 potential IPOs. Nonetheless, as Dr. Fadi Khalaf, chairman of BSE, explained “those companies that were thinking of listing have postponed their plans due to the current situation.” Any IPO is a trade-off between encouraging investors to buy and raising capital for the listing company. Khalaf believes that in this case “the problem has not so much been a matter of investor confidence, just that when you start an IPO, you don’t want any surprises, related, for instance, to the political deadlock we are experiencing.”

Some believe that more could be done to entice companies to list. Osseiran pointed out that one can use “the stick and the carrot.” Being more stringent on banking regulations by cracking down on banks that lend to companies with insufficient capital, he believes could “force companies to seek capital in other places” — namely an IPO.

However, the main setback of late to growing the BSE’s market cap was the falling-through of the planned privatization of Lebanon’s mobile telecommunications licenses, which were to have been listed on the BSE. Khalaf commented that the BSE “had been hoping the privatization would take place for some time — you need maybe 100 small IPOs to be equivalent of a few billion dollars of privatized market capitalization.” The privatization of the mobile licenses and listing of the new companies had been hoped to raise upwards of $5 billion. As he pointed out, “in stock exchanges all around the world, including developed countries, what has really boosted the exchanges were privatizations.”

Privatization of the BSE itself is also an issue, currently the exchange runs under the auspices of the Ministry of Finance. Finance Minister Jihad Azour is clearly in favor of privatizing the exchange, stating “our objective is to have capital markets that are privately owned and managed.” Plans were under way for its privatization under a draft law that was being considered by parliament, which since it is not currently convening, is unlikely to be passed anytime soon. An independent regulatory body should also come hand in hand with privatization. In the view of Osserian “a regulatory authority is of utmost importance, without it the stock exchange has no father or mother to defend it. Unless you set up a capital markets authority you will not find the driving force for the BSE.”

Biggest regional issuer of bonds

Lebanon certainly retains strengths, especially in terms of financial expertise. In the minister’s eyes, Lebanon “could easily be the regional leader in the fixed-income market.” He cited the fact that it is the biggest regional issuer of sovereign and private debt and that Lebanon’s banks are active market makers who have experience in leading eurobond issues.

Although euro and sovereign bonds have been listed on the stock exchange with a zero commission on trading as instructed by the finance ministry, they are not actually traded. According to Khalaf, “the market between banks is actually liquid, they just don’t choose to trade on the stock exchange, even with the zero commission incentive.”

There is the possibility that a new instrument may list on the exchange by the end of the year, in the form of the Blom Index. Osseiran explained that “initially we only set up the index for bench marking purposes, but this year we went live as a prelude to trading.” The form of the instrument and whether it will actually be traded on the exchange waits to be seen. As he pointed out, “we have not yet finalized the details, whether it will be a fund or a stock.” So while there may not be any new company listings, there is at least the possibility that another instrument will list in the near future.

 

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Financial Indicators

Global economic data

by Executive Staff
written by Executive Staff

GDP

Source: OECD

In terms of total GDP, the United States is, by far, the largest member country. Japan is the second largest economy followed, at some distance, by the four large EU members — Germany, United Kingdom, France and Italy. The next four largest are Spain, Mexico, Canada and Korea. These rankings have not changed significantly over the period shown.

Per capita GDP for the OECD as a whole was close to $30,000 per head in 2005. Five OECD countries had per capita GDP in excess of $36,000  — Luxembourg, Norway, United States, Ireland and Iceland. Half of the 30 OECD members had per capita GDP between $28,000 and $36,000, while 10 countries had per capita GDP below $28,000. Turkey, Mexico and Poland had the lowest per capita GDP. Note that both GDP and PPPs contain statistical errors, and differences between countries in per capita GDP of 5% or less are not significant.

Also note that in the tables, the OECD total excludes the Czech Republic, Hungary, Poland and the Slovak Republic.

Education

Source: OECD

In 2003, taking into account both public and private sources of funds, OECD countries as a whole spent 6.3% of their collective GDP on their educational institutions. The highest spending on educational institutions can be observed in Denmark, Iceland, Korea and the United States, with more than 7% of GDP. Seven out of 29 OECD countries for which data are available, however, spend less than 5% of GDP on educational institutions.

In all the countries, public and private expenditure on education increased by 5% or more between 1995 and 2003 in real terms. However, the increase in spending on education between 1995 and 2003 tended to fall behind the growth in national income in eight of the 21 OECD countries. Most notable differences are observed in Austria, Canada, Ireland, Norway and Spain where the proportion of GDP spent on education decreased by 0.4 or more in percentage points between 1995 and 2003.

It should be noted that growth in GDP masks the fact that there was a significant increase in real terms in spending on educational institutions in almost all of the OECD countries from 1995 to 2003. In addition, the size of the school age population shapes the demand for education and training, and national levels of teachers’ salaries also affect the share of expenditure on education.

Quality of life

On average, across the countries for which data are available, around 7.7% of teenagers were neither in school nor at work in 2004. Differences across countries are large: in Denmark, Germany, Iceland, Luxembourg, Netherlands, Norway and Poland less than 4% were in this situation while the shares exceeded 10% in Portugal, Spain, the United Kingdom, Mexico and Turkey.

For the OECD as a whole, there has been a decline in the percentages of teenagers who are neither employed nor education, but the decline has been most marked for females. The fact that young people, and particularly females, spend more time in education than they did a decade ago has contributed to this.

Several features of the labor markets and training systems affect the ease of transition from school to work. OECD reviews of youths’ transition from school to work have identified Nordic and English-speaking countries as those where this process is smoother than in countries in Continental and Southern Europe countries.

Access to household computer

Source: OECD

Penetration rates are highest in Iceland, Denmark, Japan, Sweden, Korea, the Netherlands, Luxembourg, Norway and the United Kingdom where 70% or more of households had access to a home computer by 2005. On the other hand, shares in Turkey, Mexico, the Czech Republic and Greece were below 40%. Between 2001 and 2005, the percentages of households with access to a home computer increased particularly sharply in Japan, the United Kingdom and Germany.

The picture with regard to internet access is similar. In Korea, Iceland, the Netherlands, Denmark, Switzerland and Sweden, more than 70% of households had Internet access by 2005. In Turkey, Mexico and the Czech Republic, on the other hand, only about one-fifth or less had internet access by 2005.

Data on internet access by household composition — with or without dependent children — are available for most OECD countries. In general, they show that households with children were more likely to have internet access at home in 2004.

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Banking & Finance

Money Matters by BLOMINVEST Bank

by Executive Staff
written by Executive Staff

Regional stock market indices

Regional currency rates

Qatar Buys Back its Stakes at Credit Suisse

According to Qatar’s Prime Minister, the natural gas rich country is buying back its shares at Credit Suisse and is planning on spending $15 billion this year to purchase shares in European and US banking institutions. The purchase deal that is still going on has not yet reached the 3% threshold at which the Swiss Stock Exchange regulations stipulate the disclosure of the acquirer’s name. The Qatari Investment Council, an emerging GCC sovereign wealth fund, has also revealed plans to set up funds in Finland and Malaysia, similar to the one that was established in Indonesia last month, at $1 billion each.

Libya Plans on Creating Energy City at $3.8 Billion

The Gulf Finance House of Bahrain signed a $3.8 billion deal, this month, with Tripoli’s Economic & Social Development Fund to create an energy business district. The project that will be built on a 528-acre site in Sabrath (west of Tripoli) will be known as ‘Energy City Libya’. Energy City will provide a full range of facilities to local and international oil and gas companies within a mixed commercial, residential and hospitality services. In addition to reviving the country’s infrastructure, the Libyan government is hoping to attract foreign direct investment into the country, especially from Gulf nations.

IMF Forecasts 5.7% Growth of the Tunisian Economy

The International Monetary Fund (IMF) has projected a 5.7% growth for the Tunisian economy from 6.3% in 2007. The main driving force of this decline has been the low demand from Europe for Tunisian exports as a result of the increase in oil prices and commodities. However, the IMF has predicted a cushioning of the slow economic growth with the revival of foreign direct investment into Tunisia. The Tunisian government is aiming at supporting the economy by introducing banking reforms and liberalizing trade practices. The IMF is expecting budget deficit and inflation to hover around 3% of GDP and 4% respectively. However, the 3% budget deficit seems underestimated given the government’s subsidy for fuel and essential commodities.

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Cover story

More than chrome

by Executive Staff
written by Executive Staff

All over the world, the iconic American motorcycle, Harley Davidson, is a passionate affair. Having, over the past two decades, changed its image from the machine for lawless bikers and heavy metal rock stars to a “statement of freedom and uniqueness” by well-respected individuals. Harley Davidson has matured and the company now also draws its clients from middle-aged professionals in the middle-to-upper management echelons. Steeped in history and tradition, in the Middle East, Harley Davidson has had several high-profile devotees, first and foremost the late King Hussein of Jordan, famous for his rides in the desert, his son now continuing the tradition.

No other motorcycle in the world gets the same devotion as a Harley Davidson. For enthusiasts, it is more than a muscle machine decked out in chrome. “Harley Davidson has a story — it’s the spirit, the people, and the way of living,” explained Marwan Tarraf, general manager of Bikers Inc., the Harley Davidson dealership in Lebanon.

Saudi Harley rider Abdelmenem Addas, owner of a Heritage Classic, banker, teacher and activity officer for HOG (Harley Owners Group) Saudi Arabia, described the culture of Harley Davidson by saying that firstly it represents the idea of “American freedom” — of traveling down an open road with the wind in your hair — and second, there is the idea of brotherhood and team spirit. Many of the region’s riders have either lived or studied in the US where they were first introduced to the Harley culture, or are expatriates living in the Gulf.

No lawlessness here

However, the region’s riders are far removed from lawlessness. Addas insisted, “We obey the strict traffic rules such as wearing helmets, signaling, and keeping space between bikes.”

Performance-wise, Harley cannot compare to other motorcycles on the market — but what it can offer is a unique experience. Its special V-engine, which gives the motorcycle its signature look and sound, also provides a feeling specific to the brand. “I bought one five years ago and loved the feeling,” said Karam Attallah, general manager of Lebanon’s Gefinor Finance and owner of a ‘04 Road King Classic.

Harley Davidson is also a marketing phenomenon with apparel and accessories designed for biking and casual wear. In addition, the logo can be found on items ranging from mobile phones to limited edition Ford Trucks. In recent years, the spirit of Harley Davidson has been used to sell everything. It’s based on the idea of community, Tarraf explained, “When you buy a Harley, something changes in your life. You then belong to a specific interest group that wants to share this with other people.”

Public perception of the motorcycle also plays into it. “It is how people perceive you that makes you want to own one,” said Ahdi al-Hunaif, rider and author of the Kuwait Chopper blog, “how everyone warms up to you on the streets, how kids wave to you at a traffic light, how old men ask you questions and give you the thumbs up.”

Money — as in, having it — also plays a role. “Harleys are not cheap,” explained Tarraf, “so buyers tend to be upper-middle class. There are people who own five bikes and never ride and then there are others who save for years and ride their bikes everyday.”

While the average Lebanese rider is around 35 years old, global statistics indicate that Harleys are mainly popular with the over-45 crowd, with incomes hitting $80,000 and above. However, with so many statistics, the reality is extremely varied. As Tarraf related, “We have a rider who used to sell fish in California and came back. He went to hajj, prays five times a day, his wife wears a veil and he has a Harley that he loves. He lives in the south, has to drive over two hours for a one-hour ride and rides back. Now he meets with a guy like Karam, and their lives are so totally different, but they share a passion for Harleys.”

On the low end, a new Harley costs around $15,000, and prices then can climb up to $60,000, although the average price is about $20,000. The two top selling models are Soft Tails — such as the Fat Boy, popular for city riding — and Road Kings — the larger touring class made for road trips and traveling.

“Usually, people who don’t know much about Harleys come and ask about the Fat Boy. But once they get to know Harleys better, they begin to want to buy a bike that suits their usage,” said Tarraf.

Another popular category is the Sportster family, which are smaller motorcycles that some who have touring motorcycles buy as a second bike. A recent addition is the V-Rod, a speed bike, created with a Porsche-designed engine for greater performance.

Customization

Customization and modification allow the rider to become the true owner of the motorcycle. Almost everyone customizes his bike. “You can buy a motorcycle and make it look like you,” said Tarraf. “That’s where Harley succeeded most; they give you a motorcycle that has the possibility of being a work of art.”

It is also a domain where a lot of revenue is generated. Customizations can double the price of the bike, if not more. Changing the handlebars, adding accessories, paint jobs — anything up to the engine can be changed. Added al-Hunaif, “It is about showing off your latest creations, making people see what type of a person you are, because in reality, each bike shows a piece of that person.”

Dealerships in the region

The dealership is an integral part of the Harley experience offering, alongside service and customization, a social forum to interact with others who share the same passion. They also provide the safety training needed to operate the bike.

Over the years, regional dealerships changed considerably. “I’ve been riding for 15 years. I remember I used to go to a Harley dealership in the States where you’d find this bearded guy with feathers all around, very rude — he wouldn’t even talk to you — and now you go to a Harley dealership and you see a younger generation managing and people that are so nice, who answer all of your questions and try to help you out. You don’t see the old guys anymore. Harley had to clean up their image; there is a new trend because they want to sell to non-traditional Harley riders and get a wider clientele.”

In Lebanon, Harley Davidson has a long history. According to Tarraf, the first Harleys were brought to Lebanon in the 1950s, imported from abroad. Ten years later, the Lebanese police began buying the motorcycle for its force. A formal dealership was set up in 1977 only to be closed after importation difficulties resulting from the civil war. In the 1990s, after the civil war, the police began selling their stock sparking an interest that led to the reopening of the dealership in 1995. However, it closed again in 2000 and in the ensuing years, few Harleys were imported. This, in turn, prompted Tarraf to obtain the dealership license, opening his doors to old-time riders and new clients in 2007.

Originally, he expected to sell only 20 motorcycles. Demand far outpaced expectations and by early 2008 he had sold around 70 bikes — not bad for a tiny country in the midst of turbulence.

The first dealership in the UAE was established in 1989, operating out of a hangar at the Abu Dhabi International Airport. It expanded to Dubai in 1992 and since then has been established in both emirates. Sales are just under 500 bikes per year. “There isn’t a model which we don’t sell,” said Marcel Bode, general manager of Harley Davidson of the UAE. For him, it is the influx of expatriates that is growing the market, something that can be observed when looking at other GCC markets as well.

Dealerships have appeared in other Gulf states since the late 1990s, and can also be found in Egypt and Morocco.

HOG chapters

Owning a Harley makes you a part of a global club. The Harley Owners Group (HOG) was established by the company in 1983 in response to a growing need to provide a forum for riders where they can interact with other riders and organize rallies to show off their bikes. The forum went international in 1991, established through local dealerships. Belonging to a HOG chapter means that one is part of a global network of riders and has access to other chapters’ rallies. “If you are a HOG and you meet another HOG from Idaho, there’s always something to talk about,” explained Tarraf.

In the region, HOG chapters are quite active. The first Middle East HOG Rally was held in Muscat in 1999 drawing over 200 bikes. The next one saw an increase to 300 and sparked a competition with Dubai. The Middle East HOG Rally continues as an annual tradition, to which rallies throughout the region have been added.

Saudi Arabia’s HOG chapter has nearly 1,200 total members, according to Addas, activity officer for the group. Nearly 70% of its members are expatriates from the US, France, Switzerland and Germany. Even with the strict social regulations, in places such as Jeddah wives and girlfriends are able to ride on the backs of bikes. The group is very active and has been used to promote tourism in the country. Last year, a ride from Jeddah and continuing up to the Durrat al-Aroos beach resort, 60 km north of the city, was supported by Mecca’s governor, Prince Khaled al-Faisal, Jeddah’s governor, Prince Mishaal ibn Majed, the General Presidency of Youth Welfare’s Saudi Motor Sport Committee and the Jeddah Chamber of Commerce and Industry, and given a police escort. And, exemplifying that the brand has come a long way from its early days as the bike of choice for motorcycle gangs and outlaws, Harleys could even be used to promote peace and understanding in the region. One day, so Addas hopes, he will be able to organize a ride from Mecca to Medina and then ending in Jerusalem, if he could secure the authority needed. “I think it would send a message to the world that we want peace.”

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