Executive Magazine

Stand-up and laugh

by Paula Schmitt December 1, 2007

written by Paula Schmitt

The Egyptian American comedian Ahmed Ahmed says in his stand-up show that, because there is a supposed terrorist also called Ahmed Ahmed, his name is in a most-wanted list. That makes air travel a unique — if not, horrible — experience. But one cannot but laugh when he tells of his ordeal: “I always know who the air marshal is on the plane. He is the guy reading People Magazine upside down and looking right at me.” After googling his own name and finding out that indeed there seems to be a terrorist called Ahmed Ahmed, the comedian wonders if the other Ahmed is in the Arab world going through the same identity mix-up: “I swear I am not a comedian, I am a terrorist!”

These and other stories are told by the Axis of Evil, a stand up comedy group formed by Ahmed, Aron Kader (whose father is Palestinian and mother is an American Mormon), Maz Jobrani (Iranian-American) and Dean Obeidallah (Palestinian-American). Of all places, the Axis’s first performance happened where the expression Axis of Evil has a whole different connotation: Washington, D.C. Since then, November 2005, they have been touring America using humor as a weapon against prejudice. Now, after full-house performances throughout the US, the Axis is touring the Middle East with a mission that is as necessary as destroying prejudice: helping make the Arabs laugh at themselves.

In America, the Axis of Evil Comedy Tour has been welcomed with raving reviews by the likes of CNN, Time, National Public Radio, and Newsweek. Along with the laughter, the group aims at promoting a shift in cultural perceptions. “We don’t want to be defined any longer by the worst examples in our community. There are a few terrorists and they define all of us,” said Ahmed in an interview on CNN.

But the paradigms are changing already. A lot has happened since 9/11, when Dean Obeidallah followed the suggestion of a club owner and dropped his Arab surname, performing under his middle name instead, Dean Joseph. Now, the group has become so popular and is so successful in defying prejudice that one of the Axis’s show in the US was sponsored by one of the main targets of the jokes: the FBI. With some of the officers attending one of the performances, Ahmed looks at them, sitting close to the stage, and tells the audience “It’s so nice to be standing in front of the FBI and not be handcuffed.”

In his routine, Ahmed reminds the audience that after 9/11, hate crimes against Middle Easterners increased by 1,000%, but that still leaves them in fourth place among hate crime victims — behind blacks, gays and Jews. “I just want to be number one in something,” he joked. United in prejudice, but with the wisdom to transform pain into pleasure, the ethnic comedians are more important in healing and unifying than they are given credit for. Quoting a colleague who is a rabbi, Ahmed says “you can’t hate anybody when you are laughing with them.”

But do Arabs easily laugh at themselves? Kader has one line aimed at the more uptight, imitating a fictitious Arab who insists he does indeed have a sense of humor: “Whoever says we don’t have a sense of humor, I will kill you and burn your flag.” But it takes a lot of high self-esteem and intellectual freedom to laugh at oneself. The only practicing Muslim in the group, Ahmed jokes that “you know you’re a Muslim when you drink, gamble and have sex but you won’t eat pork.”

Comedy is about stereotypes. As a Brazilian, I know my country has them in abundance and I was genuinely offended when my government threatened to sue the producers of the Simpsons cartoon, after one episode showed the Simpson family travelling to Rio to find out what happened to the money they were donating to a boy living in a slum. On the same trip, the Simpsons watch TeleBoobies, a show in which semi-naked girls entertain Brazilian children, while the Brazilian public transport system is depicted as one long conga line. Sadly, even our president at the time made the surreal comment that the cartoon “brought a distorted vision of Brazilian reality.”

Since when does comedy have the duty to reproduce reality? What some suspect, though, is that the president was offended not by the distortion, but precisely by the small bits that didn’t distort our reality all that much. After the embarrassing, irrelevant dispute, Homer Simpson made his retribution in style. In a later episode, he is the proud owner of a monkey. And he asks his friend to be careful with the animal, as it was a present from Brazil, and whose pedigree is very important, since “this monkey is the cousin of the tourism minister.” Kudos.

December 1, 2007 0 comments

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Hardliner city

by Andrew Tabler December 1, 2007

written by Andrew Tabler

Until recently, Syria bucked the age-old political dictum that regimes under intense external pressure halt domestic reforms until the coast is clear. The country’s 10th Five Year Plan, approved a year after Syrians were named suspects in the murder of the late Lebanese Prime Minister Rafik Hariri, introduced a slew of economic and social reforms designed to transform Syria from a state-dominated and socialist system to one involving greater domestic freedoms and a partnership with the country’s vibrant private sector. While liberalization in Syria’s finance, forex and trading regimes continue to unfold, Israel’s bombing of an alleged Syrian “nuclear” facility on September 6th has triggered the widest crackdown since the dark-days of the 1980s on Western influence in Syria and the ways its people communicate with the outside world.

The first signs came in mid-September when the Syrian government announced that names of all schools, businesses and shops must be in Arabic ahead of Damascus’ serving as the 2008 Arab Cultural Capital. As businesses with western names like KFC and Shrimpy prepared to change their marquees, foreign schools and universities were ordered to integrate Syrian curriculum into their hitherto Western teaching models. Even Arab European University — one of the darlings of Syria’s European-supported reform process — was forced to drop the term “European” in favor of “International”.

Internet speeds throughout the country then slowed to a trickle in late September without reason. Rumors filled the Syrian capital that a Finnish firm supplied technology to Syrian authorities to more closely monitor internet traffic in the country. Suddenly added to the list of banned opposition websites and blogs were such popular services such as Facebook and even some functions of Google news. The new software is rumored to allow complete tracking of individual e-mail accounts inside and outside of Syria.

Syrian “reformers” ran for cover. Deputy Prime Minister for Economic Affairs Abdullah Dardari — Syria’s reform guru and author (with German assistance) of the Five Year Plan — recently stopped meeting foreign media without prior permission from Syria’s Ministry of Information. As President Assad’s right hand of reform, Dardari is under intense criticism by pundits and economists for everything for fiddling with the economic numbers to his stark warnings that Syria must cut its annual $7 billion subsidies bill or risk a fiscal crisis of major proportions. While Dardari insists that Syrian oil production is plummeting at a rate of 11% and therefore the state must accelerate efforts to make up the difference through taxation, his critics say the high price of oil will keep the budget deficit in check. The subsequent announcement by his rival, Finance Minister Mohammed al-Hussein, that the 2008 budget deficit would be in excess of $3.8 billion, down from a $5.86 billion only five years ago, failed to stem the tide of calls for Dardari’s head in a much-anticipated cabinet change. Neither did the regime’s midnight hike of gasoline prices by 20% two weeks ago and to be followed by a 20% hike next year. Diesel is still only $0.14 a liter, however, ensuring that a steady supply of smuggled fuel will continue to make its way to Lebanon, Turkey and Jordan where it fetches nearly five times the price.

But who’s counting anyway. Dardari’s effort to launch an “Executive Plan” to monitor the Five Year Plan and actually see if Syria was meeting its targets was quietly shelved late last summer for unknown reasons. The regime’s preference to fly blind in reform followed the state’s closure earlier this year of the renowned media coverage monitor IPSOS-STAT’s Damascus offices. Syria might have plenty of new private sector newspapers, magazines and radio stations, but no one knows exactly who listens to them and how they compete with their hard-line state-owned competitors.

Rollbacks in Syrian reform this autumn are the latest chapter in a two-year hiatus in political and social legislation. In his acceptance speech to a second seven-year term as Syrian President Bashar al-Assad said Syria has been in a “battle with destiny” (presumably with Israel and the US) and therefore has not had time to follow up on changes to the political parties, emergency and NGO laws promised in the 2005 Baath Party conference. The latter law, rumored to be on the verge of passage last September, is now expected next year.

So why is the regime letting private sector banks, insurance companies, foreign exchange house and trading companies flourish? Some people say it’s due to the state’s fiscal problems. But a closer look shows that, ironically, Syria’s pullout from Lebanon in April 2005 was perhaps the most powerful impetus for reform during Assad’s first term. Strained ties with Lebanon forced the state to implement long-dormant legislation to allow Syria’s private sector to do what Syrians long contracted Lebanese to do for them. In the bizarre world of Syrian reform, Friedrich Nietzsche’s quote “that which does not kill us makes us stronger” has never rang more true.

December 1, 2007 0 comments

Editorial

A different focus

by Yasser Akkaoui December 1, 2007

written by Yasser Akkaoui

This year’s Executive Facts and Forecasts has picked three nations in the MENA region that it believes best represents its economic heartbeat: an emerging Sudan, a thrusting UAE and a Lebanon that is in transition but which has potential in abundance.

One of the exciting stories of the past years has been the resurgence of Sudan from decades of political conflict and war, enabling the country to truly access its natural resources — such as oil and sugar — and use these to develop a burgeoning economy. The result has been double-digit growth that has propelled Sudan into the limelight and made it attractive to investors seeking to diversify their emerging markets portfolio.

The UAE (and the rest of the GCC for that matter) had another record year and will continue to set new economic benchmarks. Those who believe that the oil boom is past its peak had better think again. This is not a flash-in-the-pan correction similar to what was experienced in the 70s; black gold will maintain its robustness to fund even greater projects and fuel prosperity throughout the region and beyond. But this success is not just down to increased oil revenues; they have merely helped implement a remarkable vision that has seen assets used to create sustainable economic development and transform a region into throbbing modern metropolis

Lebanon, being the regional barometer that it is, must thank its lucky stars that the political crisis that has plagued the little Mediterranean nation since mid-2006 happened during the current oil boom. The economic development in the GCC has allowed Lebanese talent to be absorbed into, and contribute to, the dream and brand Lebanon was able to diversify and become less reliant on an ailing and limited local economy. The good news is that the election of a new president at the end of 2007 should herald at least three years of calm and allow Lebanon to once again take its place as the most elegant boutique in the regional mall.

What we at Executive hope to showcase in this annual issue is that, despite the tag of instability that is so often attached to the region, the Middle East and North Africa is filled with credible and sustainable opportunities with the vision and talent to make them happen.

December 1, 2007 0 comments

North Africa

The Maghreb – Opening markets

by Executive Staff December 1, 2007

written by Executive Staff

Although both Tunisia and Morocco have free trade deals with the European Union and Algeria’s economic and political ties with Britain have reached an unprecedented high, there is a growing feeling in all three Maghreb countries that rapid growth will be spurred from the southeast — the Gulf — rather than from the North.

Even before oil prices rocketed to $100 a barrel, Gulf investors had begun to move into North Africa in a big way, eyeing especially tourism and real estate opportunities in Tunisia and Morocco, while banking interests kept a close watch on the possibilities afforded by future privatization of the monolithic Algerian state banking sector.

Gulf money is, ironically, being starved of investment opportunities at home while in Europe much of the focus previously directed towards the Maghreb is shifting to the newer and poorer members of the EU in Central and Eastern Europe.

Yet the influx of Gulf money is neither charity towards fellow Arabs nor less demanding of moves to liberalize the Maghrebian economies and open up sectors previously denied to private sector investment. The UAE firms Emaar, Dubai Holding and Abu Khater Investment Group are moving into the region in a big way. And the decision to allow “alternative” financial products in Morocco — for which read Islamic finance — opens up the possibility for the spread of a banking system that is also gaining roots in London.

Backed by this new source of interest, the countries of the Maghreb can look forward to 2008 in a situation of macroeconomic stability and steady growth.

However, the region will have to keep up the pace of reform if it is to continue to attract petrodollars as well as tackle its leading economic and social headache — high unemployment among quickly-growing, young populations. All three have kept inflation in check but pressures remain, meaning that significant monetary and fiscal relaxation would be ill-advised. The encouragement of private sector job-creation as opposed to public sinecures is the priority. This will entail sustained deregulation and liberalization, robust financial sectors and the continued development of trade and investment ties.

Morocco

Morocco has achieved average GDP growth of 5.4% since 2001, thanks to a raft of reforms, but is expected to only achieve 2.5% this year. The drop is mainly due to the effect of a severe drought on agriculture, which contributes 20% to GDP and more than 40% to employment. The cereal harvest fell from 9.3 million tons to 2 million tons and exports of products like citrus fruits have also nosedived.

The country is committed to reducing its reliance on agriculture, and the government is confident the economy will bounce back and targeted 6.8% growth in 2008. The IMF forecasts a marginally more modest 5.9%. In the third quarter of 2007, due mainly to the lively services and construction sectors, unemployment dipped beneath the psychologically important 10% level, despite the loss of 20,000 agricultural jobs. As elsewhere in the region, unemployment is a serious issue, with the government saying 400,000 jobs a year must be created over the next 10 years to keep pace with population growth and reduce overall joblessness. This is no small feat — over the past 10 years, a period of relatively high growth, on average only 130,000 new jobs were created annually.

With fears of inflation eliminating any expansionary fiscal policy as a tool for cutting unemployment, job creation will have to come from the private sector, aided by the government’s pro-business stance. Sectors such as telecom, transport and the all-important labor-intensive tourism sector are all expected to register growth between 7 and 9% over the next year.

As well as seeking to strengthen the trade-oriented industries that benefit from EU open ties, Morocco is seeking to develop trading relations with its immediate neighbors, which have been weak up to this point, not least down to Algeria’s support for the Polisario Front in Rabat’s continuing conflict over the Western Sahara.

Tunisia

In 2007 Tunisia marked 20 years since the Change, when President Habib Bourguiba, who had led the country since independence, was replaced by Zine al-Abedine Ben Ali. Under Ben Ali, Bouguiba’s socialist model has been incrementally rolled back in favor of free markets and private enterprise.

For the past 35 years, Tunisia has made attracting FDI to the country a cornerstone of economic policy, and has specifically encouraged investment in export-oriented sectors. Its geographical position, relatively affordable land and labor, and most importantly a range of trade deals, particularly that with the EU, are touted by officials as ideal reasons to invest in the country.

This policy has been accelerated since the Change, with privatization and a gradually more open economic policy being keys to ensuring that foreign capital continues to flow in, and exports to flow out. FDI grew from $83 million in 1986 to $3.65 billion in 2006, and has created an estimated 270,000 jobs in that time.

The IMF has praised Tunisia’s “outward-oriented development strategy” which eschews protectionism and looks to encourage foreign participation in the economy and stimulate exports. Over the past decade, exports have grown by 15% annually and now contribute more than half of GDP, compared to 35% 20 years ago.

Now Tunisia is focusing on further improving its attractiveness to foreign investors and in increasing the export of “value-added” — i.e. more expensive and higher-margin — products. The 11th Development Plan includes pledges to “stimulate private investment, particularly in high value-added sectors” and “improve the business climate, attract more FDI.”

Legislation is in the pipeline to allow companies to apply for 10-year tax holidays on profits derived from exports, after which they will be taxed at 10% — equal to the lowest rate in the EU.

No set timeline has been laid out for the shift of the dinar to full convertibility. Most estimates are in a vague three-to-five year range, despite the undoubted benefits of convertibility to foreign investors. While Tunisia’s present system of controlled floating rates is seen both as transitional and not a huge barrier to investment, the fact that there is no set date for full convertibility puts in doubt the political will to implement a full float.

Tunisia’s macroeconomic stability looks secure enough, promoting a continuation of strong growth. This growth will be essential to ensuring that jobs are created for the growing population, many of whom are — or will be — young university graduates, equipped to work in high-end, demanding jobs.

Unemployment has remained stubbornly around 14% for the past half decade. By continuing to promote FDI in high-earning sectors, the government is taking some of the right steps to increase employment. However, they need to be supplemented by a loosening of red tape and an even more active encouragement of private enterprise. The official projection is for unemployment to be cut to 13.4% by 2011 — even taking into account fast population growth, this seems woefully short of what is needed.

Algeria

The soaring world price of energy defies all attempts by oil and gas rich countries to diversify the fundamentals of their economies. Algeria’s non-hydrocarbon growth this year is expected to be 6%, with overall growth of 5% as hydrocarbon output was reduced. Even so, the cash interpretation of these percentages is such that the significance of oil and gas in the economy is going up, not down.

Government coffers are brimming with hydrocarbon revenues, and money is being ploughed into big projects such as the $60 billion Complementary Plan for Support to Growth which aims to bring the country’s infrastructure up to the standards of the developed world, as well as providing jobs for the country’s unemployed.

This level of funding coming on-stream requires a continuation of careful monetary policy, particularly as other pressures such as rising food and construction costs are also present. The IMF predicts 4% inflation by year-end, tolerable for an emerging market, but has warned that keeping a lid on prices is a key priority for the country, along with the elusive goal of a diversification away from hydrocarbons.

Two other, thornier problems highlighted by the organization are high unemployment and an underdeveloped financial sector. Overall unemployment is 13% officially, but youth unemployment may be as high as 45% — a very serious issue indeed for the country. While public funds and continued growth should help cut unemployment to a degree, a report prepared for the IMF has suggested that supply-side reforms will also be beneficial. These include easing labor legislation to make hiring and firing easier, a reduction in employer contributions to social security, using oil revenues to cut taxes and ensuring that the financial system is robust enough to support private enterprise.

In 2007, Algeria recommenced privatizing its previously troubled banking sector, offering 51% of state-owned Crédit Populaire d’Algérie (CPA), the country’s fifth-largest bank, with a 15% market share. Technical bids were submitted by several large international banks, including Banco Santander, Citibank and BNP Paribas and the deal was expected to be sealed before the end of the year at the time of going to press.

The fact that such large banks are enthusiastic about the privatization bodes well for the Algerian banking sector, where previous privatisations ended in crisis and renationalization. It is also a fact that has not escaped the bigger Gulf banks. State-owned Algerian banks account for 95% of loans and deposits, but suffer from inefficiency and a high proportion of non-performing loans — around 38% of all credit, compared to 5.8% in the private sector.

However, there are currently no published plans to privatize the largest state banks, Banque Exterieur d’Algérie (BEA), Banque Nationale D’Algérie (BNA) and Banque de l’Agriculture et du Développement Rurale (BADR). Since they would all benefit from the capital, technology and professionalism that the private sector can bring, it is only a matter of time before the government applies the same logic to them that it did to CPA and Banque de Developpement Local (BDL).

And those all important new ties with Britain, now assuming the economic mantle once worn by France? Bouteflika’s two-day visit to London in July 2006 was the first visit for an Algerian head of state to the UK since the country gained independence from France in 1962. His 48 hours in London was aimed at promoting Algeria to potential UK investors and the broader international community, but especially to the British energy and telecom sectors. Britain’s recognition of the potential gains from these newly forged links was signalled by its intention to acquire larger premises in Algiers for its embassy and easier visa access. The British Council is also back after a 13 year absence.

Peter Grimsditch is editorial director of the Oxford Business Group.

December 1, 2007 0 comments

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The Tunisian Change

by Peter Speetjens December 1, 2007

written by Peter Speetjens

On November 7, 2007, it was precisely 20 years ago that “the change” took place. Today, one month later, the streets of Tunis are still colored red with tens of thousands of the nation’s flags and images of President Zine al-Abedine Ben Ali, while you cannot open a magazine without reading about the incredible progress the country made under the inspiring guidance of its great leader.

So, the national press agency reported that on the 20th anniversary of “the change” 3,000 intellectuals, members of civil society and jurists had signed a declaration praising the gains the country had achieved, while emphasizing that these could not have been achieved without the will and “perseverance” of the Tunisian President. Réalités Magazine put a heavily retouched photo of the president on the cover with the headline: “The new face of Tunisia.”

This kind of journalism can hardly do any good for the country, as it just screams for an ironic reply, knowing that “the change” first of all, and rather euphemistically, refers to the disposal of former President Habib Bourgiba by current President Ben Ali. After some 30 years at the helm, Bourgiba was judged “senile”. Newly sworn in, Ben Ali solemnly declared he would never stay as long in power as his predecessor, yet 20 years and two constitutional amendments later, Ben Ali still firmly sits on the throne. Hence, he also known as “Ben a vie” (Ben for life).

Still, putting irony aside, one cannot but admit that Tunisia has booked impressive results under Ben Ali’s leadership. For “the change” not only refers to the change at the top, but also to gradual transformation of Tunisian society: From a socialist-inspired model, in which the benevolent state took care of everything and everyone, to a more liberal scheme, in which free market forces and private enterprise were allowed to take center stage. Remarkably, Tunisia achieved its change without any major social upheavals or financial crises, despite the fact the country’s economy was in a deplorable shape by 1987.

While countries such as Egypt, Syria and Algeria are still struggling to come to terms with the reality of the post-Cold War era, the Tunisian private sector today contributes 76% to the country’s GDP of some $33 billion, employs 71% of the country’s workforce, and represents 64% and 85% of annual investments and exports respectively. In addition, Tunisia has known a more or less constant annual economic growth rate of 4% to 5% annually and consequently saw its GDP almost double since the infamous change.

The good thing about the Tunisia transformation is that economic progress so far did not come at the expense of social development. So, still some 80% of the population belongs to the country’s middle class, while less than 4% lives under the national poverty line. Nearly every household is connected to the electricity grid. An increase in health centers and hospitals, combined with free medical care for the needy, saw life expectancy increase to an average 73 years, while illiteracy has been reduced to less than 20%.

The latter may still seem a lot, yet one should know that by the end of the French colonial rule in 1956 no less than 98% of Tunisians were illiterate. In that sense, it is no exaggeration to state that Tunisia has come a very long way, especially as it did so without an abundance in natural resources. Add to that the country’s safety record and, last but not least, the fact that in 2008 Tunisia’s free trade agreement with the European Union will go into top gear, and one understands why Tunisia has become a darling destination for international investors.

So, the Spaniards bought themselves into the country’s formerly state-owned and quite lucrative cement industry. The Italians have signed up to construct an electricity plant and industrial city. The Turks are building an airport and the Indians a phosphate producing plant. In recent years however, it has especially been the Emiratis who have come to appreciate the Tunisian model and the country’s strategic position on the edge of Europe.

It made President Ben Ali a busy man. In July, he laid the cornerstone for “The City of the Century,” Dubai Holding’s $15 billion dollar mixed-use project on the edge of Tunis, while in November he laid yet another symbolic first stone for “Tunis Sorts City,” Bukhatir’s $5 billion theme-based development on the shores of the capital’s Lac du Nord.

Seeing Tunisia’s achievements over the last 20 years, it is all rather unfortunate that the country’s media still too often behave as a caged bird. Its overzealous parroting and personal worship only leads to unintended irony. Ben Ali, the new face of Tunisia? No, not quite. Ben Ali, the face of a remarkable Tunisian turnabout? Like it or not, but most probably the only reply to that question would be a wholehearted: yes, indeed.

December 1, 2007 0 comments

By Invitation

Web 2.0: Profiting from the threat

by Jad Hajj December 1, 2007

written by Jad Hajj

Web 2.0 — the second generation of web-based services and communities that emphasize online collaboration, networking and user-created content — is growing at a phenomenal pace. A recent Booz Allen Hamilton study shows just how prevalent this interactive consumer behavior has become and puts to rest any notion that social networkers are all 17-year-old boys or that “average people” don’t read Weblogs. The study found that 50% of all internet users frequent social media sites, and that more than half of the visitors to MySpace, the notoriously youth-oriented social networking site, are 25 or older.

Among the many activities taking place on new technology platforms, such as blogs, wikis, podcasts and online communication pit stops, is one that should particularly pique the interest of corporate managers: More and more, consumers are sharing their opinions about products, services and the behavior of companies. What this means for business is not always clear, but most executives have a sense that their company must respond to this phenomenon. They’re just not sure what to do or how to begin.

One useful approach is to frame the issue as a challenge: How do internet-based social media change the marketing environment for companies? We have identified three ways that the internet is altering the landscape, along with the hidden opportunities in each.

Companies are no longer solely in control of their message

Corporations are unable to rely on traditional one-way methods of communication to reach and influence consumers. Web 2.0 has turbocharged the whole notion of “word-of-mouth,” circumventing traditional marketing by letting individuals talk directly to each other about their passions, their buying preferences and their pet peeves. Hence, instead of trying to control the message, companies should focus on joining in these conversations. Web 2.0 offers limitless opportunities for companies to engage their customers in meaningful dialogues and learn exactly what they’ve wanted to know all along: precisely what their consumers think about their products and brand. Companies can begin at sites like Technorati.com to find out what is being said about them online and respond to postings about their products or services or addressing concerns as warranted. And they can begin generating conversations themselves by creating their own blogs, as Sun CEO Jonathan Schwartz has done with Jonathan’s Blog.

Web 2.0 is fragmenting marketing channels

The explosion of blogs and social networking sites — some 100,000 new blogs launch daily — is breaking already-fragmented marketing channels into even tinier pieces. Visitors to the web no longer start at large portals like Yahoo or MSN; rather, they go straight to niche communities and websites catering to their specific interests. But fragmentation has its upside, offering companies a shortcut to highly desirable demographic groups. Want to get the attention of professionals with an average of 15 years of experience? Try LinkedIn.com. Moreover, establishing a brand presence on online channels costs a fraction of what it does in traditional media channels. And it allows companies to leverage “consumer evangelists” — those customers who, once captured, undertake their own word-of-mouth marketing campaigns and help a company’s customer base evolve.

In addition, companies can take advantage of fragmented channels to perform targeted, inexpensive product research — partly because customers are already using these channels to describe what they love and loathe about companies’ offerings. Companies that collect and analyze this data can use it to improve and shorten product development cycles, which in turn can lead to increased predictability of product successes.

Web 2.0 offers a bullhorn for consumer complaints

Learn from computer maker Dell’s mistake: In 2005, it ignored a single blogger’s complaint about its poor customer service that eventually reached traditional media outlets such as the Wall Street Journal and the New York Times. In the months that followed, Dell’s customer satisfaction rating, market share and share price in the United States all plummeted.

Rather than ignoring — or fearing — criticism generated in Web 2.0 forums, companies should seize Web 2.0 tools to respond. For example, when frustrated JetBlue customers launched a blog recounting the hours that the airline left them stranded on the tarmac during a February 2007 storm, JetBlue responded with a video apology from its CEO on YouTube. The video was viewed 40,000 times in its first seven days online, during which time JetBlue received thousands of supportive e-mails from consumers. In addition, JetBlue was praised by blogger pundits for successfully incorporating social media into crisis communications.

Social media need not set off a panic. Although companies can no longer count on the power of one-way messaging, it’s also important to realize that new platforms carry new potential benefits. Furthermore, building competency with the new platforms is not an option; it’s a requirement. In the interactive context, traditional marketing campaigns are no longer enough; getting the desired message to the target audience takes vigilance and constant adjustment to the fast-changing communications landscape.

Jad Hajj is an associate for Booz Allen Hamilton in Dubai.

December 1, 2007 0 comments

By Invitation

Muscling the Mideast music market

by John Defterios December 1, 2007

written by John Defterios

It took us a half hour to drive from Sheikh Zayed Road in the center of Dubai to the Al-Quoz Industrial Area where you’ll find the headquarters of Arab Media Group or AMG. Their three-letter acronym will soon have a very familiar three-letter brand running right along side it, MTV.

The one you know is celebrating the launch of its 60th channel this weekend, 53 of those outside the United States. The other, AMG, gets a chance overnight to play in the big leagues of global media, with its 10-year partnership agreement.

A great deal has been said already ahead of the launch, but let me boil it down into three headlines:

MTV is ready to enter a market of 50 music channels in the region. Their lead music channel will be built around Hip Hop and two-thirds of the population in the Arab World is under the age of 25, so there is room to grow.

What is equally important but often overlooked in the excitement about edgy programming and the rush for advertising dollars, or in this case dirhams, is what I call the third ‘D’, dialogue.

MTV sees itself as something much more than music television. It is a platform for debate to discuss drugs, health issues and can be a great vehicle to exchange cultures, music and ideas. Bill Clinton and Tony Blair jumped into MTV town hall meetings for the same reason advertisers choose this platform, to reach youth in their space.Bill Roedy, MTV’s global ambassador since 1989, not only gets excited about rap music emerging out of Saudi Arabia, but the potential to break down barriers. “I think often there are stereotypical views about the Middle East,” Roedy says, “And this will give us a chance to reflect this great culture and what I think is going to be a great product.”

His counter-part in the venture, Abdullatif al-Sayegh the 30-something CEO of AMG, did the interview with me in the traditional Arab tobb, against the MTV graffiti studio backdrop. He talks about listening to the Arab youth and engaging them through entertainment.

“Just go with the language they understand, with the language that they believe in, with the way that they can understand you better. I am sure we can fill a lot of gaps between the West and the Arab World if we do this.”

Sounds worthy, but possible. How about the backlash against the message coming from what is clearly a western brand? Not a problem. The Virgin Music Store we went into was filled with a mix of Arab and western expatriate youth, thumbing through the latest offerings and perusing New York Yankee baseball caps. Downstairs in the shopping mall, teenagers and their parents lined up at Starbucks to get their iced lattes and blended fruit drinks.

So the lesson we may all learn out of the latest launch of MTV, is that many on the streets of the Middle East may not agree with US policies in the region, but they do trust American brands and what they stand for — openness, edginess, and can we say it? Being hip.

John Defterios is the host of “CNN Marketplace Middle East,” a new weekly business program dedicated to the latest financial news and figures from across the Middle Eastern region.

December 1, 2007 0 comments

By Invitation

A random blip or a future trend?

by Imad Ghandour December 1, 2007

written by Imad Ghandour

Zawya Private Equity Monitor released last month its statistics for investments and fund raising for the first nine months of 2007.

Problems in fund raising?

The funds raised in the first nine months have increased by 20% from $1.9 billion in 2006 to $2.3 billion in 2007. Great news — at first glance.

However, the $2.3 billion includes $1.2 billion raised by Abraaj’s Infrastructure and Growth Capital Fund, and conceals the untold truth that many funds are struggling to raise money. The easy money days of 2005 and 2006 seem to be over.

Despite headline news of oil hitting $100 a barrel and the excess liquidity in the region, many private equity houses are unable to close their funds. A leading regional private equity firm that was successful in raising several funds and has billions of dollars under management have closed its latest fund only a third of its target of $1 billion. Another regional investment bank, targeting $150 million, have barely reached a third of that amount after one year of fund raising. Only two of many stories.

New comers to the business sailed even worse than the rest. I now have a long list of funds that were announced in 2005 and 2006 and have still not closed. Chances are, they will never close.

I was not sure if this is a result of a glut in the liquidity flow, a pause for investors to think if private equity works, or actually a reasonable evolution of the industry. Liquidity may have shrank in the first few months of this year as interest rates rose (this is now being reversed) and oil prices dropped in the first quarter to around $50 (that now seems as the distant past). You can also argue that investors have poured billions in 2005 and 2006, and now they wanted to see some returns before pumping more cash in new funds.

The fact is, those funds that have established a track record, like HSBC Private Equity, found no problem raising another fund despite the (mildly) adverse conditions. Investors are not shy from investing, but they are betting on funds with solid track records.

Signs of a maturing industry? Let’s see the last quarter of the year before we make a final judgment.

Jordan — a role model

UAE has consistently — at least since Zawya and GVCA has started to compile these statistics in 2005 — been ranked as the prime destination for private equity investment. No surprises here. UAE houses 75% of all private equity fund managers, so it is easy for fund managers to invest in the neighbor next door. UAE is also the second largest economy in the region, and one of the most competitive (I am now lost with a dozen competitiveness indexes being churned out every year).

I was surprised (again) to find Jordan being ranked number two. The only explanation I have found so far is that Jordan is one of the most stable and open economies. Despite its small size, Jordan is offering real opportunities for private equity.

I was surprised (again) to find Saudi Arabia sharing the fourth place with Bahrain. The largest economy in the Middle East is outdone by UAE, Jordan, Egypt, and Bahrain. Not a surprise based on the same analysis above. Despite its vast potential and immense number of opportunities, private equity investors are not excited to invest in the opaque kingdom.

A wake up call for the investment promotion agencies that vigorously publicize their country’s competitiveness: private equity investment is probably the best reliable measure of how attractive any economy is to private capital. This category of investors will diligently and objectively balance the risks, obstacles, laws, growth, rewards, etc., in every economy and investment opportunity. They are the only one of those “competitive index publishers” who put their money where their mouth is. Food for thought for the region’s governments.

Imad Ghandour is Head of Strategy& Research, Gulf Capital and Board Member of theGulf Venture Capital Association.

December 1, 2007 0 comments

Capitalist Culture

Freedom – Into oblivion

by Michael Young December 1, 2007

written by Michael Young

Just when it seemed that things couldn’t get worse for capitalist culture in the Middle East, we now have to absorb the backward blow of a dismal 2007. The region is more than ever trapped in enmity, pushing the advance of free minds and markets further into oblivion; Lebanon is facing a sustained threat to what remains of the 2005 Independence Intifada, with the increasing likelihood that Syria will re-impose some form of hegemony in the coming years; and 2008 is looking very much like it will only exacerbate the tensions of this past year.

So much for your Christmas cheer. Complicating matters is the price of oil. It’s moving inexorably upwards, helping the likes of Iran, Russia, and others who have a vested interest in seeing the United States remove itself from Iraq and downgrade its power in the region. Whatever the merits or demerits of such ambitions, they are sure to make Washington angrier and more frustrated than it already is in the Middle East, so that some form of conflict is likelier. And where there is conflict, liberty withers.

As one observer put it so well, while crises in much of the world tend to unblock situations and create new opportunities, those in the Middle East only make things worse. The tectonic plates of the region lock further, so that the probable outcome is a major new earthquake.

Everywhere, on one side of the regional divide or the other, the matter of liberty is being ignored. If the Middle East is facing a new cold war, as the New York Times columnist Thomas Friedman has argued, then on one side of this partition you have Iran, Syria, Hizbullah and Hamas; on the other you have the mostly Sunni-led Arab states, particularly Saudi Arabia, Egypt, and Jordan, backed by the United States. While all the parties disagree on quite a lot of things, the net impact of their degenerating struggle, and an unmentioned point of agreement between them, is that now is not the time to allow democrats to be empowered, or even to allow civil society to display new vitality.

In Iran, for example, where society presents the greatest opportunity for a liberal breakthrough in the region, the prospect of a war between the US and Iran can only be nefarious for liberty. Not only would most Iranians probably rally to the side of their state, no matter how oppressive, a conflict would give that state even greater means to control the society.

In Syria, the issue of liberty is not even being seriously discussed. President Bashar al-Assad has stifled civil society much as his father did, and the brief “Damascus spring” is a distant memory. The regime is bolstered by an improving economic situation, thanks to Iraqi refugee money, Arab investments, and Iranian funding. Syria remains vulnerable, however, as its oil reserves are almost finished and investment moods can quickly change. But for the moment Assad is stronger than he has been in years, and his people are torn between apathy toward a system that forever seems to be going nowhere and fear of what the regime’s departure might bring. Worse, the international community refuses to create new options by working on strengthening Syria’s democratic forces. It accepts the idea that it’s either Assad or chaos, and in so doing fortifies the regime.

In fact, Assad has shown just how far he is willing to go by trying to return to Lebanon in one way or another. The Syrians, in coordination with an undemocratic Hizbullah, have provoked chaos in Lebanon in order to turn themselves into the inevitable interlocutor on the country’s future. When France recently engaged Syria on the Lebanese presidential election, that strategy seemed to be working. A liberal space was opened up in Lebanon in 2005. Is it about to be closed again because of Western foolishness?

On the other side, too, liberty is largely a figment of the imagination. The Egyptian president, Hosni Mubarak, is focused on his own succession, particularly ensuring that his son takes over power. There can be no democracy when the prevailing vision is of a republican monarchy. And the regime is hitting out everywhere, with even youthful bloggers being tossed into jail and tortured. Saudi Arabia is little better, with its participatory system in congenital lockdown. What freedom there is happens behind closed doors, with the regime alarmed by a rising Iran and an Iraq that might at any moment destabilize the kingdom.

One can go on. 2005 was supposed to be the year of grand democratic transformation in the Middle East. Partly it was; but it was also a trigger that autocratic regimes in the region needed to circle the wagons and ensure that liberty would be suffocated in the egg. Free minds are flat-lining in the region, and that’s not going to change anytime soon.

December 1, 2007 0 comments

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Greater Middle East in 2008

by Claude Salhani December 1, 2007

written by Claude Salhani

It’s that time of year again and there is little to rejoice about as 2007 draws to a close. The Middle East crisis, for decades confined mostly to the countries bordering Israel, has spread to include what the Bush administration calls the “Greater Middle East” with Turkey and Pakistan dragged into the fray.

Pessimism is the order of the year. The situation, many observers believe, will get worse before getting even worse. The Bush administration’s hope to sow democracy throughout the region has shifted into reverse gear. But then again, this is the Middle East where miracles have been known to happen. That reverse gear can just easily shift into first.

Weeks shy of scheduled elections Pakistan’s President Pervez Musharraf, a major US ally in the “war on terrorism” decided in early November that his country could do without democratic institutions and declared a state of emergency. The general, it was hoped, would keep his military uniform tucked away in his closet and run as a civilian in the elections, one of the demands of the opposition, instead came out of the closet wearing full battledress fatigues. But perhaps US pressure sometimes comes through. Musharraf did end up shedding his uniform, but only after appointing a close ally to replace him.

Musharraf, who has received about $10 billion from the US, said he was placing his country’s interests above everything else. That includes Bush’s hopes to see democracy spread. Instead, I predict that free and fair democratic elections in Pakistan are unlikely to take place in the immediate future. Pro al-Qaida Islamist groups will increase violence hoping to overthrow Musharraf and create the first nuclear powered Islamist state. That is assuming Iran doesn’t beat them to it. Musharraf’s battle with the country’s judiciary is likely to escalate before the turbulence shaking Pakistan’s political climate settles down. And the lawyers may win.

An easy prediction is the war in Iraq. Despite claims that some provinces are getting better, the conflict will outlast the Bush administration. As George W. rides off into the sunset from Washington for his ranch in Crawford, Texas, he will leave to his successor (a Democrat, in all probability Hillary Clinton) a legacy more muddled, more complex and more volatile than ever before. Turkey will become militarily involved as it pursues Kurdish separatists into Iraq.

On the economic and home fronts Bush’s legacy fares no better with oil nearing $100 a barrel and the housing market in shambles as a result of the financial debacle over the sub-prime mortgages which forced two CEOs — Charles Prince of Citigroup and Stan O’Neal of Merrill Lynch — to resign. New York City-based Citigroup may soon layoff as many as 45,000 jobs as a result of the sub-prime crisis. Citigroup employs about 320,000 people and manages roughly 200 million customers worldwide. The company lost about $6.5 billion in the sub-prime affair.

Prince’s departure came only a week after the resignation of O’Neal, the head of Merrill Lynch, one of the world’s best known investment banks. Merrill Lynch, too, is said to be caught up in the sub-prime loans business.

Relations between the United States and Iran will remain frozen, if we are lucky. A last-minute effort by the Bush administration to destroy Iran’s nuclear capability is not to be ruled out. If that were to happen a new wave of jihadi violence can be expected.

For Israel and Palestine, the revived road map for peace in the Middle East led to the Annapolis mega-peace conference which brought close to 50 countries and organizations, including for the first time, 16 Arab countries, among them Saudi Arabia and Syria together with Israel.

As predicted by numerous analysts, the Annapolis conference in and of itself failed to produce any immediate results. Instead, the Israelis and Palestinians promised to “continue pushing towards peace.” In political parlance that’s the equivalent of “the check is in the mail.” If indeed nothing concrete comes out of Annapolis and the follow-up meetings at the White House, the Bush administration can well be blamed for failing to apply pressure when it was needed most. The most dangerous consequences of a failed attempt at peace-making at this stage is likely to give birth to a renewal of violence in the region. If the year 2008 does not usher in a peaceful agreements between Israeli and Palestinians, it could see the beginning of Intifada III.

In Lebanon, the political scene remains so muddled — and with it the economic development of the country — that even the bravest of political scientists fear making predictions other than to say that the next 365 days are unlikely to see a resolution of the crisis. Lebanon may have a new president, this one less dependent on Damascus, though the pressure from the Syrian neighbor is unlikely to abate. The country’s future will remain intricately tied to Syria’s.

December 1, 2007 0 comments