By Invitation

Muscling the Mideast music market

by John Defterios
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.

 

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By Invitation

A random blip or a future trend?

by Imad Ghandour
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.

 

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Capitalist Culture

Freedom – Into oblivion

by Michael Young
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.

 

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Greater Middle East in 2008

by Claude Salhani
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.
 

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Teeing off in Kashmir

by Paul Cochrane
written by Paul Cochrane

Teeing off at the Royal Springs Golf Club in Srinagar, Kashmir, it was not hard to see what would attract Arab golf enthusiasts looking for a slightly more adventurous destination.

The mountainous backdrop, the trees in autumnal reds and oranges, Dal Lake behind, and a course designed by golf architect great Robert Trent Jones, all make the club the best in India.

But the problem at the club is the lack of players, and that is not due to the exceedingly low green fees ($20), club hire ($5) or caddie service ($2). It is “because of the situation” said manager Rafiq Azad, sounding not unlike a Lebanese businessman.

Azad was referring to Jammu and Kashmir’s 60-year struggle for independence, and the militants — largely Pakistani-backed but now dwindling in number and popularity — that have waged a 20-year insurgency against the Indian state.

The ongoing situation in Kashmir has destroyed lives, acted as a catalyst for emigration, generated tensions between Delhi and Islamabad, and is costing the Indian state some $7 million a day to station one million troops there.

This is all the more tragic as Kashmir was once a popular tourist destination, famed for its mountains, lakes, flowers and skiing, and called locally the “second Switzerland” — all comparable to that so-called “Switzerland of the Middle East,” Lebanon.

Azad said he wants to attract Gulf Arabs to play at the club, but until there is more investment, an international airport opens, and people feel it is safe to go to Kashmir again, this northern part of India will remain wanting. Even from Indian investment.

The big money is being made elsewhere in the world’s second largest growing economy, just as it is by Lebanon’s (and indeed, the Levant’s) cousins in the Gulf. That is where the Indian-Arab relationship is blossoming, in recent decades rekindling an ancient mercantile relationship, with India signing bilateral protection agreements with nearly all the GCC countries.

As India’s economy is growing at over 9% a year, it is not surprising Indian exports to the GCC are surging, up 17% from 2005’s $14 billion to $16.7 billion last year. And if India signs a FTA with the GCC, two-way trade could reach $40 billion by 2010.

With such a booming economy, India’s 50 million middle class have increasingly more rupees in their pockets, a demographic that Lebanese luxury retailer Aishti is rumored to be wanting to move in on, and Dubai’s Emaar already has.

The economic outlook is apparently bullish, with the middle class expected to surge to 40% of the population, to 587 million, by 2025, according to a McKinsey Global Institute (MGI) study, due in part to a growing 16-64 years old age range, from 700 million in 2005 to 950 million in 2025, and household income tripling in the next two decades to bring India up from the 12th largest consumer economy globally to fifth position.

This may come to be, but a lot will have to change to alter recent government statistics that state that 92% of the population are informal workers, and some 836 million (77%) of Indians live on less than 20 rupees ($0.50) a day. As for the 10 million Kashmiris in India, a viable solution to the situation is needed between Delhi, Islamabad, and Beijing (which controls 10% of Kashmir), as well as divisions among the Kashmiris — a bit like Lebanon’s situation with all and sunder poking their noses in. Indeed, Saudi Arabia’s Wahhabi influence has spread to Kashmir, there is widespread support for Iran (and Hassan Nasrallah) among the 20% of the population that are Shia, and Israel is reportedly seeking to gain a foothold as well, according to academics at Kashmir University.

But as this is the festive season, let’s be optimistic. The McKinsey’s figures might not be pie-in-the-sky forecasts and political and economic realities can be overcome. All Indians will get a slice of the economic pie, Kashmiri golf clubs will have membership waiting lists, and peace will come to all men in the troubled North India region and the beleaguered Middle East.

It might also be worth my teeing off from Beirut’s golf course as an act of solidarity, but perhaps in the new year, regardless of the “situation.”

 

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Who will you be (with) this holiday season?

by Rana Hanna
written by Rana Hanna

As a new year begins and we all search to reinvent ourselves, here are a few ideas for those wishing to find out who they really are, and even who they may want to be.

For those who wish to know the past before moving on to the future, you can now can trace your ancestry using genetic genealogy and find out if you are closer to Claudia Schiffer or a monkey. The DNA Ancestry Project, offered by Genebase Systems, allows us to trace our origins based on mutations in our DNA. According to the project info, DNA tests have proven that we all shared a common ancestor anytime between 50,000 and 200,000 years ago. As people migrated out of Africa, genetic mutations occurred in their DNA. As these mutations cemented in the generations that passed, each mutation in our genes today can be linked to a specific time and place in history. By sending a sample of your DNA, obtained through a saliva sample on a cotton swab (provided in the special participation kit on sale for $119) certain mutations that are predominant in certain areas will determine where you come from. Check it out on www.dnaancestryproject.com.

Closer to the monkey? No problem. Just reinvent yourself as an Avatar and make a new start on Second Life, a virtual community populated by Avatars. If you’re not already, you can reinvent yourself as a tall, blue-eyed blonde, find work and buy property. With over 2 million residents, life in Second Life (or SL as it is commonly known) is replete with shopping sites, discotheques, parks and even a red-light district. There are many real-life companies that have set up offices in Second Life, including CNN, Reuters, Cisco, Toyota and Starwood Hotels and Resorts. The government of Sweden even opened an embassy there. SL is a complex system with its own economy (it has its own currency, the Linden Dollar), laws, rules and regulations so if you do decide to reinvent yourself, make sure you have a lot of time on your hands. (www.secondlife.com)

But if you decide to stay in present day reality, then like most of us, you will probably be sending holiday greetings to all your friends on Facebook.

Facebook, like MySpace, Frienster and LinkedIn (a network of professionals with degrees of separation), is one of the many social and professional networking sites that allow people to get in touch and stay connected, one of the many marvels of the internet that have made us more and more dependent on our machinery and the cyber world.

On these sites, you can post up your pictures and tell people as little or as much as you like about yourself. Where you are, what you’re doing, your state of mind and even what you’re eating.

Facebook is about popularity. It is not so much who you are, but who you know, and how many people you know that matters. Facebook has introduced a new concept to friendship: the Facebook friend. A Facebook friend is someone whose news you only know through Facebook because you simply don’t have time (or maybe don’t want to) catch up with in reality. But there’s another type of friend introduced by Facebook: The long lost childhood friend. But here’s the catch: You’ve found your long lost friends. Now what? After exchanging greetings, sending pictures that you wish you could retouch and summarizing the last 30 years of your life in three lines (trust me, it can be done), where do you go from here? I have found it difficult to keep in touch with my childhood friends because I can’t face the momentous task of catching up. A few months ago I found a friend I hadn’t seen in 24 years. We exchanged phone numbers and we’re still waiting to have lunch! (Makes you wonder why you lost touch in the first place).

Never before have people been as connected as they are now. Virtually at least. But as we stare at our screens and “touch someone”, do we realize how disconnected we have actually become from reality and the people around us? How dependent we have become on our cyber life? Here’s a test you can do to test how dependent you are on your internet connection: stay at home or office for one hour and switch your connection off. Give yourself 10 points for not minding, 5 points if you looked longingly at your laptop and 0 points if you freaked out.

 

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Tehran’s domestic battles begin

by Gareth Smith
written by Gareth Smith

Western media reaction to last month’s International Atomic Energy Agency (IAEA) report on Iran’s nuclear program sounded chillingly like the beat of war drums. Even supposedly reputable outlets seized on the line — from British spin doctors — that Iran had “failed to come clean.” In fact, the report recognized that Iran had improved its cooperation with the IAEA, in line with a decision Tehran took in August despite growing western belligerence.

The US and British-led plan is undermining the pragmatists in Tehran. Hence, last month’s announcement of spying charges against Hossein Mousavian, the former Iranian security official who played a leading role in nuclear negotiations with the Europeans.

I found Mousavian an urbane and intelligent man when I interviewed him several times in 2004 and 2005. He was one of the three Iranians leading talks with the European Union. That was a time when Iran suspended key parts of its program and when some European diplomats spoke privately of a compromise in which Iran would keep at least some uranium enrichment capacity.

The charges against Mousavian — which include passing secrets to the British embassy — have all the hallmarks of being political. The fundamentalists who criticized the talks back in 2003-5 have taken over more and more levers of government power since the election in 2005 of Mahmoud Ahmadinejad to the presidency.

But Mousavian is part of an older trend of Iranian officials who have paid a price of working for an agreement with the West and then failing to deliver tangible benefits in a compromise that recognizes Iran’s “rights”.

Ali Larijani, secretary of the Supreme National Security Council, resigned (or was pushed to do so) in October after the failure of his dual strategy of talking to Javier Solana, the EU foreign policy chief, and improving cooperation with the IAEA. The dialogue with Solana was undermined by opponents at home and in Europe.

Gordon Brown, the British prime minister who at first distanced himself from the Middle East policies of his predecessor Tony Blair, made a speech at the London Lord Mayor’s banquet last month that president Bush must have enjoyed. Brown warned Tehran it had a choice between “confrontation with the international community leading to a tightening of sanctions” and “a transformed relationship with the world…if it changes its approach and ends its support for terrorism.”

Western proponents of tougher sanctions and — “if necessary” — military force against Iran argue that harsh treatment will change the behavior of the regime in Tehran. They say existing sanctions are already biting, despite the country’s record oil revenue, which rose by 13.6% to $54 billion last Iranian year (ending March 2007).

Certainly, the international energy majors with existing Iranian interests are pausing. Royal Dutch Shell, Total, OMV and Repsol are all holding off commitments on investment after their agreements in principle over developing Iran’s massive gas reserves — the world’s second largest. Iran has given the companies until June 2008 to decide. But it insists both its gas and oil reserves can be developed if necessary through Iranian companies cooperating with east Asian companies, and some small European companies willing to take risks that may offer huge long-term benefits.

The warming up of the domestic political battles in Tehran also reflects a build up to parliamentary elections due in March. Iranian politics have changed in many ways since the last poll, in February 2004, saw a relatively unified conservative camp win a comfortable majority in a quiet election after many leading reformists were disqualified.

Critics of Ahmadinejad — including both reformists and conservative pragmatists allied to former President Akbar Hashemi Rafsanjani — were encouraged by their performance in December’s local council elections. But in all likelihood, conservatives will retain their parliamentary majority — even if reduced — and maintain their advantage as Iran moves towards the 2009 presidential election.

However, the political pendulum swings in Iran, the western expectation that internal Iranian politics can work in its favor is misguided.

First, the track record is terrible. Consider Bush’s botched intervention in the 2005 presidential election, when his message that the poll “ignored the basic requirements of democracy,” presumably designed to help a boycott campaign led by right-wing exiles, was followed by a high turnout.

Secondly, it is far from clear who the West would like in power in Tehran. Many Washington neo-conservatives, like their Israeli allies, were delighted with Ahmadinejad’s election win, believing to would bring confrontation nearer, and have done nothing to disguise their glee at the propaganda opportunities he has presented them, particularly in remarks about the Jewish holocaust.

But there are still some Europeans who believe an agreement is possible, because they realize, especially after Iraq, what the alternative might be.

 

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Financial Indicators

by Executive Contributor
written by Executive Contributor

 The Beirut Stock Exchange closed its fourth trading week in October with the year’s best index showing as the BLOM stock index reached 1373.636 points on Oct 26. Banking shares were the force behind the upwelling of optimism; the market buzz centered on talk of an acquisition offer for BLOM Bank. The bank’s GDR shares closed at $90.70 on Oct 26, its listed shares at $77.10. Bank Audi also pulled up, its GDRs reached $71.65 and its listed shares, $68. With some hopes emanating from political talks, Solidere also firmed further and closed at around $19 on Oct 26. Total value of shares traded on the BSE in the third quarter of 2007 was $257.4 million. A new run at auctioning two mobile phone operator licenses for the two existing cellular networks is scheduled for February, with distant hopes for broadening the activities on the BSE by listing part of the government’s stakes in the two operators. 

Beirut SE: Blom  (1 month)

Current Year High: 1,526.31         Current Year Low: 1,168.36

 The Amman Stock Exchange was the region’s Ramadan racer. It slowly rose from months of slumber in the mid-5000s at the beginning of the fasting period. In October, the ASE Index pulled up in a steep ascent to close at 6,713.02 points on Oct 25, its 17.3% gain for the month measuring near the top in the MENA region. Arab Bank, the bulky force behind many ASE developments, rallied by 29% between Oct 1 and Oct 25. It was the first time since February that the bank’s stock was quoted above JD 27 ($ 38.14) and the climb came ahead of its quarterly results announcement, in which the bank disclosed a 15.6% increase in net profit for the first nine months of 2007. After banking, the industrial, financial services and insurance sectors moved up on the ASE in the week to Oct 25. Noteworthy in the real estate sector was the IPO announcement by Damac Jordan for Real Estate Development with subscription in late October and early November. 

Amman SE  (1 month)

Current Year High: 6,764.93         Current Year Low: 5,267.27

The Abu Dhabi Securities Market displayed an even better mood than the Dubai bourse as far as fasting induced index gains. It soared 12% after Eid to close at 4,269.4 points on Oct 25, bringing its gains for the month to 22.2% and to 42% since the start of 2007. During Ramadan, Abu Dhabi’s key real estate stocks ALDAR and Sorouh set the pace for bullishness on the ADSM but banking and energy values also went strong. Energy company Taqa gained 17% from Oct 1 to Oct 25; banks First Gulf and NBAD moved up 25% each. Etisalat, which traded up just over 25% during the period, attracted attention on rumors that it would open its share ownership to foreign investors but denied late in the month that it would takAbu Dhabi SM  (1 month)

Current Year High: 4,291.22         Current Year Low: 2,839.16

 Fasting is good for the soul and it also looks to clear the mind with leanings for optimistic investment decisions nowhere in the GCC more than on the UAE bourses. The index moved to 4969.82 points on Oct 25, up about 17% from the first of the month. No more Mr. Sluggish, the Dubai Financial Market appears to have determined in introspection and even the weight of still lackluster Emaar with an unexciting third-quarter profit statement could not hold the DFM down. Between Oct 1 and 25, Deyaar (up 15%), Arabtec (up 22%), Air Arabia (up 24%), DFM Co (up 33%), and Amlak Finance (up 39%) were among the stocks that drove the positive market sentiment. While the end of the month saw some expected profit taking, analysts started talking about the index scaling the 5,000 points and further by end of 2007.

Dubai FM  (1 month)

Current Year High: 5,192.29         Current Year Low: 3,658.13

The Kuwait Stock Exchange embraced a new valuation level as its index closed above 13,000 points Oct 7 and stayed in record territory by its close of 13,096.4 points October 25. In peer comparison, however, the KSE paid a modest price for having been the year’s top artist in escaping from the hesitancy that held the UAE and Saudi markets in its grip in the second and third quarters during which the northern exchange soared ahead. In the one-month period from Sep 25 to Oct 25, the KSE index advanced by just under 2% while four of its neighbors took flight with increases above 10%. But since mid-October, the ratio of market cap to GDP in Kuwait exceeds two to one, far above this ratio in other GCC countries. The bourse’s oversight authorities made new attempts at increasing transparency by toughing up regulations in October but the initiative met with a backlash of criticism from major market players. Kuwait’s capital markets draft law is still under discussion in parliamentary committees.   

Kuwait SE  (1 month)

Current Year High: 13,175.20       Current Year Low: 9,164.30

 The Tadawul Index on the Saudi Stock Exchange closed at 8,364.51 points on Oct 27, an improvement of 517 points for the month. In its year-to-date performance, the gap between the SSE and GCC peers last month widened in favor of the latter, however, as the Tasi is trailing neighboring indices by between 12 and 37 percentage points. Analysts named banking and electricity as two sectors that contributed significantly to the subdued development. STC, seen as telecoms underperformer, closed Oct 27 up 4.2% on the month but third-quarter and nine-month results couldn’t impress even as the state-controlled company announced the third 12.5% quarterly dividend for 2007. The SSE led the region as far as time off for the Eid celebrations with closure from Oct 11 until Oct 20 but the exchange used the period to switch to a new trading system with wider capacities that debuted successfully on Oct 21.  

Saudi Arabia SE  (1 month)

Current Year High: 9,717.89         Current Year Low: 6,861.80

 The Muscat Securities Market rose 13.1% in October to a close of 7,942.94, a new record high. The market is up 42.3% since the start of the year. According to research by a Kuwaiti investment firm, the Omani market last month reached a price to earnings ratio of 15.50, behind Kuwait (20.20) and Qatar (19) but ahead of Saudi Arabia (15.40), the UAE (14.60) and Bahrain (13.70). BankMuscat, the sultanate’s largest bank, traded sideways with a 1.3% gain for the month; however, it reported a 40.7% increase in its nine-month profit. Debutant Galfar Engineering shot up 67% in its first two days of trading Oct 24 and 25. Telecoms operator Omantel, for which a partial sale of the government’s 70% stake to a strategic investor is expected in 2008, soared by 43.5% upon news of the planned sale. The UAE’s Etisalat is said to be among the companies interested in the stake. 

Muscat SM  (1 month)

Current Year High: 8,051.92         Current Year Low: 5,399.29

 The Bahrain Stock Exchange index closed at 2,615.85 points on Oct 25, its 2.8% rise on the month making it October’s second slowest index gainer after the Kuwaiti bourse and, after it was overtaken by the Dubai Financial Market, dropped to being the year’s second worst performer after the Saudi Stock Exchange. Banking stock played a mixed role, with a diverse showing of positive and negative profit growth in the third quarter. Gulf Finance House, which showed a 49.4% improvement in third-quarter profit, rose 12% from Oct 1 to Oct 25. Bank of Bahrain and Kuwait, which undertook a 15% rights issue on Oct 16, dropped 12% during the period. Telecoms firm Batelco closed 7% higher compared with the start of the month after retreating from a year high the stock reached on Oct 17. Newcomer Seef Properties, in its third month of trading, climbed 15% in October.  

Bahrain SE  (1 month)

Current Year High: 2,642.85         Current Year Low: 2,106.70

 The Doha Securities Market was also in full upswing in October. It started the month with a 200-point jump and closed on Oct 25 at 8,947.7 points, representing a 13.6% index increase over 30 days. Among the winners: Industries Qatar closed Oct 25 up by 17.5% compared with Sep 30; Al Khalij Bank advanced 22%, Rayan Bank 25%. Third quarter earnings were strong to exceptional for a number of companies, including Rayan Bank and also Nakilat which gained 27.5% while Q-Ship traded up 11% but reported a 56% drop in third-quarter profit on Oct 25. Also down in third-quarter profit (by 16%) was Salam International, which had a 22.5% rally till Oct 23 before profit taking set in. A rise of Gulf Warehousing Company stock accelerated after the firm on Oct 17 announced a return to profitability in 2007; the stock doubled in price in October. The DSM became a correspondent member of the World Federation of Exchanges, an international trade organization of securities markets. 

Doha SM: Qatar  (1 month)

Current Year High: 9,331.88         Current Year Low: 5,825.80

The Tunisian bourse closed at 2,532.49 points October 26, up 2.6% from its index reading of 2,468.27 on October 1. It was 8.64% up from the start of the year. Market heavyweight SFBT advanced over 5% in the course of the month. Banque de Tunisie, the bourse’s number two firm by market cap, gained 4.3% between Oct 1 and its close on Oct 26. Tunisair stayed on a slope and closed the month down by more than 12%.

Tunis SE  (1 month)

Current Year High: 2,712.33         Current Year Low: 2,294.38

 The Casablanca Exchange stayed its mellowing course with a 2.3% gain to 13,184.17 points on Oct 26. Year-to-date, the index is up 39%. In terms of price to earnings ratios, the Moroccan bourse is in a steam bath with PE of more than 28 times, above Egypt’s 19 times and above anything in the GCC but its protected status continues to be fending off correction impulses. Market aing 21% of total market cap, moved at the rate of the index, while leading bank Attijariwafa Bank closed Oct 26 with a very slight drop when compared with the first of the month. Atlanta Insurance started trading on the exchange Oct 16 aCasablanca SE All Shares  (1 month)

Current Year High: 13,506.29       Current Year Low: 8,431.06nd moved from its IPO price of MAD 1,200 ($152.7) the share to MAD 2,078 on October 26.  

  The Hermes Index of the Cairo & Alexandria Stock Exchanges vaulted over the 80,000 points line late October in post-Ramadan trading and closed at a record 81,062.75 points on Oct 25 on a single day jump by 1,200 points. Between Oct 1 and 25, Suez Cement pushed up 25% to a new year high; financial holding EFG Hermes moved up over 10% to a 17-month peak while Telecom Egypt moved to 20-month highs toward the end of the month. Real estate firm Sodic attracted buyers and continued to rise in October, adding 11%. Orascom Telecom rose 8%; Orascom Construction traded sideways but could announce it was awarded a $109 million contract to build Egypt’s first integrated solar power plant. On Oct 25 Egyptian authorities said the country’s new NILEX bourse for small cap stock (capital range $90,000 to $4.5 million) is assuming operations with modest first-year listing goals.

Cairo SE: Hermes  (1 month)

Current Year High: 82,439.79       Current Year Low: 55,853.97

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Uncategorized

World CO2 emissions from energy use

by Executive Contributor
written by Executive Contributor

 Global emissions of carbon dioxide have risen by 88% since 1971 and are projected to rise by another 52% by 2030. In 1971, the current OECD countries were responsible for 66% of the total. As a consequence of rapidly increasing emissions in the developing world, the OECD contributed 49% to the total in 2004, but this is expected to fall to 38% by 2030. By far, the largest increases in non-OECD countries occurred in Asia, where emissions in China have risen by 5.5% per annum between 1971 and 2004. The use of coal in China increased levels of CO2 by 3.2 billion tons over the 33-year period.

Two significant downturns can be seen in OECD CO2 emissions, following the oil shocks of the mid-1970s and early 1980s. Emissions from the economies in transition declined over the last decade, helping to offset the OECD increases between 1990 and the present. However, this decline did not stabilize global emissions as emissions in developing countries grew.

Disaggregating the emissions data shows substantial variations within individual sectors. Between 1971 and 2004, the combined share of electricity and heat generation and transport shifted from one-half to two-thirds of global emissions.

Fossil fuel shares in overall emissions changed slightly during the period. The relative weight of coal in global emissions has remained at approximately 40% since the early 1970s. The share of natural gas has increased from 15% in 1971 to 20% in 2004. Oil’s share decreased from 49% to 40%. Fuel switching and the increasing use of non-fossil energy sources reduced the CO2/total primary energy supply (TPES) ratio by 7% over the past 33 years.

Employment in companies under foreign control

As a percentage of total employment

The shares of foreign affiliates in manufacturing employment show considerable variation across OECD countries ranging from under 10% in Switzerland, Turkey and Portugal to 30% or more in Sweden, Belgium, the Czech Republic, Hungary, Luxembourg and Ireland. Employment in the service sector foreign affiliates is lower in all countries although as noted above, comparability is affected in several countries by the exclusion of employment in banking and insurance services.

In the period from 1997 to 2004, employment in foreign-controlled manufacturing affiliates grew or remained stable in all countries for which data is available except Spain and Ireland, where the rate slightly fell and in Austria, Portugal and the United States where the shares have remained fairly stable. Particularly sharp increases were recorded by the Czech Republic, Belgium, Finland, Norway, Poland and Sweden.

Remittances to major remittance receiving countries

As a percentage of GDP

The issue of immigrant remittances is not a new one but it has acquired a certain prominence in recent years, because of the realization that immigrants are transferring to their home countries amounts that significantly exceed the development aid given to the same countries by host-country governments of the countries where they are working. In certain countries, in particular Honduras, Lebanon, Bosnia-Herzegovina and Haiti, the amounts transferred are equivalent to close to 20% of the national gross domestic product.

As migration continues to increase (by over 3 million persons per year among long-term migrants as well as significantly many short-term migrants), the amounts transferred will continue to increase. Immigrants tend to transfer more in the early years after arrival but less as time goes on and the settlement decision becomes more definitive.

The presence of many Caribbean and Latin American countries in the table reflects the importance of the United States as a major destination country for persons from these countries.

A certain number of OECD countries appear towards the bottom of the table, not all of them for migration-related reasons, however. The remittances for Belgium in particular reflect essentially the large number of residents of that country working cross-border in the Netherlands and especially Luxembourg.

Road motor vehicles

Per thousand population

 In 2005, ratios of motor vehicles to population range from 780 per thousand inhabitants in Portugal to 86 in Turkey. Over the periods shown, ratios of vehicles to population increased in all countries except in the United States. Sharp increases of this ratio occurred in Greece, Poland, Iceland and the Russian Federation.

In 2005, road fatalities per million inhabitants ranged from over 237 per million inhabitants in the Russian Federation to 46 in the Netherlands. Over the periods shown, rates decreased in all countries except in the Russian Federation with particularly sharp falls in Portugal, Slovenia, New Zealand, Luxembourg, Finland and Spain.

Road fatality rates per million inhabitants are an ambiguous indicator of road safety since the number of accidents depends to a great extent on the number of vehicles in each country. Rates per million vehicles are affected by driving habits, road design and other factors over which governments may exercise control. In 2005, fatality rates per million vehicles were less than 100 in the Netherlands, Iceland, Norway, and Switzerland, but exceeded 400 in Slovak Republic and Korea. Note that low fatality rates per million inhabitants may be associated with very high fatality rates per million vehicles. For example, a country with a small vehicle population may show a low fatality rate per million inhabitants but a high fatality rate per vehicle.

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North Africa

Tunisia Increased Learning

by Executive Contributor
written by Executive Contributor

The process of reforms initiated by the government during the last 20 years has lead to a quantitative change in the educational system in Tunisia. After having succeeded at raising the attendance rate, the country must now take on the challenge of modernizing and improving the quality of its educational system.

Free schooling and the recent reforms have resulted in an attendance rate of 99% for children aged 6 and a literacy rate of 94.3% for ages 15 to 24, according to figures released by the Ministry of Education. Such figures are impressive in comparison to most other states in the MENA region.

Nevertheless, the education budget has created a solvency problem due to the demand and heavy burden on public finances, claiming nearly a third of the state’s general budget, or 7.5% of the country’s GDP.

The increasing number of students, which should reach some 500,000 by 2009, will further burden the slice of the budget allotted to education, especially if the state system remains predominant. In competition with the free public system, private institutions still remain largely “marginalized”, with student bodies made up mostly of foreign students and the children of affluent Tunisian families.

Quality issues

Faced with this growing demand, the challenge concerns not only the ability to accommodate students but above all, the quality of education received. The growing need for teachers explains why a large proportion of the 19,000 teachers is recruited without experience and are themselves still a part of the student population. These teachers are often saddled with responsibilities exceeding their capabilities, a fact which is affecting education quality.

In fact, many professionals have noted a significant decline, reflected by low skill levels among the new generations of graduates, requiring companies to invest in the training of their employees. These conditions contribute to the existence of a genuine market for private institutions.

These challenges make the renovation of the education system the focus of the school year 2007-2008, aimed at improving the quality of instruction. Lazhar Bououny, the minister of higher education, scientific research and technology, has emphasized the need to “create a partnership among businesses, the educational system and professional training programs, by developing new skills and by adapting university programs to the needs of the economy, in order to assure a better level of employability among graduates.”

The unemployment rate among young graduates is estimated at above 25% according to analysts (18-19% according to official figures). The goal is thus to increase the number of students in the most promising sectors and to achieve increased employability (especially in the service sector and the new information and communication technologies) through the creation of new educational departments in line with university education in the countries of the EU.

The BMD (bachelor’s-master’s-doctoral) reforms officially adopted in July 2005 are part of this framework. The central objective of these reforms is to raise the level of the tertiary educational system in order to meet international standards by facilitating the equivalence of Tunisian diplomas with foreign diplomas and adapting training programs to employers’ needs through the professionalization of university studies. The BMD scheme has received 48 million euros from the EU under its program to modernize higher education.

The implementation of the bachelor’s degree will be followed by the master’s degree in 2008 and the doctorate in 2010. While 59 out of the 190 institutions of higher education have already adhered to the BMD system, this figure is expected to reach 107 in 2008.

Close collaboration among representatives from the field of public education and the private sector will lead to the preparation of a workforce better qualified and more able to compete in the national and international economy. As Tunisia does not have the resource wealth of its two biggest neighbors, Algeria and Libya, creating a smart workforce remains the best way to maintain economic growth.

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