Special Report

Luxury Automotive  Desert Glamour

by Executive Contributor
written by Executive Contributor

with the GCC achieving record income from ever-rising oil prices, assessed to have amounted to $300 billion in 2006, and the UAE’s per capita income standing at $35,000 the country’s automobile sector is riding the wave, and in terms of growth is now considered to be among the top emerging markets next to China and India. Within the GCC, the UAE automotive sector ranks only second in size behind Saudi Arabia.

As behooves a country flush with money and a culture of conspicuous consumption, luxury cars are taking up a significant share of the overall automotive sector. Of all the cars with a $100,000+ price tag sold worldwide, around 5% go to the Middle East, and the vast majority of those in the GCC. According to international analysts, until 2009 the luxury segment will even rise by over 10% in the region, whereas globally it will decline.

The demand for luxury cars is now so high that many brands have waiting lists of up to one year. Some customers can’t wait that long and pay dealers extra fees to get a car from Europe and ship it to the Gulf. Hotels, many of whom are catering to high-end customers, are now also ordering luxury cars for their fleets. All this is exciting news for luxury car brands.

Since December 2007 Bugatti, owned by Volkswagen, has sold 15 of its $1.2 million 1,001-horsepower Veyron coupes in the UAE alone. Rolls Royce’s sales in the Middle East rose by 36% in 2006, making up 15% of its worldwide sales of around 800 cars.

Porsche celebrates the 5th year in a row of double-digit growth in the Middle East and Africa. Only eight years after opening the Porsche Middle East & Africa office, it became the fifth-largest Porsche subsidiary worldwide, after North America, Germany, the UK and Italy. The German car maker, whose current sales in the Gulf are around 3,800 units, expects a 20% increase. Of its models, the Cayenne SUV alone accounts for 75% of its sales in the GCC. According to Deesch Papke, Managing Director of Porsche Middle East & Africa FZE, “The market demands an extremely rich product mix that is certainly a specialty in our region. We sell more 911 Turbo than Boxster or 911 Coupe. There is a strong demand for very high exclusive equipment.”

The American brand Cadillac can look at a presence in the Middle East that goes back all the way to the 1920s. For a long time it had been the vehicle of choice for royalty, senior government officials and businessmen, thus generating a loyalty on which the brand could build and expand today. From 2001 to 2006, regional sales have doubled and reached 2,449 cars, making up almost 10% of Cadillac’s global sales. Figures to date for 2007 are showing a 35% increase over 2006.

The venerate British car maker, Bentley, has seen a staggering 1,000% growth over the past four years, yet now reached its global production capacity — just under 10,000 per year — and thus will over the next five years actually see its regional sales decline from a peak of 500 cars in 2006. This is part of an overall strategy to maintain exclusivity, yet necessitates a “re-training” of luxury car dealers to stop sneering at the used car market and convince customers that a “pre-owned” Bentley, of which there are 3,000 in the Middle East, might actually be something desirable. A significant target group in the UAE are expats as they are more likely to buy used cars than nationals.

The new kid on the block

In comparison with other brands, Maserati has made its entrance into the UAE market fairly recently, having been present only since 1998. But the local market quickly became important enough for the Italian car maker so that in 2004 it decided to stop managing the brand in the Gulf via intermediaries and in 2006 created a regional office in Dubai to be able to directly take care of the customers’ needs and wishes. In relation to its increase in global production and sales (from 5,500 cars in 2006 and 6,500 in 2007, the target for 2009 is 12,000 cars, the maximum production capacity), the brand’s regional numbers have risen even faster. After selling around 150 cars each year during 2004-05, this year Maserati expects to sell 400 cars, a 40% increase, and plans to raise that number by another 80% in 2008, thus pushing its market share in the luxury car segment from 6.5% to 10%. According to Umberto Cini, the brand’s area manager for Middle East and South Africa, Maserati’s ultimate aim is to “become the credible alternative to the mainstream players in the luxury segment, producing passionate and innovative 2-door and 4-door vehicles, focused on delivering market leading customer service.”

The luxury car sector does not only attract local buyers of vehicles, but also buyers of brands and assembly lines. In March 2007, Aston Martin, best-known as “makers of James Bond’s cars,” was bought off Ford for $925 million by a consortium mainly funded by two Kuwaiti investment houses, The Investment Dar (TID) and Adeem Investment. Initially, this is nothing but a regular investment in a promising brand. Certainly there are no plans in the GCC to produce cars en locale, like others in the region do — Iran, for example, is the world’s 16th-largest car manufacturer — and the local car industry will remain the realm of post-sale maintenance and augmentation. But Gulf participation in luxury brands might influence future design, or at least help brands to better target the wishes and needs of Gulf customers.

Influence on design

Since luxury car owners tend to be the most discerning of buyers, the luxury car brands pay extra-special attention to their potential clients’ wishes. Thus, Mercedes puts an emphasis on making its vehicles resistant against the specific local environmental conditions, such as sand and humidity. General Motors, owner of Cadillac, sent its vice-president for Global Product Design twice to the region in 2007. Phil Horton of BMW avers that “our design department is very interested in following Middle East trends with a view of developing special models, colors and trims.”

All luxury cars have elaborate customization programs, some of which, like Bentley’s Mulliner, go back over a century to the early history of the brand. Maserati introduced specific model versions and offers more than 4 million combinations of options. Mercedes has its Designo range and its performance division, Mercedes-AMG, has opened its own Performance Studio. Most high-end luxury cars are essentially tailor-made.

Competition

Despite so much money chasing a limited supply of luxury cars, there are too many brands represented in the markets to just sit back and wait for customers to sign their checks. Thus salesmen are coming up with their own unique ways to differentiate themselves from “the rest of the pack.” In the luxury segment, all cars are expected to have been built to highest quality standards and fulfill the most rigid international standards in terms of safety, so brands need to go further. In neighboring Saudi Arabia, Bentley is sending buyers on a two-day tour of the home factory in Manchester, where they can see how the cars are built. Umberto Cini of Maserati drives his brand’s strategy to attract buyers through exclusivity, but the Italian car maker has also responded to market demands by producing its first automatic transmission vehicle, the Quattroporte Automatica that saw its debut in early 2007 and will be joined, at the Middle East International Motor Show in Dubai in November, by the brand-new GranTurismo.

The German carmakers can, of course, count on their reputation for flawless engineering and ultimate reliability and are often building their image on these “Teutonic” qualities. Thus BMW, which in 2007 is selling 15,000 units throughout the Middle East and has just passed the 100,000-car-mark since opening a dedicated regional office in 1994, points out its superior technology and counts on “an ever increasing appetite for the highest level of technology safety and innovation.” Mercedes invites regional representatives to its car clinics and conducts hot weather testing for its models in the Middle East.

Cadillac, whose marketing manager, Melanie Maddux, acknowledges that “generally, European products are perceived as higher quality than other offerings in the market,” nevertheless avers that her brand has been using the distinctly American attitude that “the competitiveness of the segment benefits consumers who are able to find [a] better and better product.” And Maddux thinks that Cadillac “stacks up extremely well.”

Going Green?

One aspect of global car culture that has yet to make real inroads into the UAE and Middle East market is that of “greener” cars. With petrol being cheap and incomes high, there is no economic reason for local drivers to concern themselves with fuel efficiency and hybrid engines. However, local governments are increasingly taking environmental concerns into consideration. Dubai’s ruler has mandated that all new government buildings in the emirate “go green” and the overall government strategy aims for sustainable development, environmental protection and greener infrastructure. The emirate is also investigating hybrid public transport systems and Abu Dhabi is introducing cleaner diesel fuel. In June 2007 Dubai’s TECOM Investments launched enpark, a green energy and environment park project, which not only includes businesses, residences, and retail space based on sustainable development and clean energy, but also mandates that its inner area may only be accessed by cars that run on natural fuel. With projects like this, TECOM hopes to attract hybrid or biofuel cars to the UAE, for which, according to enpark’s director Ali Bin Towaih, there is already a market.

Although luxury cars are more associated with large engines and high outputs of power, and with it emissions, some of the high-end brands are actually leaders in green technology and see raising customer awareness for environmentally-friendly cars as part of their corporate social responsibility.

there is no economic reason for local drivers to concern

themselves with fuel efficiency

Porsche proudly points out that the world’s first hybrid car was developed and produced in 1900 by the company’s ancestor, Ferdinand Porsche and that today all its engines are able to run on a certain share of ethanol, the best-selling Cayenne up to 25%. BMW is looking forward to introduce its own technologies, like Efficient Dynamics, to the regional customers, waiting for an increase in customer awareness. Cadillac will present its Chevrolet Tahoe hybrid at the 9th Middle East International Motor Show in Dubai that will have a focus on energy diversity.

With the rapid increase in luxury cars, the UAE is now also facing a new problem, which so far was only known from news stories about Eastern Europe or movies like “Gone in 60 Seconds”: luxury car theft. In September 2007 the Abu Dhabi Police arrested a gang that had specialized in stealing luxury cars, especially 4x4s. The thieves were tech-savvy — being able to overcome the burglar alarms and then decoding the operation switches — and worked for foreign “buyers”. It remains to be seen if this problem becomes more serious. One thing is for certain: it will not deter potential buyers from getting the latest Porsche, Benz, or Bentley. Only now the brands might make sure to add Low-Jack to the basic options.

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Special Report

Tobacco industry  Sparking up

by Executive Contributor
written by Executive Contributor

As Europe and the United States slap higher taxes on tobacco products and ban smoking in public places, the Arab World keeps on sparking up, boasting some of the highest per capita tobacco consumption rates in the world.

Tobacco manufacturers and advertising companies are only too happy to keep this multi-billion dollar business from being stubbed out, with international players focusing increasingly on the developing world due to declines in smoking incidence in the West and the barrage of court settlements the industry has had to pay out in recent years, particularly in the US.

Indeed, of the 1.1 billion smokers in the world, 800 million live in developing countries, with the World Health Organization (WHO) predicting that by the mid-2020s 85% of all smokers will come from the world’s poorer countries.

And while smoking declines in the developed nations, there is not a corresponding drop off in the global production of cigarettes or the number of smokers. According to the Food and Agricultural Organization (FAO) of the UN, world tobacco production is projected to reach over 7.1 million tons of tobacco leaf by 2010, up from 5.9 million tons in 1999. The number of smokers is expected to grow from the current 1.1 billion to around 1.3 billion in 2010, according to the report. This is an increase of about 1.5% annually.

Such growth is reflected in the Middle East, where the majority of national tobacco markets record between 1-3% annual growth rates. According to the WHO, tobacco consumption in the Middle East grew by 24.3% between 1990 and 1997, whereas consumption in Africa over the same period grew some 3.6%.

“The industry is focusing on this region as it is an emerging one. If you ask someone at Proctor and Gamble, they will say the same,” said a former marketing manager for a leading international tobacco company, who wished to remain anonymous.

The main markets the industry is concentrating on are Egypt, the region’s most populated country, Algeria, Saudi Arabia and Iraq.

“Iraq is a huge emerging market. Companies are dumping cigarettes there left, right and center,” said the source. “It’s now on CEOs’ lists for top brand sales.”

International firms also have their eyes on the Middle East for its booming population, with some 50% of the region under 25 years old. Although international firms do not deliberately market to minors, it is nonetheless a positive indicator for the industry of future market growth.

Regulations on the horizon

Despite the region still puffing away, regulations on advertising and smoking are coming to the Middle East, via countries signing up to the WHO’s Framework Convention on Tobacco Control (FCTC), established in 1995. The FCTC provides guidelines for countries to “impose restrictions on tobacco advertising, sponsorship and promotion; establish new packaging and labeling of tobacco products; establish clean indoor air controls; and strengthen legislation to clamp down on tobacco smuggling.”

Western governments have been at the forefront of implementing FCTC guidelines, but as countries sign up, controls are likely to gradually be implemented globally.

Incidence of smoking and annual growth

“The tobacco industry has changed dramatically in the past decade,” said Nadine Antun, corporate affairs executive for Philip Morris International’s (PMI) Lebanon branch. “The legislation in the US and UK will cascade down to everywhere else, it will just take time and will be to varying degrees.”

Varying degrees of implementation seems to be the region’s current catch phrase. Despite all Arab countries (bar Iraq) being signatories to the FCTC, there is minimal standardization across the region — few countries have health warnings on packets, advertising is still allowed (with the exception of certain ‘black’ markets, such as Jordan and Syria) and there is negligible public awareness about the hazards of smoking.

Even in countries that have banned smoking in public places and sales to minors, such as in Jordan, there is minimal enforcement.

“Sellers could be fined, but who is going to fine them?” queried Samer Fakhouri, vice chairman and general manager of Jordan’s International Tobacco and Cigarettes Company (ITC). Cracking down on violators of the ban on advertising and promotion is equally problematic. “The laws are still far more strict than implementation. For instance, smoking is not allowed in public areas but is in fact widespread,” he added.

Such problems are not limited to the Levant. The Emirates are now having a second go at banning smoking in public, after an attempt in 2005 fizzled out. This time the government has imposed the ban gradually, starting off in shopping malls, then fining people after an initial 90-day grace period and eventually, prohibiting smoking in all work places, schools, and food courts.

even in countries that have

banned smoking in public places and sales to minors, such as in jordan, there is minimal

enforcement

Other countries still have a long way to go. In Syria, where the tobacco market is controlled by a state monopoly, the General Organization of Tobacco (GOT), tobacco advertising has been banned for the past five years, but only international brands, which make up a tenth of the market, are required to have health warnings on packets.

In Lebanon, no tobacco regulations are in place, although a draft law to implement FCTC guidelines was drawn up last year. But due to no parliamentary sessions being held because of the current political standoff, the law has yet to be passed. Once inked, the law would restrict sales to minors, ban advertising and implement restrictions on smoking in public places.

“We support any limits or bans, the only thing we believe is right to maintain is communication to consumers at point of sale. It is a product that causes harm and should have a health warning,” said Antun.

“But a law has to be implemented and controlled, or what’s the point? It’s up to the government to enforce, and we will comply,” she added.

Such regulatory changes are forcing cigarette companies to alter their marketing strategies. “The type of adverts will change, but advertising budgets haven’t been slashed,” said the former tobacco company employee. “Compared to six or seven years ago, the budgets have gone from, say, sports to direct marketing, which is the future of most advertising.”

As if to protect their backs years down the line from massive payouts to chronically ill ex-smokers, as has happened in the US, major players have placed self-imposed restrictions on advertising.

“Philip Morris is allowed to advertise on TV here, but we don’t,” said Antun. “We make sure that for magazines the readership is 75% adult, and adverts are restricted to inside the publication.”

Nonetheless, the majors might not get away scot-free in the future. Earlier this year Saudi Arabia’s Ministry of Health opened a lawsuit against the representatives of 14 tobacco-producing companies that operate in the kingdom. The ministry is demanding compensation of $2.6 billion for financial losses incurred treating smokers in the past, and wants a further $133 million a year from tobacco companies for medical treatment. The outcome of the case, which is still pending, could set a benchmark for the region.

A smoldering market

To what degree imposed or self-imposed restrictions impact on cigarette sales is hard to tell, say insiders. “If tomorrow we don’t have billboards outside, I don’t know how much it would affect sales. It might, but if it does, so be it,” said Antun.

Nevertheless, hikes in taxation are actively discouraged by tobacco companies as a means of curbing smoking. “By increasing taxes you are not undercutting smokers but losing revenues and affecting producers as smuggling will increase,” said Fakhouri. Equally, countries like Syria are unwilling to raise the cost of tobacco. “We have no intention to increase the price, otherwise we would pay in profits,” said Faisal Sammak, director of GOT.

Tobacco companies’ market share

Counterfeit and smuggled cigarettes are a major problem for the industry, not so much in Lebanon, but particularly in Jordan, Syria, Iran and the Emirates. Countries that neighbor Iraq are particularly affected due to rampant smuggling, while British American Tobacco (BAT) estimates that the illegal market grows some 40% a year in the Emirates.

The unnamed source said some companies are actively encouraging smuggling to boost sales, naming French-Spanish tobacco company Altadis as involved in the illicit trade, shipping excess quantities to Jordan and Iraq that are then sold on elsewhere.

“We have no intention to increase the price, otherwise we would pay in profits”

“Some companies will do anything to get their sales, but BAT, PMI and Japan Tobacco International (JTI) are at the forefront of doing business in a responsible manner,” he added.

Ultimately, smoking incidence is likely to decrease in the region as health awareness improves and regulations are implemented. But this still doesn’t mean the end for the tobacco industry. “If fewer people smoke in five years, you can still compete between companies and still expand. That’s where competition comes in,” said PMI’s Antun.

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Regional chess

by Executive Staff
written by Executive Staff

There are two schools of thought regarding President George W. Bush’s Middle East peace extravaganza held last month on the shores of the Chesapeake Bay in Maryland, which brought together for the first time 16 Arab countries and Israel in a non-violent environment.

One group believes it was a waste of time, pure theatrics by an administration desperate to leave something more substantial for the history books than the wars in Afghanistan and Iraq. Critics of Bush’s foreign policy were quick to denounce the Annapolis antics as just a mega-photo opportunity and a publicity seeking stunt meant to take focus off the economy, a US dollar at its weakest point in decades, a hurting real estate market going south as a result of the sub-prime scandal and gas prices going through the roof.

Then there are the optimists, the president’s supporters and those who believed a miracle could be accomplish in Maryland when previous attempts have failed in the Holy Land, where miracles traditionally are given greater odds.

Bush’s intent was to jump-start the comatose peace negotiations between Palestinians and Israelis with the expectation of reaching an agreement for a two-state solution before the end of his mandate, now just a year away. For the president, it was somewhat of a shot in the dark. Palestinian and Israeli leaders walked away from the peace conference promising the US president they would “push for peace.” In political parlance that is the equivalent of saying “the check is in the mail.”

But something unexpected did come out of Annapolis. The first thing is the highly significant return of Russia to the Middle East peace negotiations. According to sources close to President Vladimir Putin, Russia was instrumental in convincing the Syrians to participate in the Annapolis meeting. Putin personally telephoned Syrian President Bashar al-Assad urging him to participate in the Annapolis conference. This was confirmed by a high-ranking European diplomat in Washington.

Syria, long shunned by the Bush administration for its policies in Iraq and Lebanon and considered by Washington to be counter-productive to peace efforts, remains a key player to any future negotiated settlement of the larger Middle East crisis.

Russia’s renewed interest in bringing about a peaceful settlement to the Arab-Israeli dispute injects a new momentum in a process that has been dragging for decades. Putin has already convened a follow-up summit in Moscow scheduled for January.

Saudi Arabia and other Arab states are suddenly eager to shift the peace talks into high gear. After decades of refusing so much as to even mention the name of Israel, there seems to be a new impetus, spearheaded by the Saudis, to get the ball rolling.

Why this sudden sense of urgency after years of procrastination? Because the Saudis, much like the Russians, have seen what sort of damage home-grown terrorists can cause to the economy.

Another result of Annapolis is a meeting of the minds of two leaders on opposing ends of the political spectrum: Russia’s Putin and King Abdullah of Saudi Arabia.

Just like Russian pressure on Damascus convinced Assad to send his deputy foreign minister to Annapolis, similarly, the Saudi king’s political clout brought a total of 16 Arab countries — including Syria — face-to-face with Israeli leaders at the conference.

What motivated those two politically opposed leaders to act in unison with the European Union, the United States and Israel? The fact that they all share a common enemy — Islamist terrorism.

Moscow and Riyadh, much like Washington, London, Paris, Madrid, Istanbul and other cities that have experienced firsthand attacks by Islamist terrorists, also agree on a fundamental focus point of the Middle East conflict. They say that until the Palestinians have their own state, the continued unrest in the Middle East will provide extremist Islamists a perfect recruiting poster for their cause.

The Russians, much like the Saudis, and indeed the United States, have seen the results of homegrown terrorism and it was not pretty. Ironically, the Islamists, contrary to what they were hoping for, ended up acting as a unifying force by bringing together the United States and Russia, two former Cold War warriors. At the same time, they succeeded in pushing the vast majority of the Arab World into the same camp with the Western-Russian alliance — and Israel — who now agree they have a new common enemy — the extremists within Islam.

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Special Section

Luxury Automotive – Directing the best

by Executive Staff
written by Executive Staff

What is your brand’s overall strategy for the Middle East?

Our strategy is to be the leading luxury passenger car and SUV brand in the Middle East and Levant.

How does the Middle East market respond?

We are one of the oldest luxury brands in the region with ties to many of our authorized distributors for over 50 years. The Mercedes-Benz brand has always represented quality and innovation and will continue to do so which is why we continue to be the leading German luxury automotive brand in the Middle East and Levant.

How has Mercedes-Benz responded to market demands?

Our customers are important and we always listen to them. For example, it was a customer who suggested that we should build a special version of our Mercedes SLR McLaren to celebrate the 50th anniversary of the Mille Miglia victory by Stirling Moss. We responded by introducing the limited edition ‘722’ version that had its world media premiere in Dubai at the beginning of this year.

What percent of your brand’s overall sales go to the Middle East and how many units are sold?

The Middle East and Levant, excluding Iran, Iraq and Egypt, account for approximately 1% of the company’s turnover, of which approximately 90% is achieved in the countries of the GCC. Within the GCC, the UAE and Saudi Arabia account for over half of the total 2006 volumes and around 60% of GCC sales.

In 2006, the Mercedes Car Group (Mercedes-Benz passenger cars, Maybach and SLR McLaren), sold a record 15,675 vehicles, a12.8% increase over the previous year’s figure of 13,898.

Are you growing in the Middle East?

Sales of Mercedes passenger cars continue to grow every year because we constantly introduce a range of innovative new products and also ensure we offer the best available sales and after sales service.

The Middle East is one of DaimlerChrysler’s largest markets particularly for Maybach and SLR. Basically, Mercedes-Benz sales in the Middle East and Levant form an inverted pyramid, unlike almost any other market region, whereby the S-Class forms the base with a share of Mercedes-Benz sales of more than 30% and the B-Class the tip. The total market for smaller vehicles is significant, particularly for fleet and rental, and especially in those markets with a high expatriate component, but generally the region remains disproportionately that of a “large car” market.

In light of increased liquidity in the Gulf, has your brand responded specifically?

Middle East customers like to have special versions of their vehicles. At Mercedes-Benz our Designo range allows them to choose their own interior design. In addition, our performance vehicle arm, Mercedes-AMG, has opened its own Performance Studio that can meet the individual requirements of any customer.

What are the difficulties faced by Mercedes-Benz in the Middle East market?

Vehicles have to be equipped to cope with the environmental conditions pertinent to the region generating heat, dust and humidity and, in some areas, rough roads. It is worth mentioning that only cars from authorized distributors meet the homologation requirements defined to deal with these conditions. In terms of customer comfort, customers are no different to those in other countries.
 
On a local level, how are you competing against others?

We position ourselves as the premium luxury automotive brand. We maintain that position by annually outselling the competition.

Has the Middle East/GCC market influenced design?

Car clinics for future designs include representatives from the region. The Middle East plays a significant role in hot weather testing for all our Mercedes-Benz models. 

What is your best-selling model?

For some years, the S-Class has been and continues to be the region’s favorite luxury sedan. As I said, the region remains a “large car market”. Last year, the new S-Class continued its tremendous success with 6,272 units sold compared to 3,937 in 2005.

Does Mercedes-Benz have a CSR commitment to alternative energy? Does this issue and ecological awareness play any role in your Middle East operations, or do you think that at this time it is a “lost cause” in the region?

We do not believe the Middle East and Levant is a lost cause. The governments of Dubai and Abu Dhabi are aware of the problems and are moving to make a difference with Dubai investigating the introduction of hybrid public transport and Abu Dhabi set to introduce cleaner diesel fuel.

DaimlerChrysler revealed its agenda for the future at the recent Frankfurt Motor Show with a display of 19 new models, among them seven hybrids and the trailblazing F700 research vehicle that uses the innovative DiesOtto engine which combines the best elements of both diesel and petrol engines.

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Clear view on billboards

by Paul Cochrane
written by Paul Cochrane

Earlier this year, Sao Paolo’s conservative mayor Gilberto Kassab made a radical decision when he introduced a Clean City Law that banned all public advertising in the metropolis, saying it constituted as “visual pollution.” All 15,000 billboards, outdoor video screens and ads on buses were removed.

The advertising industry threw up their arms in horror but the public will prevailed, with more than 70% of Paulistas approving, according to surveys, and some $8 million in fines issued to cleanse Sao Paulo’s urban landscape.

In Lebanon, such a development seems otherworldly. Take a drive north from Beirut to the Casino du Liban and you are bombarded with images of scantily clad ladies, scantily clad men, bottles of booze, tinned meat, watches, political propaganda, and so on.

Billboards obscure signposts and traffic dividers, in places, have adverts every five meters — it is serious overkill. Indeed, one of the reasons billboards are banned on highways in much of the world is because ads are a distraction, especially if you are a male with wandering eyes and an gargantuan image of a woman’s bursting cleavage heaves into view; just enough of a distraction to ram into the car in front.

It would arguably be all right if this plethora of billboards were confined to urban areas, but billboards pop out of the Lebanese landscape in the most wonderful spots — instead of an unimpaired view of a valley stretching into the distance you get to see a hair replacement ad. Nice.

It was not ever thus. In the early 1990s the billboard epidemic was similar to what it is today, with hoardings mushrooming all over the place as the country struggled to get back on its feet.

Then the government decided to tear down all the billboards and establish regulations that stipulate where billboards could be placed and the distance between each hoarding. There was a brief respite for the visually weary, and a few years later the practice started again, with a vengeance.

Although billboard companies are now individually abiding by the law by erecting hoardings 100 meters apart, the problem is that a firm will place their billboard in-between a rival’s, and have the next ad 100 meters on, meaning billboards are every 25 or 50 meters.

“There has been a total misapplication of the law and a major laissez faire by companies, sometimes municipalities, who have profited from the income,” said Danny Richa, president of the International Advertising Association’s Lebanon chapter. “This is in addition to a lot of political figures who profited from free adverts for the elections and gave backing and blessing to some companies to break the law.”

Herein lies the conundrum for the sector and the state. Billboards are a major income earner for cash-strapped municipalities, but the more billboards there are the less effective advertising becomes and the less money there is to be made by municipalities.

Richa said that in the first year after the regulations were enacted a company would need to advertise on just 200 billboards to get a result, with the average price of a 3×4 meter billboard $100 a week. Today, to get the same reach a company would need to advertise on 1,000 billboards, paying an average of $20-25 a week per hoarding.

“It’s costing billboard companies more to place these ads, maintain them, and bill post them, and the advertisers are getting less efficiency,” said Richa.

So what is to be done? Outdoor marketing is estimated at some $14 million a year (not including wall ads), an important income earner, and billboards do serve a purpose as a form of visual entertainment when stuck in traffic, as people increasingly are. Equally, outdoor adverts have proven to be morale boosters, such as after the July War when numerous companies lifted people’s spirits through witty billboard campaigns — something the international media picked up on and reported.

Part of the problem though is that alternative forms of advertising have not taken off in Lebanon, such as direct marketing or internet advertising, as mass advertising is cheap and effective in terms of geography and reaching the country’s small populace.

Going Sao Paulo’s route is therefore not an option for the foreseeable future. What is called for is tighter regulations, such as applied by Beirut’s municipality, which permits fewer billboards but charges higher prices.

“We have reached a point were we’d like the billboard owners to get together and immediately start to apply the law again by removing the excess, because if they don’t we will be obliged to lobby the government and could find a situation where all billboards are removed: the good, the bad, and the ugly,” said Richa.

The less draconian solution is to implement regulations area by area, fining violators and entitling companies that play by the book the visibility they are paying for. As for the countryside, let’s be able to see the valley without the billboards.

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Talking To

Stephane Fouks – Branding Dubai

by Stephane Fouks
written by Stephane Fouks

Stephane Fouks is the executive co-chairman of Euro RSCG Worldwide, CEO of Euro RSCG France and CEO of Euro RSCG C&O — all part of one of the world’s largest communication and advertising networks. Executive caught up with him in Dubai to talk about advertising and branding in the Gulf, and how Middle Eastern brands can try to go global.

What are your impressions of Dubai when you come here, particularly when looking at the city from an advertising and communications point of view?

The energy is the first thing you feel when you arrive. Of course, that’s partly because of the amount of construction but also — and this is something that’s very interesting for us — because of the desire for modernity here, which is most apparent in the architecture. This is exciting for the advertising industry because you need that energy, since you’re interested in reaching a growing market, but you also need that desire for modernity. Of course, this is modern and well-designed but it also has an Arabic fragrance in a very interesting way. For advertising people this is always very exciting because it’s what our business is about. It’s taking what you can from each identity and using it to develop international relations and international communication between brands, consumers, media and people. So you really get the feeling that this is an ideal place for our line of business.

So your business must be growing very quickly here in Dubai?

Well, it’s a double-digit growth, so of course it’s very good. In fact, Dubai for us is like a big country, it’s like Brazil, Russia or India — a market where you have a double-digit growth in our industry.

The advertising market here is obviously much newer than in more developed markets like Europe, but where do you see the biggest differences, and where do you think the local market has to catch up?

I think you have three main differences between this region and what we can call the mature markets, even though what makes my business exciting is that it’s a never-ending story: if you consider that a mature market is a market with no change, then you are dead. This industry is always about the future and not the past.

The first difference is linked to the place taken by international brands in Dubai, where they represent the mainstream of communication and marketing. This is a place that gives a fantastic position for international brands, which is not the case in France or Russia, where things are really different. The second difference is that this is not a mature market for media. Even though there are new magazines and newspapers and TV channels coming up all the time, this is just the beginning of this media explosion, especially of the digital world and online communication.

The third difference is that what I said earlier about architecture is also true for advertising. You are working with international modern codes, but there’s a need for international codes with local emotion. And it’s not just about respecting internal rules or local culture, but it’s more because there is a strong history of craft and design which can be drawn upon. There’s a specific culture. It’s like when you’re working in China or India you can’t do exactly the same advertising as you can in Paris or New York.

A recent study by a major international magazine listed the top 100 global brands, none of which came from the Middle East. Looking ahead, what do you think Middle East-based brands need to do to achieve more of a global awareness?

First, I think that Emirates is not far from being one of these global brands. They have a real territory where they can express their culture of “more than comfort.” It also has a good pricing level so any of their ads will be probably present a very strong brand in this industry.

Also, some internationally-recognized brands are actually seeing large investment by shareholders from this region, particularly from Dubai, Qatar or Kuwait. In some cases they’ve become the main shareholder in some of those global brands. It’s true for the hotel industry, and it will also become true in other industries, for instance in sports cars like Aston Martin. This investment doesn’t change the DNA of the brand but it does change the way the brand can be perceived here, as it gives the brand more regional ‘routes’.

E Some UAE companies, particularly major property developers like Emaar, are starting to go regional and even global. If you were advising them on creating an international brand for themselves, what would you advise?

From what I saw from them, I think they are still at stage number one of developing a brand. They still speak about size, business and efficiency, which is a good definition of this first stage. But you don’t become a brand if you don’t define a culture, a goal and a mission.

What has stood out or impressed you in Dubai about the advertising market here?

There is certainly a strong outdoor presence here, as there is a strong print culture in all the Arab countries. But the most impressive note for me has been architecture. I think there is still more modernity here in architecture than in advertising, although this is a good sign as it means that ads will become more and more modern. Much of the corporate advertising here is still very poor, but this is a good sign for us because it means we can really help them to do better.

Are you doing a lot of online work?

Yes, of course. For a lot of clients, it’s a way of entering the market with a good level of investment. Online business is growing fast, at close to 40% per year in the Middle East, so it’s very strong even though that 40% growth is starting from a low base. Despite all the growth here, we consider that the reality of the communication world is not just about digital — we are convinced that there will always be a place for print media, for outdoor, for TV, and that when you want to establish a brand you need to consider a way to be channel-free and not to purely focus on TV or digital. Concentrating on just one channel is the best way to lose out on the evolution of the brand and the market.

What kind of image does Dubai have in France?

In Europe there is a strong, strong excitement about this “new Far East,” if I may call it that. In Paris, they consider that Dubai is a fantastic place for both holidays and business. It’s a fantastic mix where you can find great hotels, but also a fast-growing business market where you see an emerging financial services hub or a regional base for advertising and communication. It’s very exciting. In Europe, they don’t consider that Dubai is part of the ‘crisis area’ of the Middle East. However, it was interesting that we looked closely at the possibility of holding our annual meeting in Dubai — the idea was very well received by all the Europeans but it was more difficult to persuade our US friends, as they tend to see the whole Middle East region as a general ‘crisis area’ and see that Dubai is only a few kilometers from Iran.

So if you were advising the whole region on improving its image in the US, what kind of strategies would you suggest?

There are two mistakes that you should avoid. The first mistake is thinking that because there is an Arabic ‘fear’, you should try to present yourself in a way that avoids using an Arabic image. That is a mistake because the DNA of the brand is stronger with your own image. Instead, you should concentrate more on differentiating yourself than escaping from reality. You should assume the reality to create the differentiation. The second thing is to understand that the offer will create the demand. A lot of campaigns and posters think that you should follow the demand, and if you do market research in the US, you will surely find that Arab-branded products or services are not in demand. So, therefore, many people might believe that you should escape this Arab image. I think this is a terrible mistake: you should assume the image of modernity of an Arab country, which is possible, and which in fact exists here in aspects like architecture.

Do you think that Dubai does a good PR job in terms of promoting itself?

Absolutely. For me it’s probably the best fast-growing city brand in the world. The others are Shanghai or Mumbai, in my opinion, so Dubai is really in that category of fast-growing global city brands.

What are your plans here in the coming years?

We consider this place as a regional hub. Not just for the local market, but rather at the center of a region which reaches from Mumbai to Cairo. Dubai is a very good location to offer our services to an interesting cultural mix.

And the cultural mix is very diverse and segmented in Dubai — does that pose a challenge or an opportunity?

It’s a reflection of my company. Traditionally, the advertising world would try to duplicate everything American. But we really consider that this world is now over: we live in a multicultural world where we have to take into account that there are several hubs. And here in Dubai is one of the hubs of tomorrow, especially for services, like financial services, media and communications. As a multicultural company with a marketing HQ in New York, a corporate HQ in Paris, a CEO in London and a joint venture with a very well established family here, we are in a good position to be a fast-growing network in this region.

Do you feel restricted by the constraints placed on advertising in the Gulf, in terms of what can and can’t be shown, and which types of products can be advertised?

There are two ways of looking at limits on creativity. In the name of my industry, I prefer it when we have more flexibility and freedom to create, but I also recognize that limits oblige you to be more creative. For example, in Russia the alcohol market has become very restricted: you can’t show any people consuming the product, because no assimilation is allowed between the brand and consumption. This has therefore actually forced the ad agencies to be more creative. So on the one hand I prefer more freedom, but on the other we know how to manage these constraints to be more creative.

One last question about Lebanon, where Euro RSCG also has a presence. What prospects do you see for Beirut’s advertising market and how much ground has it lost to Dubai in the past few years?

To be honest, Lebanon was the hub of creativity for the Mediterranean region for years and years, but because of the various crises in the past few years, the market has become stronger today in Dubai than it is in Beirut. However, there is still a culture and a creativity in Beirut which is just asking to come back. It started this year with movies, with some Lebanese productions that were very interesting. For us, having a culture of film and cinemas, like you have in Bollywood in Mumbai, means that you already have the elements of the advertising market. We still think that amidst all the troubles, there is still the flame for a growing advertising market in Beirut.

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Banking & Finance

IPO Watch – New trends coming

by Executive Staff
written by Executive Staff

The next big thing in initial public offerings for the Middle East will sell a slice of the world for give or take $4 billion in November. The slice amounts to 20% and the world is DP World, the UAE’s flagship global company with its fingers in harbors in almost all continents.

The flotation of DP World will gobble up about the same amount as all IPOs in the Middle East did in the second quarter of 2007. It ascertains that the region’s 2007 primary market will stand head and shoulder above the $8 billion that were raised in 2006.

Apart from being the largest beast in the short history of Arab IPO times, the DP World offer will be set apart from garden-variety offerings where the flat-rate subscription price represents an outsized discount to the company’s fair value.

Instead, institutional investors will be asked to bid for shares in mid-November and this book building will determine the IPO price within a — at time of this writing not yet announced — range. Retail investors can subscribe to the offering in early November and will have to pay the price set through the book building process.

As further mark of distinction (and new governmental strategy), DP World will debut on the Dubai International Financial Exchange (DIFX) as the first state-backed company of its size to populate the fledgling bourse and hopefully set a paradigm for liveliness more than two years after the launch of DIFX with overoptimistic short-term forecasts.

In a new batch of insurance IPOs, Al Saqr Insurance put 42% of its equity on offer on the Saudi Stock Exchange at the regulator-mandated par value of $2.67 per share and total offering size of $22.5 million, while fellow sector companies Trade Union Insurance and Arabia Cooperative launched offerings for $28.1 million and $21.4 million. Subscription for all three companies has been scheduled to close November 3.

Another two IPOs announced for the second week of November in Saudi Arabia, for educational firm Al Khaleej Training and for manufacturing firm Middle East Specialized Cables, have been approved for issue sizes of 30% each without providing details.

As recent stock market trends seemed encouraging enough, Jordan rounds off the scene with two short-notice IPOs in the under $10 million range, by Model Restaurants Co. ($8.84 million, until November 10) and Damac Jordan for Real Estate Development ($1.76 million, until November 11).

Moroccan plastics and soda producer SNEP had announced an IPO subscription offer worth up to $131.5 million for a two-day period ended October 23 but results had not been publicized by time of this writing.

Several firms joined the fray for investor interest in October; most notably Oman’s Galfar Engineering which made its entrance into the public trading square at the predicted pace and gained more than 80% in the first three days of trading.

In Jordan, the Professional Company for Real Estate Investment and Housing started trading on the Amman Stock Exchange at JOD 1.05 ($1.48) and ended its first week with a 20% gain, at JOD 1.26. Over in Casablanca, insurers Atlanta rode up 73% in 10 days between its flotation and October 26.

Shedding some light on the greater primary markets picture, a tally by international consulting firm Ernst & Young made the region’s IPO spring and early summer appear respectable but not overwhelming in global context. After a slow first quarter, the region’s primary market activity leapt in the second quarter of 2007.

Ernst & Young’s global count found the second quarter of 2007 having 531 IPOs worth a combined $88 billion worldwide. The US market recorded $15.7 billion in IPO funds gathered during the quarter. However, emerging markets contributed exceedingly to the total, led by the BRIC (Brazil, Russia, India, China) countries with $35 billion. Within BRIC, Chinese IPOs gobbled up $15.5 billion and Russians, $11.7 billion.

In relation to these numbers, the Middle East primary market activity in the second quarter of 2007 amounted to 4.4% of global capital raising through IPOs, and was equal to 11.1% of the IPO funds raised in the BRIC countries. However, by the region’s own benchmarks, the performance is impressive and latest announcements foretell much to come, with expectations focused on privatization of successful state-owned companies.

By end of October, Emirates Airlines revealed itself as the next contender for a multi-billion dollar IPO in the UAE and the general manager of the Saudi Stock Exchange told the Zawya Dow Jones news service that the bourse wants to go public as the second exchange in the region.

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By Invitation

Harnessing broadband – promise and potential

by Hana Habayeb, Chady Smayra & Jad Hajj
written by Hana Habayeb, Chady Smayra & Jad Hajj

Over the past decade, the MENA region has come a long way in terms of telecommunications sector advancement.

Between 2000 and 2005, sector revenues grew at an impressive CAGR of 16%, compared to 8% for OECD countries, largely driven by mobile sector growth. Often achieving penetration rates of well over 100%, local mobile markets have enabled phenomenal growth for operators and their global expansion.

However, the data sector is not advancing at the same pace. Only 15% of the MENA region’s population are internet users. The vast majority of this minority are constrained by the limitations of low-speed and intermittent dial-up. Broadband adoption remains abysmally low, reaching at most 6%.

Figures for 2006 show that the region’s 1.7 million broadband subscribers represented less than 1% of the world’s total broadband subscriber base of 250 million.

Why then, have populations exhibiting such appetite for mobile adoption remained so far behind their equals in broadband penetration?

The classical arguments are low affordability, capacity and coverage constraints, low awareness and accessibility, and limited online content and applications. But uniformly applying these arguments to the MENA region is neither possible, nor practical for understanding the dynamics of broadband penetration.

Affordability

In a number of countries, market forces are at work. There are several operators to choose from, and prices are below those in highly competitive European and Asian markets. So why the low take-up rate?

The annual cost of a basic broadband connection in Egypt, Jordan, Morocco, Bahrain, Algeria and Palestine, for example, is lower than, or on par with international standards. That said, adjusting for income levels, clear divergences are observed. Barring Bahrain, the annual cost of a connection is well over 10% of GDP per capita, reaching 35% in Palestine. Market forces alone cannot address such a deep-rooted affordability problem. Instead, it should be addressed through government initiatives, PC subsidies, community broadband centers, and other such affordability-related programs. While many countries are taking these steps, it is a long, slow drive to encourage adoption.

In other MENA countries, with the annual cost of a broadband connection at well over $500, price is a problem symptomatic of other issues.

The main culprit, unsurprisingly, is a lack of competition. In many Gulf markets, retail internet provisioning remains uncompetitive, explaining the high monopoly and duopoly prices. In these and other countries, the real bottleneck is the undelivered promise of competition higher up the telecom value chain. Service providers do not, or cannot, own alternative infrastructure. They are prevented from owning their own gateways, and must get access to the internet backbone, typically through a monopoly operator.

Capacity and coverage

The problem is further exacerbated by capacity and coverage constraints. Even in countries witnessing very high investment per capita in telecoms, there is a serious broadband access investment gap. Long local loops necessitate immediate investment in less densely populated areas, if broadband is to be provided over traditional networks. Within the next five years, new applications, and increasing user sophistication will outstrip the last-mile capacity of most current networks.

Another concern is international connectivity. While mobile operators can, for the most part, operate independently of one another, this is impossible for internet service providers. International connectivity can represent more than 80% of internet connection costs for service providers. The problem is twofold: first, international liberalization is in its infancy, restricting international bandwidth and capacity; second, the lack of regional co-operation for peering and local traffic aggregation has forced ISPs to accept high connection prices. The region has only two Internet Exchange Points, and several plans to build a region-wide backbone have yet to materialize, forcing operators to pay high international transit charges, when traffic could otherwise be handled locally.

Awareness and accessibility

Aside from market and access considerations, there is the issue of awareness. Understanding how critical computer literacy and appreciation of the internet’s potential is for broadband uptake, countries such as Egypt and Jordan have launched concerted awareness building and broadband utilization programs, partnering with NGOs, schools and universities.

But exclusively top-down provisioning programs have met with limited success when unaccompanied by grassroots utilization initiatives. The objectives should not be limited to education about how to use the internet, but perhaps more importantly, about what it can offer. Unfortunately, the direct impact of such programs is difficult to assess, and educational initiatives frequently require years of concerted effort before tangible benefits are reaped.

Beyond awareness, operators in the region must recognize their responsibility in making broadband accessible to the mass market. Broadband services’ complex installation and maintenance requirements are outpacing customers’ knowledge. As broadband use expands, fewer new customers will be technologically adept. Consequently, customers can no longer be relied on to facilitate installation and troubleshoot problems on their own. If broadband use is to extend beyond tech-savvy early adopters to the mainstream public, higher levels of customer service backed by responsive customer call centers will be required.

Online content and applications

The lack of local content and applications locks the final piece of the puzzle. Mobile technologies are primarily about communication with an existing network, external content is for the most part superfluous. Conversely, the internet is content and applications. With less than 3% of pages on the web in Arabic, it is no surprise that the internet has a limited value proposition for potential local users. Appeal is further curtailed by laws restricting certain applications such as VoIP, a major driver for broadband uptake.

Online content and applications are a major driver of consumer demand for broadband services, which in turn attracts necessary investment into more sophisticated infrastructure and services. Incubator and funding programs are needed to facilitate the development of attractive local content and applications, which will unlock significant economic value to developers.

Increasing broadband penetration by 2% in one year will boost telecom sector revenues in the MENA region by a minimum of 8% (at least $2 billion). This value can be captured and the success of regional mobile markets can be emulated. To this end, it is imperative that concerted policy, regulatory and market initiatives are undertaken to address the multiple roots of the MENA region’s broadband penetration deficiency, to achieve broadband’s true potential.

Issues to be addressed for more widespread broadband adoption in the MENA region:

• Affordability

• Capacity and coverage

• Awareness and accessibility

• Online content and applications

Hana Habayeb is a senior consultant,
Chady Smayra and Jad Hajj are associates
at Booz Allen Hamilton.

 

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Capitalist Culture

Liberty – and its interpretation

by Michael Young
written by Michael Young

Over the past years, Capitalist Culture has been a regular feature of Executive, so what better occasion than this 100th anniversary issue to look back at the column, and more particularly at the themes it has tried to raise in looking at Lebanon and the Middle East.

A persistent aim of Capitalist Culture has been to address those issues somehow fitting into a broader context of free markets and free minds. The assumption has been that capitalism in its cultural manifestations encourages, or should encourage, openness, the free exchange of ideas, minimal state-imposed restrictions, an embrace of globalization, and, in some absolute way, the pursuit of human liberty. The column has always considered in an implicit way that the state is, at best, a necessary evil — an often clumsy barrier to naturally free flows in the human marketplace.

Has the column been successful in getting the message across up to now? Readers will have to answer that question. However, Capitalist Culture has benefited from the gargantuan transformations in Lebanon and the Middle East in the last five years — from the Bush administration’s decision to invade Iraq as of 2003, to the 2005 Independence Intifada in Lebanon, to the summer 2006 war between Hizbullah and Israel and its aftermath. Each of these events, and the countless ones in between have, in some fashion had an impact on the issue of liberty, state power, the forcible imposition of a democracy agenda, and much more.

The war in Iraq, following on from the 9/11 attacks of 2001, unleashed one particular global debate that has yet to subside: Was imposing democracy on other peoples the optimal way to bring about open societies in the Middle East — societies that would not send young men on missions of mass murder half way across the globe?

The answer was no way as clear-cut as the question, but suddenly the matter of liberty in the region became of paramount interest. The fiasco in Iraq did not simplify matters. From a war against terrorism, the conflict became a war for democracy, before metamorphosing, today, into a war to contain Iranian power. The centrality of freedom had not lasted very long, but in many ways it very much remains at the core of the Middle East’s woes, as does the suffocating hold of states over the region’s peoples.

Capitalist Culture also addressed, as best it could, Lebanon’s effort to break away from Syrian hegemony in 2005 and afterward. The uncertain results of that endeavor were best summarized in the piece on the late Samir Kassir, whose assassination in June 2005 was the first bloody sign that “independence” would come with a heavy price tag. And Lebanon’s peculiar confessional system has been a frequent theme of articles on Lebanon — the argument being that, for all its faults, the system, by making the religious communities and their leaders more powerful than the state, has in some way also protected pluralism. Why? Because no one side or person can impose its writ on the others, and the state is in no position to control everybody, therefore each community, even faction, is able to survive amid a general balance of forces in the country.

Where Lebanon has been less impressive, however, has been in allowing its divisions to deny the full flourishing of a capitalist culture. What openness can there really be when the society is all rifts and cracks? What kind of prosperity can ensue when political groups are willing to punish the society at large merely to score points against other political groups? Why is it that liberty in the country — such an essential aspect of the Lebanese template — is so often ignored when it advantages the other side?

The guiding libertarian principle of freedom being something one must pursue as long as it does not encroach on the freedoms of others is violated daily in Lebanon. If anything, freedom is often deployed at the expense of others, creating a society far more divided than it need be.

In the coming years in the Middle East, a great deal of trauma is likely to be felt, but the essential demands of capitalist culture will remain at the center of the region’s reality. The overbearing nature of state authority over its citizens, the lack of freedom, of intellectual liberty and artistry, of opportunity, the persistent mistrust of globalization — globalization that is increasingly leaving the Middle East far behind in its wake — are all issues that will handicap the region in ways far more fundamental than the usual and appalling problems one hears about: the Palestinian-Israeli conflict, Iran’s nuclear project, or the killings in Iraq.

The reason is simple: Everything boils down to the issue of liberty and its interpretation. One might applaud the expansion of markets when they affect economic relations; but if they don’t expand human freedom and facilitate human relations, some form of deep failure is bound to ensue.

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Comment

The Damascene dilemma

by Claude Salhani
written by Claude Salhani

Strike Damascus, bomb Tehran,” say the hawks in Washington. “No,” argue others. “Open negotiations with Damascus, bring Syria out of the cold, into the fold, and help distance Damascus from its ‘really evil’ ally, Iran.”

To strike, or not to strike? That is the question, if one may paraphrase the Bard and adapt his poetry to fit 21st century geopolitics. But what the heck is the answer? There seems nary a viable reply that may please the court, or in this case, the White House, let alone a divided American electorate in what will be a crucial election year.

There was persistent talk throughout the summer of US strikes on Syria and Iran. In fact, it’s been more than just talk. According to some people very much in the know, the question of “what to do with Iran and Syria” has, as of a few months ago entered the stage of some very serious military planning.

Cynics will counter argue that the military are always working on plans to invade some place or other. It’s part of what they do in the military. Matter of fact, the Pentagon probably has, somewhere on their top secret shelves, plans on how to invade Liechtenstein, Andorra and Monaco. They also possibly have plans on how to invade Canada and Mexico, although judging by the numbers of Mexicans in the US the Mexican invasion has already begun.

But where Iran and Syria are concerned this time, it seems to go beyond the usual planning. Military tacticians and civilian analysts have been burning the midnight oil laying out strategies of how best to tackle those two countries. Mostly, they look at Iraq and say to themselves, “We cannot have another Iraq on our hands.” To be sure, neither does anyone else. Washington wants quick, clean, short wars, much like the first Gulf War. But again, if Iraq is an example of what’s in store if a similar scenario is to unfold elsewhere, say in Iran or Syria. No country would want that and least of all, Israel.

Both Syria and Iran are accused by the United States of supporting terrorism and of trying to acquire weapons of mass destruction. Syria has been on the US radar for a while now, accused of facilitating insurgents on their way to and from Iraq to fight US and coalition forces.

Strangely enough, those in favor of a strike on Damascus are actually more royalist than royalty. They tend to fall in two schools of thought. The first are the neoconservatives; a tight-knit cabal, close to Vice President Dick Cheney. At times they tend to be more pro-Israeli than the Israelis themselves. And as this administration’s time is ticking away, they would like to see Iran and Syria brought to heel, because they believe the next administration will not have what it takes to confront either country. And a nuclear-armed Iran and/or Syria will forever change the military equation in the neighborhood.

If and when Iran gets the bomb, analysts worry that other countries — Saudi Arabia, Egypt and possibly even Turkey — would want to follow suit, therefore initiating a new arms race, this one perhaps being far more dangerous than the previous one which brought about the Cold War. With tempers being the way they are in the Middle East, there might be nothing cold about the next war.

The second group urging the US to act against Syria can be found among a certain branch of what can best be described as neo-Libano-conservative. They are closely allied to the vision shared by the vice president, and remain at the same time in close agreement with Israel. Or, perhaps one should say more in sync with the Israeli lobby? They see the only way for Lebanon to attain true political independence is through a change of regime in Damascus.

As politics makes for strange bedfellows, Bashar’s best friend, so to speak, may well be the Israelis. Because when you come right down to it, Israel remains strongly opposed to striking Damascus. OK, let me rephrase that, seeing that Israel just carried out a strike deep inside Syria. Israel remains opposed to a change of regime in Syria, especially if what follows is uncertainty. Everyone in the Middle East immediately thinks of Iraq whenever anyone says regime change. And they shudder at the very thought.

As the saying goes, it’s better to deal with the devil you know than … well, you know the rest.

Where Syria is concerned, so long as certain red lines are not crossed — such as Damascus trying to acquire weapons of mass destruction — Israel would rather deal with the government of President Bashar al-Assad than with an unknown entity, particularly if that entity turns out to be the Muslim Brotherhood, the only other organized Syrian group besides the Ba’th Party.

But Iran is a different ballgame altogether. Where Tehran is concerned the US and the European Union are quite adamant in preventing the Islamic Republic from reaching militarized nuclear capability. In Iran’s case, it probably will not be a matter of “to strike or not to strike,” but rather when.

 

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