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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No menial task in Jordan

by Riad Al-Khouri
written by Riad Al-Khouri

There is little doubt that reform over the past 15 years is helping Jordan to grow. The Jordanian economy has done especially well recently: Jordan’s real gross domestic product grew by 6.4% in 2006, while foreign and internal indebtedness fell last year to 73% of GDP, from 84% in 2005, and the deficit in the government’s budget represented 4.4% of gross domestic product in 2006, from 5.3% the year before. Prospects for 2007 are also good; and, barring regional conflagration, the outlook for next year is bright as well.

Growth nevertheless hides variations in economic performance. For example, cutting unemployment is a main goal of reform. However, at 14% in 2006 and around the same level today, joblessness is still high, and has been in double-digits for the past two decades.

That was not always the case: in the mid-70s and early 80s, due to public sector expansion, strong economic growth, and demand for Jordanian workers in regional markets, Jordan saw little unemployment. Such prosperity did not last long, however, and joblessness rose in the mid-80s because of slow growth of the regional labor market and the gradual return of Jordanian expatriates from the Gulf.

Additionally, high population growth began to have an impact on joblessness. Jordan’s population rose 10-fold in the past 50 years, to close to over 5.5 million today, because of immigration and high fertility coupled with low mortality. This increases the need for employment creation: the economy has to provide over 60,000 new jobs per annum for the next five years and 70,000 annually in the decade after to absorb new entrants into the labor market and prevent further unemployment, which today stands at around 170,000.

Although Jordan has achieved higher economic growth and attracted foreign investment, this has not helped create enough jobs for Jordanians. There is some evidence that the impact of growth on job-creation has lessened due partly to computers and other mechanization, though there is scant research on this topic and firm data is unavailable.

This requires new solutions to the joblessness problem, with the government trying some innovative training and helping to nudge locals into work previously done by non-Jordanians. Of these, there are more than a few in the kingdom: according to official figures, the number of guest workers in Jordan now stands at 314,000, and there are around 100,000 foreigners working in the country illegally.

About 72% of guest workers in Jordan are Arab, mainly from Egypt. Because of the proximity of the two countries and their affinities, large numbers of Egyptians come to Jordan, many in search of employment. More than 216,000 Egyptians work in the kingdom, representing 69% of the non-Jordanian workforce, but many are also in the country in other capacities, some of them illegal.

The state now seems to be doing something about this: to regularize the status of guest workers from Egypt, Amman this April suspended entry of Egyptian workers into the country offering a grace period to those already there to rectify their status under new work permits or switch to vocations in which they are entitled to employment. During that time, Jordan issued 77,000 work permits to Egyptians, before the ban on workers from Egypt entering the country ended at the beginning of July. Egyptians then wishing to work in Jordan had to hold professional certificates under a new labor accord between Amman and Cairo.

Will such a focused interventionist policy towards Egyptian migrants into Jordan succeed? Industrialists and farm owners in the kingdom say that replacing foreign labor with Jordanians should be gradual as there already is a shortage of cleaners, porters, and farm workers, most of these jobs filled by Egyptians. It is difficult to switch labor quickly, and the country’s industrialists have urged the government to be flexible in implementing the agreement with Egypt until enough Jordanians of appropriate categories become available. Farm owners in Jordan who employ Egyptians have noted bad experiences in the past with locals who could not tolerate the work environment or commit to working hours on farms. Jordanians shun work in the agricultural sector due to tough conditions; on the other hand, thousands of agricultural work permits annually go to Egyptians working in the kingdom.

It is obviously too early to tell whether stricter control on migrants will help resolve the country’s unemployment, but the key factor, of course, will be whether Jordanians can be convinced to do the menial jobs currently held by Egyptians and others. In any case, global forces mean that Jordan’s borders must stay open to migration — into and out — and that will inevitably make the task of state intervention tougher.

 

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Lebanon’s bumper crop

by Nicholas Blanford
written by Nicholas Blanford

You will find broad smiles on the faces of farmers in the northern Bekaa this autumn after they successfully brought in the largest hashish harvest since the end of the 1975-1990 civil war.

The grinding political crisis between the government and the opposition as well as the additional security commitments of an overstretched Lebanese army encouraged the farmers to return to old ways this year to supplement their meager income from legitimate crops by growing hashish which they process into cannabis resin and sell to local dealers for a hefty profit.

The Internal Security Forces (ISF) estimates that some 6,500 hectares (16,000 acres) of drug crops — mainly hashish with a small amount of opium poppies — were planted this year in remoter stretches of the northern Bekaa. Farmers normally can sell the cannabis resin for about $1,000 a kilo although they expect the price to drop to about $600 to $700 this year due to the glut.

One farmer, Ali, said his eight dunam field of hashish plants with their distinctive spiky saw-toothed leaves will produce about 15 kilograms of cannabis for which he expects to earn $10,000. With one crop planted in March and harvested in July followed by another harvested at the end of October, Ali expects to make about $20,000 this year from hashish. That’s a considerable sum for this area and for almost no work at all.

“All I have to do is throw the seeds on the ground, add a little water and that’s it,” Ali said, sniffing the hop-like scent of a knee-high hashish plant. “I would be crazy not to grow hashish.” That is a common sentiment among the farmers living in the dusty villages flanking the northern Bekaa, most of whom anticipate growing more hashish the longer the political crisis lasts. “The worse the security situation is in Lebanon, the more we can grow,” Ali said.

The cannabis sativa plant has been planted for centuries in the Bekaa Valley, but cultivation reached its apex during the lawless 1980s when it generated a local economy worth at least $500 million a year, turning simple farmers into multi-millionaire drug barons.

With the end of the war, the government, in cooperation with the United Nations Development Program, launched an initiative to replace the hashish and poppies with legitimate crops. The UNDP estimated that some $300 million was required for its rural development program which included improving the infrastructure, building new schools and clinics, extensive irrigation projects to harness the waters of Mount Lebanon along the western edge of the valley and terracing the hillsides. Lebanon was removed from the US government’s list of major drug producing countries in 1997, but, between 1994, when the project was launched, and 2001, only $17 million of the $300 million was received. The project fizzled out a year later as the farmers began growing hashish again.

The UNDP continues to try and implement new programs to steer farmers away from hashish, but it’s slow progress. One pilot project about to be launched is a year-long assessment of the viability of growing industrial hemp, a similar product to hashish but without the narcotic properties. The fibers from industrial hemp are used to make bank notes, rope, paper, animal feed, building materials and clothes worn by eco-fashionable Europeans. Hemp oil is used to make a wide range of cosmetic products.

Still, the allure of easy cash from growing hashish is hard to beat, and farmers are prepared to turn violent to protect their crops. Each August, the ISF, accompanied by troops, raids the hashish fields, ploughing them with locally-hired tractors under the glaring eyes of aggrieved farmers.

This year was different, however. The owners of tractors were warned that if they allowed themselves to be hired by the ISF to destroy hashish crops, they would find their houses burned down. The ISF also faced its own security problem with the army unable to provide the same level of security as in past years. The army was stretched to breaking point with security commitments in the southern border zone, along the Syrian frontier, policing Beirut and not least battling Fatah al-Islam militants in the Nahr al-Bared camp throughout the summer.

When an ISF drug squad team stormed hashish fields near Boudai, supported by only 10 soldiers, they came under fire from machine guns and rocket propelled grenades from nearby woods and houses. With RPG rounds exploding in the air above them and bullets cracking by, the team leader decided discretion was the better part of valor and beat a hasty retreat. The ISF was concerned that another attempt to eradicate the crops could provoke civil unrest which inevitably would become politicized with the government and the ISF on one side and Hizbullah (which disapproves of drug cultivation but turns a blind eye) supporting the farmers on the other.

The hashish harvest was all but over by the end of October, and in November the farmers will be busy processing the dried hashish leaves into the dark brown bricks of cannabis so beloved by generations of university students. The ISF is hoping that it will be able to seize the finished product in the farmers’ workshops before it is sold to local dealers and either exported or sold on the domestic market. If the raids fail, expect to see the northern Bekaa awash with green hashish next year.

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Calling a spade a spade

by John Dagge
written by John Dagge

Australians go to the polls to elect a new Prime Minister on November 24 and — if the polls are to be believed — the country’s second longest serving Prime Minister, John Winston Howard, is a dead politician walking. His opponent, the Mandarin-speaking leader of the Labor Party, Kevin Rudd, is the country’s most popular opposition leader in the past 35 years. “Arrogant” and “untrustworthy” are words emerging from political focus groups to describe the man who won control of both houses of parliament in the last election by promising to keep interest rates low. They rose and a highly mortgaged public is now demanding its pound of flesh. The introduction of new workplace laws, effectively doing away with collective bargaining and lowering wages in the process, has also angered working class Australians. The Iraq debacle — and Howard’s unwillingness to withdraw troops — burns in the background.

Speak to his supports and you will be told that Howard is a man of vision and conviction, never backing away from making the tough decisions — a “man of steel” says fellow admirer George W Bush. A leader who calls a spade a spade and speaks for ‘ordinary’ Australians (whoever they are) and defends Australian values (whatever they are).

A quick glance at the record, however, shows that Howard has always been a pure political animal — one that has never known a career outside of politics. If he ever called a spade a spade, he always made sure he had plausible deniability. He introduced “core” and “non-core” election promises into the country’s political lexicon, the latter (and frequently the former) being pledges that he felt no obligation to keep. Symbolism and the mean stoking of nationalism have been used with great success throughout his career. Everything was up for negotiation — witness his conversion on climate change, finally declaring the science valid when he could no longer ignore it was hurting him in the polls.

Likewise, the 68-year-old’s recent pledge to hold a national referendum to insert a statement of reconciliation into the constitution’s preamble towards Australia’s Aboriginal community smacks of election opportunism. His moment of clarity regarding the government’s recognition of the country’s first inhabitants comes after 11 years spent ignoring their plight and trying to erase some of the most violent acts of white settlement from the history books (dropping the “black armband view of history”). So shameless is Howard’s latest initiative that even he was forced to admit “some will no doubt want to portray my remarks tonight as a form of Damascus Road conversion” during its announcement.

The most important Australian value, according to Howard, is mateship, which he defines as the “unconditional acceptance, mutual and self respect, sharing whatever is available no matter how meagre, a concept based on trust and selflessness and absolute interdependence.” Howard’s sharing of Australia’s long economic boom is evidenced by the fact that the gap between the country’s rich and poor has never been wider. Howard’s Australia is one where 20% of the richest households own 61% of the wealth ($1.7 million per household), while the poorest 20% own around 1% ($27,000 per household). After a decade of robust economic growth, low income households have gained an extra $24-a-week increase in income, while high income households have enjoyed more than five times that with a $139 increase. His latest round of industrial relations reform has lead to a $106 per week decrease in the wages of low skilled workers and a widening of the gap between men’s and women’s wages. At the same time, corporate salaries have never been higher. Over his term, Howard has worked tirelessly to introduce a two-tier health and education system. Rampant greed and materialism — qualities once scorned by the nation — are now praised as evidence of a strong entrepreneurial sprit.

Likewise, Howard’s “unconditional acceptance” was amply displayed in his treatment of asylum seekers, who he imprisoned in detention camps located in the desert or surrounding Pacific islands. The 2001 election was won by appealing to the basest elements of the Australian (or any) psyche: us against them. While framing the debate in terms of border security — postulating that al-Qaeda operatives might float over in leaking ships disguised as refugees — the ugly reality was that he was re-elected by adopting the policies of Pauline Hanson’s racist One Nation party. Howard started his career by working to halt Asian immigration and will end it by frothing at the mouth regarding the country’s Muslim community.

Howard will lose the election. His legacy is a cynical, meaner and more materialistic Australia.

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Our role in climate change

by Rana Hanna
written by Rana Hanna

The awarding of the Nobel Peace Prize this October to former US Vice President Al Gore and the Intergovernmental Panel on Climate Change (IPCC) has sent an unprecedented message to the world: the future is green.

The IPCC had caused alarm bells to ring loudly at the United Nations earlier this year when it announced that global warming was “most likely” i.e. over 90%, caused by human development and carbon dioxide emissions. Al Gore, for his part, had sent a chilling message about the consequences of climate change in his movie An Inconvenient Truth, for which he also won an Oscar.

In layman’s terms, global warming is all about carbon emissions that cause heat to remain trapped in the atmosphere, which in turn melts ice caps and glaciers causing epic flooding in some areas and intense drought in others. Taken to extremes (that is, if all the ice melts), whole coastal cities could disappear, as could many species of flora and fauna. There would also be less water and more disease. Scientists predict that within the next 100 years, average temperatures may rise anywhere between 1-6 degrees.

Scared? Here’s the good news: part of this process is, it seems, reversible and many European countries have apparently taken initiatives to combat global warming including banning certain ‘greenhouse gases’ and launching mega awareness campaigns.

The vast majority of the world’s population however, are not fully aware of the dangers of global warming and even if they were, would no doubt be unsure what to do about it. Whilst it is true that individuals in themselves contribute very little to endangering the planet (industry and airlines are the biggest polluters) a concerted, unified effort by us little people would consolidate results and make a difference.

How many Lebanese — or Arabs in general — recycle? How many use water efficiently, switching off lights that are not being used, and perhaps most importantly, are not reliant on their cars to drive 100 meters? Some people in the United States and Australia have gone as far as to disconnect their homes from the electricity grid and forego toilet paper! They are even blogging about it.

However, the solution to global warming can only come from governments who will make a unified, concerted effort to work together to reduce carbon emissions. Unfortunately, the two biggest polluters in the world, the US and China, refuse to enact legislation that combats global warming and it seems that the Lebanese state (although relatively minor in its contribution) has adopted the same line.

After the oil spill during last summer’s war with Israel, the government did very little to foster awareness of environmentalism, while a move to ban mazoot in cars and vans has all but been reversed since it came into effect a few years ago. A report from the Lebanese Ministry of the Environment on Global Warming drawn up in 1999 with the UNDP (United Nations Development Program) clearly says that the Lebanese government, although committed to combating climate change, had ‘other things’ to worry about. Meanwhile, Sukleen, the company charged with keeping Lebanon clean, does place recycling bins on major streets and is happy to provide them for corporate recycling but the main initiative has to come from the consumer.

So, should we panic? It is important to keep a cool head in a (rapidly) heating situation. There is other scientific research that acts as a counterweight to the IPCC’s research and that claims that global warming is a cyclical phenomenon that will phase itself out, and yet other researchers suggest that global warming is a natural occurrence without which we would still be living in the ice age.

But if you do decide to ignore global warming then I should put you in touch with my four-year old who is exhibiting extreme calm in the face of a melting Earth and is already making plans to move to another planet.

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ADL‘s chutzpah on genocide

by Peter Speetjens
written by Peter Speetjens

How world politics can have an impact on a local level was nicely demonstrated on October 17 in Boston, where the Somerville Human Rights Committee held a special meeting regarding the Statement on the Armenian Genocide by the Anti-Defamation League (ADL). The ADL, a Jewish advocacy group against anti-Semitism and all forms of hate speech, had declared on August 21 that the “consequences” of events in Turkey between 1915 and 1918 were “tantamount to genocide.”

The carefully worded statement avoids any indication of “intent” on Turkish side, which is a crucial element to be able to legally characterize a mass killing as genocide. The ADL furthermore labeled the recent US Congressional proposal to acknowledge the Armenian genocide as “a counterproductive diversion,” while the organization’s national director, Abe Foxman, met with Turkish Prime Minister Recep Erdogan to express his sorrow over what the proposal has caused for the leadership and people of Turkey.

Foxman called for a joint Turkish-Armenian effort to study the tragic events in Turkey during WWI. By doing so, he fully embraced the Turkish position, which argues that the Armenian genocide was the unfortunate consequence of the chaos of war, while more research is needed to determine the exact causes.

Not only Armenians, but also many Jewish Americans were shocked and outraged by the ADL’s statement. “Foxman talks about scholars who should study this,” one Holocaust survivor told the New York Times. “That, to me, rang exactly like Ahmadinejad saying ‘let’s have a committee to study the Holocaust.’ Give me a break.”

For the past 15 years, the ADL and other Jewish and/or pro-Israel groups have generally sided with Turkey against the recognition of the Armenian genocide. The main reason is that Israel is on good terms with Turkey and does not want to jeopardize its strategic relation, which allows among other activities for the training of Israeli F16s above Anatolia.

But what has the Somerville Human Rights Committee (HCR) to do with all this? Well, the HCR runs the ADL’s “No Place for Hate” program in local schools. Spearheaded by members of the American Armenian community, a growing number of citizens believes that the ADL has now disqualified itself as the right partner to run an anti-bigotry program. A handful of municipalities in and around Boston have already cut ties with the ADL.

Some 30 people attended the Somerville meeting and sat opposite the four committee members led by chairman “Barbara” who started by saying that this was her last day as chairman as she had a new job starting the next day. Seeing the many people, Barbara said, and the fact that the committee has a regular meeting at 7 p.m., Barbara suggested everyone speak for five minutes only

First came an elderly lady who read an emotional letter from a friend who had survived the genocide. Next came a fired-up Irish redhead who claimed she had often questioned the committee’s ties with the ADL, seeing the latter’s pro-Israel stand, and complained her letters were never answered. Third was a young Armenian who questioned the ADL’s moral right to teach “our children” when the ADL is apparently willing to politically compromise on even genocide. He quoted historian Israel Charny, as saying that denial is double killing: “First the physical deed, followed by the destruction of the remembrance of the deed.”

Many more people said similar things, but from the start it was clear that the committee members did not want to deal with the subject. As a master politician, committee member, Sarah, showed how to get a thorny issue off the debating table by simply formalizing it, by trading content for procedure.

Sarah started by saying that the issue was of course a very complicated one, and could not be decided upon in evening. Secondly, the HRC was not the one to decide, but the municipality. The HRC could only advise them. To do so, she suggested everyone to put their grievances on paper and send it by mail, so they could pursue the matter.

Unfortunately, this was no crowd pleaser as people failed to see what more should be written after all that was said and done. What’s more, it had seemed a clear-cut case for some six other municipalities who had cut ties. To calm things down, Barbara was forced to shed a light on the main reason why cutting ties with the ADL was so difficult.

The ADL, she said, was one of the few organizations that donated Somerville HRC an annual grant with which it was able to operate and, as it was nearly 7 p.m.., the HRC really should be starting its regular meeting. “But do send us your letters.”

Outside Tuffts University, where the meeting was held, people gathered to voice their frustration. “Money for justice,” one man said. The Irish redhead, still angry, related how ADL members called her a neo-Nazi for criticizing Israel. At 7:15 p.m., Sarah runs out of the building. She had to cut the meeting short to go to a reception. Her husband is waiting to pick her up.

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A new world economic paradigm?

by Mazen Soueid
written by Mazen Soueid

One comes out of the IMF/World Bank annual meetings in Washington DC realizing how much the world economic landscape has changed over the last several years. The rise of emerging markets, called “third-world countries” only a couple of decades ago, has been nothing short of spectacular. Benefiting from sound macroeconomic management, a supportive external environment and high commodity prices, these countries have managed to move to the center stage of the world economy, amid the failure of the mature or big industrialized countries to face up to their challenges. These challenges have ranged from growing fiscal and trade imbalances in the US, to lagging bold and crucial structural changes in the EU that would, among other things, render its labor markets more flexible and hence, more capable of generating potential growth rates, to finally a Japan that has yet to generate domestically-driven growth and emerge from a decade long suboptimal growth.

Of course, the positive factors that have helped emerging markets’ upward move as a global economic power were not accidental but rather the combination of well taught policy lessons, policy responses in mature markets, and some luck. The policy lessons were accumulated after a series of currency and debt crises that rocked the emerging markets from Mexico (1994) to Asia (1997) to Russia (1998) to Brazil (1999) to Argentina (2001), leaving policy makers in these countries and other emerging markets with the realization that sound and prudent fiscal and monetary management of the economy are necessary conditions for sustainable high-paced growth. Meanwhile, the collapse of the dotcom bubble in 2001 prompted an unprecedented easing by the Fed, creating one of the cheapest credit cycles, which in turn led to liquidity abundance and hence higher emerging markets asset-prices be it in stocks, bonds or even real estate. The third supporting factor, i.e. the increase in oil and other commodity prices, is a combination of a bit of luck and a reflection of strong global demand.

Two developments over the last couple of years have particularly underlined this shift in economic status and the emergence of a new world economic paradigm. The first was last year, when the big four emerging markets (Brazil, Russia, India and China) contributed all together more than 50% to the global growth rate. In other words, of the 5.4% growth rate that the world achieved in 2006, more than 2.7% were generated in the four large emerging markets. The second development came in this year (2007), as China is set to be the largest single contributor to world GDP growth, beating both the US and the EU. In other words, of the 5.2% world growth rate expected for 2007, China alone is contributing 0.9% while the US and the EU are contributing each less than 0.8%. These are major shifts in the global economic conditions, underlining the facts that the engine of world growth is no longer the US, or even the EU, but rather emerging markets.

The vulnerability bias and not just economic relevance seems to have changed. The US sub-prime mortgage debacle and its consequences on the money and credit markets globally, was indeed the first global credit crisis in a long time that breaks in a mature rather than an emerging market. After a series of emerging market crises in the 90s propagated to world markets, jacking up interest rates and causing jitters in world stocks, the last episode of massive write-offs, tight credit conditions, and volatile stock markets has actually originated in the US market where easy credit conditions over the last several years have encouraged over-lenient lending and speculative investments whose reversals are just starting to materialize. Even more surprising has been the resilience of emerging markets to the global financial distress, as evidenced by their debt and stock markets which continued to rise in value as mature debt and stock markets declined.

Skeptics are very careful about declaring “the end of history” (a term coined by American historian Francis Fukuyama upon the collapse of the Soviet Union) of the world economy, and even highlight emerging market vulnerabilities that would make them unshielded from a severe meltdown of global financial markets. We do not completely disagree with such skeptics, and though we are not ready to declare the end of economic history ourselves, we are surely prepared to recognize the start of a new chapter.
 

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London, ten years later

by Gareth Smith
written by Gareth Smith

When I left England in 1996, I had no e-mail address and no cellular phone, Tony Blair was yet to become prime minister, and Manchester United had just won the English premiership with youngsters Paul Scholes, David Beckham and Gary Neville.

Eleven years on, a Japanese diplomat in Tehran warned me London had become expensive and a British diplomat assured me there was a wider variety of food in supermarkets. Both were right.

Renting a one-bedroom flat in central London can easily be $1600 a month, and my municipality tax is another $200. A pretty average curry is $100 for two, and a Lebanese breakfast in Edgware Road can top $50.

Britain is unquestionably more affluent. The average income is £1800 ($3,600) a month, with living standards rising 2.3% a year since 1996. The over-50s have accumulated more wealth, largely from rising house values, than the combined GDP of the UK, Germany and France.

But the society has changed in more ugly ways as the result of technology, the decline of the family and even the political climate of the ‘war on terror’.

Western society has long considered itself a model for the rest of the world to follow. In the 1990s Francis Fukuyama’s “The End of History” proclaimed the universality of the West after the collapse of Soviet communism. Most English people seem still to believe this. Greater overseas travel has done little to challenge the assumption that other societies are inferior or backward.

Neither has the internet — the world’s virtual rubbish bin — stymied the culture of tourism. As technology has shrunk the world, the mainstream media has slashed its foreign news. Big stories like the Iraq war are reported by journalists good at drama but lacking any real knowledge of the country.

Even the good old BBC has replaced reporters like Mark Tully in India or Charles Wheeler in the US with aspiring celebrities who change countries every other year.

This is beyond the old British Foreign Office practice of moving staff before they “went native”. Today, all change is seen as improvement and the media merely follows the business trend.

Sandwiches and mobile phones sell, and each accounts for around a quarter of the shops on an average English high street. The marketing is aggressive, and even people on low incomes change their mobile every year.

While the variety of handsets and SIM tariffs is bewildering, an old-fashioned land-line is less of a money-spinner and so a low priority for suppliers.

I tried BT, the former state-owned company, who installed the line in my home many years ago. I spent 50 minutes trying BT’s free helpline from a street phone without an answer, and by e-mail could extract only a promise to call two weeks later.

Virgin, the all-dancing brand from Richard Branson, offers cable in my area, so I chose broadband, television with Sky Sports and a land-line at a basic of about $80 a month. The land-line was still not working four weeks later, and the broadband has slowed to the pace of Beirut dial-up on a bad day.

The Virgin ‘help line,’ unlike BT’s, is not free, and when I eventually got through, the person answering had an accent that suggested he hadn’t been long in the UK and was probably working for peanuts. He admitted he had received little training and wasn’t sure what could be done.

The business model is clear. Offer tasty bait to hook the customer. Resources go into attracting customers with glossy brochures, TV advertisements and ‘cheap’, introductory offers — rather than delivering a service once the customer has paid up.

The transport system is a similar mess. The cold, damp British weather makes an immediate attraction of cheap air travel to Europe and beyond — once you get through the airport and flight delays. But the rail and bus systems have fragmented into privatized, shabby chaos.

Before you travel, get some cash, and pray you don’t face any complications. Banks have massively cut staff, offering on-line and push-button telephone banking while reducing their branches to high-security kiosks fronted by ATM machines.

At all times be vigilant. The ‘war on terror’ has brought a fear that terrorists may have moved in next door, and I’ve been asked more times about my bag in London than I was in Iraq.

My friends tell me not to worry, that I should get out more, and that I will adjust in time. I dare not tell them how much I miss Tehran.

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Consumer Society

Luxury watches – Buying a classic timepiece

by Michael Karam
written by Michael Karam

What is it about watches that drive people to distraction? Why can something whose function is purely to tell us the time be the object of such obsession and devotion? Maybe it’s because we wear it everyday. Maybe because, to some of us, a watch is more a companion than a timepiece and one of the few ways a man can express himself. Or maybe it’s simply because they are, in many cases, just so damn beautiful.

My first teenage crush was the Rolex but then my brother-in-law had to spoil it by giving me his eminently more sensible steel Rolex Oyster Perpetual Datejust. We are still together. It is over 40 years old and still keeps immaculate time, but I still hanker for a watch — or watches if the truth be told — that will send the pulse racing.

It is a good time to be on the look out for a new watch. While the rest of the $3 billion global luxury watch market has taken a bath in recent years, the GCC, especially KSA and the UAE, are still going strong. They are in the top 15 national importers of Swiss watches (Dubai imported 700,000 units last year) with demand increasing by roughly 15% annually.

36mm used to be enough

The fadmeisters tell us that today’s watch should be BIG. In a previous life, a 36mm diameter watch was more than enough for a man. Today if you’re wearing anything under 40mm, apparently you just aren’t cutting it. The trend was set by über-brand Officine Panerai (most models are 44mm and with a chunky winder protector), whose Italian navy heritage and distinctive lines have helped the brand carve out an intriguing niche in the global watch market. Still, purists believe Officine Panerai to be arriviste among the aristocrats of the luxury watch constellation.

So you have just got your annual bonus and you think, well, you’ve worked hard, the school fees are paid and the mortgage is in good shape and the wife isn’t badgering you to get the apartment painted and you have a decent car and you can afford an annual holiday and your credit card is paid off and … well, basically everything is squared away. (Because let’s face it, throwing down anywhere between $2,000 — entry level for a luxury watch — and $30,000 — in reality the sky’s the limit — on something that tells you the time and is in all likeliness less accurate than a Casio, is something you really gotta justify.)

Now as I said, if you want pinpoint accuracy get a Casio or a Swatch or any other quartz powered watch. Don’t get me wrong, some can cost thousands, but these — sports and diving watches excluded — must be considered jewelry before anything else. If you are going to buy a watch that reflects how you see yourself (and, if we are being honest, how you want other people to see you), it really should be mechanical and by that I mean either automatic (powered by wrist movement) or manually wound (yes, they still make them). A friend recently announced that his next watch must be manual, as he wanted to feel he had a connection with his watch by having to wind it every day. It is this level of deep satisfaction that for many people justifies owning an expensive watch from a historic manufacturer.

Today’s great models

One decent watch should be enough, so here is my selection for what it’s worth. I have chosen what I believe are watches that have proved themselves in terms of brand equity, design build and quality and performance. Many are held up as performance classics — Rolex Submariner, Omega Speedmaster, Breitling Navitimer — design icons — Audemars Piguet’s Royal Oak, Longines Lindbergh, Jeager-LeCoultre Reverso, Tag Heuer Monaco — or simply just stunningly elegant and timeless — Vacheron Constantin Patrimony Contemporaine. I have also earmarked the IWC Da Vinci and the Patek Phillipe Gondolo Calendario for future greatness.

Patek Phillipe, arguably the most prestigious name in watch making, captured the essence of owning a great watch with its “father and son” ad-campaign that suggested a watch was something one handed down the generations. Slightly more tricky to sell is the idea that you can pass along your Swatch or Seiko. Then again, I might just be a very shallow man with too much time on his hands!

Michael Karam is Managing Editor of Executive.

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