As a foil to Dubai, where runaway fees and commissions are en vogue, Qatar’s central bank has begun efforts to cap bank commissions and fees, according to local newspaper Asharq’s February 22 report. The new rule will cover 30 different commissions deducted from personal accounts for banking services. The crackdown will also include the requirement of full disclosure of all fees and commissions both to the banks’ customers and the country’s central bank.
Slump? What slump? If you listen to some of the pundits, one would be forgiven for thinking that the Beirut real-estate sector had forgotten the country is on the edge of the abyss. High-end developers still claim they are achieving $2,000/m2, that’s $500,000 for a “modest” new 250m2 apartment, albeit in sought-after Ashrafieh.
But for the average Lebanese, housing has become unaffordable. In the last three years, property prices in Beirut rose by around 50%, according to some figures. Despite the current unstable political climate, prices are not decreasing. In fact they are set to increase even more due to the rising cost of building material such as steel and cement and the weakness of the dollar against other currencies. Any rise in VAT will also be reflected in the price and the steady emigration of foreign laborers has resulted in the increase of labor prices. Another factor is that those Lebanese who can afford to buy are, securing property before foreign buyers return and drive up prices further.
Prime locations in Ashrafieh have in fact reached an unprecedented $4,500-5,000 per square meter, according to Patrick Geammal, chairman and managing director of Ascot, a real estate brokerage firm. “We have never seen the kinds of prices we have been seeing in the last 30 days,” he explains, speaking in mid-July, a period which saw Lebanon gripped by political crisis, bombs, assassination and battle. Yet despite this, municipal Beirut is experiencing a property boom, with tell-tale holes in the ground springing up everywhere.
Ashrafieh has been helped by the evolution of the Beirut Central District. Geammal says that prices now radiate outward from the BCD and now encompass the genteel Christian quarter Ashrafieh. Ten years ago, when the BCD was one vast construction site, the most desirable areas were in West Beirut — Verdun, Ramlet al-Baida and Ras Beirut — where commercial potential drove residential demand.
Ashrafieh was almost Suburbia. “In this part of town, that was not the case,” remembers Geammal. “The only people investing there were Ashrafieh residents themselves.” Today, hotels, restaurants, boutiques and shopping malls have seen it well and truly become part of Beirut’s metropolitan heartbeat and prices have hit the stratosphere, rivaling Verdun and Ras Beirut.
However, even with this spike in prices, Geammal believes that some Lebanese still find Beirut something of a bargain compared to other capitals. “A million dollars for Lebanese working here is a lot when you consider the salaries but for those living abroad, a million dollars for a 500-square-meter apartment, especially in a prime location, is nothing. Lebanon is still relatively cheap compared to prices in London or Paris.”
Not all are bullish
Raja Makarem, managing partner of Ramco, real estate advisors, is not so bullish. He believes that something has had to give during Lebanon’s worst political crisis since the end of the civil war. He says that projects for apartments larger than 600m2 have been halted and very few apartments larger than 400m2 or more (the $1 million-plus category) are selling. “The Gulf customers have stopped coming and the Lebanese living abroad have stopped buying large apartments.”
Any movement in the market, says Makarem, is being financed by Lebanese working in the Gulf who maintain their families in Lebanon. Makarem believes that this bracket has given the impression that real estate is on the up and further states it is this perception that kept asking prices artificially high as property owners hold out the price they want and not what is determined by the market. To back up his theory he says that new smaller-size projects have begun to slow down in the past six to eight weeks and interest could wane further.
But how does all this affect ‘regular’ or first time home buyers? With most of the construction focus on the high-end of the spectrum aimed at foreign buyers with foreign salaries, affordable (for Lebanese) new apartments are scarce and much sought after, driving up prices by as much as 25%, putting the “low-end” market out of the reach of most Lebanese.
In this climate, buyers are gradually accepting that one does not need a home the size of a football stadium to live comfortably. Lebanese who have lived abroad and have been forced to live in small apartments in London or Paris have realized that they don’t need to have a huge apartment to live well.
Changing mindsets
“The mentality has changed in Lebanon that yes, I can live in a 100 square meter apartment,” said Geammal. You also have the Lebanese and Gulf Arabs that only spend their holidays here and are willing to live in smaller quarters. “Think about when you are on vacation and how you and your family were able to stay in a hotel room and were still happy — it’s the same mentality,” adds Geammal. “You have to understand that many of these smaller apartments are bought by the same type of people as the larger apartments but with different mentalities.”
However, in Geammal’s view, the current market is not as skewed as it appears. “Imagine that there is a launching of 1,000 flats,” he says. “I sincerely believe that between the 3 million Lebanese living here and the 10 million living abroad, a thousand of them are successful enough to put half-a-million or so aside to buy an apartment. This isn’t like Dubai where they throw 100,000 flats on the market to see how they sell. In Lebanon, if no one buys there is no problem because if they don’t sell today they will sell tomorrow. If you are the owner of a $1 million flat, you can take a loan for $100,000 and it will not change your life. You don’t need to sell your property to make do.”
Ultimately it’s all about the allure of property, particularly to those living in this part of the world. For most Lebanese investment is about owning things — things you can show and things that you can touch. Property represents a secure commodity in which to invest their savings, as opposed to currencies, which are subject to market fluctuations, as evidenced by the recent decline of the dollar. For Lebanese, it’s about having a piece of land and being able to pass it on to future generations. “Cash has no value for us; if I had $10 million in real estate, I would be richer than if I had $50 million in cash,” argues Geammal. “If you wanted to take a loan from the bank, they wouldn’t ask how much you are worth but the value of your properties.” The old adage, “money in the bank,” just doesn’t cut it around here, it seems.
As the rumors of a strike on Iran continue, with US saber rattling an almost weekly occurrence — lately over Hizbullah agents in Iraq, and al-Qaeda allegedly using Iran as a staging ground — a question begs to be asked, is this as much about energy as Tehran’s nuclear ambitions?
Iran is sitting on huge oil and gas reserves that have not been utilized to their full potential. The country’s gas reserves are of major importance to the development of the global economy, particularly liquefied natural gas (LNG), with global consumption surging by over 30% in the five years to 2005.
Qatar’s North field and Iran’s South Pars field is the largest known gas field in the world, with estimated gas reserves of 1,300 trillion cubic feet (TCF) or 221 billion barrels of oil and gas equivalent (boe).
Major energy companies are champing at the bit to access this veritable gold mine, but the US sanctions on the Islamic Republic — which threaten to punish foreign firms that do business in Iran under the Iran-Libya Sanctions Act of 1996 — has prevented the development of the South Par’s estimated 500 TCF (85 billion boe) of natural gas.
The majors have resultantly concentrated on Qatar, which overtook Indonesia last year as the biggest exporter of LNG, exporting 31.09 billion cubic meters (bcm) or 15% of global LNG exports. But with global demand for LNG rising — demand is expected to nearly double in the next three to four years — Iran remains the untapped diamond.
“The fact is we will need Iranian energy sooner or later, perhaps sooner,” said Ian Moncrieff, vice president, Oil and Gas Practice, at American consultancy firm Kline & Company.
So the question is, will the global thirst for Iranian gas necessitate war by the US or rapprochement?
A thaw in relations could — and arguably should — occur, spurred on by the majors, as occurred in Central Asia in the 1990s. Furthermore, the world has become increasingly dependent on the energy flowing out of the Gulf.
Last year, Bahrain, Iran, Iraq, Kuwait, Qatar, Saudi Arabia and the UAE produced about 28% of the world’s oil, while holding 55% (728 billion barrels) of the world’s crude oil reserves and 41% of total proven gas reserves (2,509 TCF). OECD gross oil imports from the Gulf countries averaged about 10.4 million barrels per day (bpd) during 2006, accounting for 31% of the OECD’s total net oil imports.
A strike on Iran would cause a serious upset in accessing this energy, as in such a scenario the Straits of Hormuz could be closed or partially blocked. With some 17 million bpd exported via the Straits, roughly one-fifth of the world’s oil supplies, even a slight disruption to the flow of energy would have a serious impact on energy prices — the price of a barrel of oil would not just spike, it would rocket into the triple digits.
The Gulf countries are very aware of the dangers that the reliance on the Straits presents, with two pipelines on the drawing board that could pump as much as 6.5 million bpd, around 40% of the daily exports through the Straits. These pipelines will not be finished for several years however, and the possibility of pumping oil and gas by pipeline to the Mediterranean is equally years off, due to the billions of dollars needed to overhaul as well as build pipelines across Iraq and through Syria, another geopolitical wild card.
The global need to access the Gulf’s energy resources could conceivably prevent a strike on Iran. Then again, US Energy Secretary Sam Bodman said last year that the United States would be in “good shape” if Gulf exports were affected due to America’s emergency stockpile of almost 700 million barrels of crude oil. It would be the rest of the world that would not be in such good shape however, and with Washington increasingly isolated over its adventurism in Iraq, an attack on Iran and the knock-on consequences on energy supplies could leave the US without many friends. These factors are no doubt being given due consideration on Capitol Hill and at the Pentagon.
What will equally be considered is that Qatar will supply the US and UK with some 40% of their LNG needs, but only by 2010, and that LNG projects in Iran are only likely to swing into action by 2013 — plenty of time to tackle the Islamic Republic and still come out trumps, unless Iraqi resistance style developments occur in Iran of course.
Just as the invasions of Afghanistan and Iraq were about securing energy resources as well as waging the “war on terror” and nipping the supposed threat of WMDs in the bud, America’s posturing over Iran is as much about accessing energy as countering the threat of Iran’s nuclear aspirations.
How Washington handles this crisis is of grave importance not only to the region but to the rest of the world, who desperately rely on the Gulf’s oil and gas to keep their economies ticking along.
PAUL COCHRANE is a freelance journalist based in Beirut. His work has appeared in Britain’s Petroleum Review
Last month, the United Nations and the World Bank released global performance reports on private sector immersion and country level achievements in the crucial areas of social responsibility and governance.
The UN corporate citizenship initiative for joint efforts with the private sector business community goes by the name of Global Compact. According to the organization’s first worldwide annual report and survey (published last month), participation has widened to over 4,000 entities in 116 countries, including more than 3,000 corporate participants.
The largest increases in participation were recorded in Europe and Asia, whereas MENA response rates accounted for only 2% of the total. The Compact mentioned Egypt as the country where it found the strongest resonance in the region and a local network has been crafted. Jordan and the UAE were listed as countries where networks are under formation; even more limited presence exists in Syria, Lebanon, Qatar, and Kuwait as well as Tunisia and Morocco.
Promoted by the UN, multilateral agencies such as the World Bank, and a sea of civil society and academic organizations, concepts such as corporate social responsibility (CSR) are today entrenched in the vocabulary of industrial decision makers.
Where do the MENA business communities stand today in realizing corporate governance, environmental policies, and CSR?
When they started promoting Corporate Social Responsibility in countries of the region, organizations such as the UNDP found that companies in the Middle East often respond to social sponsorship requests and commit resources to their communities.
However, an important qualifier in declaring charitable activities to be CSR is treating it strategically, meaning that companies do not merely respond to needs from the community and answer to appeals for aid, but incorporate this activity into their core giving it comparable importance to their investor relations and production.
Compared to the Western business world, some of the largest Middle Eastern companies have incorporated CSR references into their identity but without the immediacy and weight of their multinational peers. Sabic, the Saudi petrochemicals producer, hints at CR content with a homepage button labeled “our commitments” that shows social action examples from 2004. Regional telcos MobiNil and MTC reference their commitment but also present only dated material.
The sites of Lebanon’s Banque Audi and Saudi bank Al-Rajhi are void of CSR statements or related news. The homepage of Emaar Properties is exclusively loaded with sales and marketing, one has to dig deep into the “About Us” section to find some board room basics as corporate governance info; Solidere presents a citizenship angle with its Garden of Forgiveness, although its relevant information is limited to a 41-month-old CEO speech.
What these leading Arab companies and most others in the region do have in common is that they hint at their corporate responsibility awareness but apparently still place CSR several notches below the strategic presence of corporate citizenship in developed and leading forward-thinking markets.
Also on national parameters, benchmarks such as the World Bank’s Worldwide Governance Indicators (WGI) support the view that Arab countries have much catching up to do in the overall global competitive environment.
This, however, must be seen in the context of an overall timid progress of governance issues worldwide where the IMF has made it a point to note that it has not been able to detect a uniform worldwide uptrend in governance since it started gauging national governance factors in 1996.
But good things take time and more than that. While the seven-year-old Global Compact expounds that in an ideal world all companies would comply with its principles, the current corporate membership is but a very hopeful drop in a huge bucket, even when postulating an impact bonus for the significant presence of F-500 companies.
One thing not to forget in regional CSR issues is that the primary measure for this responsibility is the relationship between the company and its workforce. In this aspect, the region is impacted by increasing challenges, evidenced through labor disputes that express wage inequalities and growing social pressures on many employees which are accompanying the eminent boom in corporate activity in the GCC.
In Lebanon, conversely, labor rights are presently extra reason for concern because of economic hardships that forced companies to cut expenses but also saw some bosses take advantage of the high competition for jobs in the tight market and unjustifiably beat down the salaries of existing or new employees.
Taking stock of CSR in the Middle East today goes to restate that good things are notoriously difficult to achieve — even if they reflect the ultimate common sense, such as the reality that there is no such thing as pure self-interest, corporate or otherwise.
THOMAS SCHELLEN is the business editor for Zawya Dow Jones in Beirut
Over the coming years, Saudi Arabia is likely to experience a sharp increase in its healthcare needs. Most observers believe that population growth, a slowly aging society, and the conditions that affluence often exacerbates, such as obesity, diabetes, and cardiovascular diseases, as well as cancer, will create a tremendous new demand for healthcare services.
“Saudi Arabia’s healthcare system is ripe for investment opportunities,” according to a senior associate at Booz Allen Hamilton. “The growing affluence of Saudi Arabia and the GCC region as a whole will mean that the healthcare systems of these nations will need both money and expertise from outside sources in order to cope with an aging, yet well-to-do population.”
At present, the Saudi Arabian government funds most of the demand for healthcare capital and operating expenditures. However, analysts believe that government alone will struggle to continue to meet this demand. They have concluded that the only way to ensure that Saudi nationals’ health needs will be met without adversely affecting economic progress is to increase private sector participation in the health care system. The Saudi government has recognized this situation, and has identified healthcare as one of the key sectors targeted in its wide-ranging privatization program.
Today, the Ministry of Health (MOH) is working to prepare the sector for this essential but difficult transition. As a first step, the MOH has studied the best practices of the countries with the most successful healthcare systems and drafted plans that adapt these practices to the unique needs and circumstances of Saudi Arabia. The underlying goals have already been established:
Create a stronger institutional setup and effective regulatory framework to promote private sector investment in healthcare, including the production and distribution of pharmaceutical and medical supplies,
Develop a business environment that will make Saudi Arabia a more attractive destination for private healthcare providers, and
Attract investors and other partners to the Middle East’s largest market for healthcare
The takeaway for healthcare providers and suppliers is clear: the Middle East’s largest market of healthcare consumers will become increasingly open to private investment.
Growth unsustainable without increased private sector participation
By the year 2020, the population of Saudi Arabia is expected to reach 30 million. Over the next decade, health expenditures are expected to increase dramatically, even faster than the rate of population growth. Demand for hospital beds is likely to grow from 51,000 to 70,000, demand for physicians is likely to rise from 40,000 to 54,000 — and the number of hospitals is likely to rise from 364 to 502. There are several reasons MOH planners see such a sharp rise in health needs:
Saudis will become older. The percentage of the population over 60 is rising, and is expected to more than double by 2020. By 2020, the number of old people is expected to grow from approximately 1 million (4% of the population) to roughly 2.5 million (7 % of the population). At the same time, as incomes increase, Saudis are likely to spend an increasing amount of money on healthcare treatments, such as leading-edge therapies.
But wealth will not always bring health. As most countries have learned, affluence is not an unmitigated benefit to health. Today, the average Saudi national is overweight. The average Body Mass Index (BMI) of Saudi nationals 15 years and older is 30 kg/m2, far above the global average of 23. A score greater than 25 is considered overweight. Such personal choices are likely to continue to translate into expensive and chronic conditions.
And the costs of treatment will continue to rise. Paying for care of such chronic conditions is difficult now and is likely to grow worse.
Past experience at MOH suggests that the long-run trend is toward rapidly increasing expense for healthcare. Between 1999 and 2005, government saw a 7.2% annual compounded annual growth in its healthcare budget. The Kingdom spent $13 billion on healthcare in 2005, and this spending is expected to grow to over $20 billion by 2016.
A blueprint for change
Currently, the government dominates the healthcare sector in Saudi Arabia. Private sector spending for health care in Saudi Arabia accounts for 25% of the total. Increased private sector participation in healthcare is generally accepted as essential to achieve the Kingdom’s objective to increase the efficacy of the Saudi healthcare system while reducing the burden on government spending. Present plans call for a transition of the Kingdom to a mixed healthcare system, in which government participation is limited largely to healthcare coverage of the poor and military, with a variety of private healthcare options available to everyone else.
The plan for this transition calls for the following main changes in the current MOH healthcare system:
1. MOH will concentrate its healthcare provision activities on preventive and curative primary care
2. A new government entity will be established, the General Organization for Hospitals, separate from MOH, and all MOH hospitals assets will be transferred to this new organization to prepare the ground for increased public private partnerships in healthcare provision
3. A National Health Fund will be established under the Ministry of Finance, also separate from MOH, to fund directly healthcare services provided to patients
All these changes are likely to create vast new opportunities for international healthcare companies and other healthcare providers. Over the coming decade, a variety of opportunities are likely to open up in virtually every aspect of the Saudi healthcare sector, including tertiary care, secondary care, ambulatory care and testing centers, generic pharmaceutical, medical devices manufacturing, insurance, e-Health and education.
Conclusion
The fully nationalized system that served an earlier era well is no longer suited for the complex, dynamic country that Saudi Arabia is now becoming. For both economic and public health reasons, the government is committed to a course of change that will in the end create a system that is more responsive to the health needs of Saudi consumers.
“A market-driven healthcare system means competing groups providing the best care possible,” adds a senior associate of Booz Allen Hamilton. “In order to cope with the future needs of the country, Saudi Arabia is finding that it must make substantial changes to the way it conducts healthcare.”
This transition to a market-driven healthcare system will not only be good news for Saudis and the Saudi economy. For international healthcare providers and investors, the coming liberalization of the sector will mean increased access to the largest healthcare market in the Middle East, and an exciting opportunity to help millions of Saudis live longer, healthier lives.
Ziad Fares is a Senior Associate at Booz Allen Hamilton. He is a member of the Global Health team at Booz Allen and is currently responsible for growing the health practice, leading engagements and consulting teams in various countries in the GCC and MENA regions.
Any proper understanding of the debt phenomenon in Lebanon requires a short historical review of how this huge amount of debt could have piled up. It is to be noted here that the Lebanese public debt stood at the equivalent amount of $2 billion at the end of 1992, representing approximately 50% of GDP at that time. By the end of 2006, this debt stood at the equivalent of $40.5 billion representing 200% of GDP. During this period of 14 years, the total fiscal deficit of the state and the public sector (without debt service, but including all reconstruction expenditures and expenses outside the budget) did not exceed the equivalent of $4.7 billion.
This means that the cumulated annual amount of debt service during the period 1993-2006 reached the astronomic figure of $31.4 billion, while the capital of the debt at the end of 1992 ($2 billion) plus the fiscal overall primary deficit ($4.7 billion) during this period did not exceed $6.7 billion (2 + 4.7). The cumulated amount of debt service was higher than the total of all other budget expenditures during the period and represented 87% of the cumulated overall Treasury fiscal deficit including debt service for the period 1993-2006 ($36.9 billion).
The main factor leading to such a staggering figure is the level of interest rates on the T-bills issued in domestic currency between 1993 and 1998. Rates have reached levels of more than 35% in 1995 and of more than 20% in certain years between 1993 and 1998. Real interest rates have been almost above 10% of the local CPI throughout the period from 1994 to 2002. Although the level of yields on domestic T-bills declined substantially in 1999 from 18.6% to 14.4%, it is only after 2002 that it was reduced again to below 10%. In fact, the average annual interest rate paid on the capital of the debt was 14.6% during the period 1993-2006, a very high average compared to the level of international interest rates and to the domestic CPI.
It will be very important to be explicit in the future why interest rates increased so dramatically in Lebanon during the 1990s. After all, during this decade interest rates were declining worldwide, domestic inflation was coming down substantially, there was a surplus in the balance of payments and the Central Bank was piling up foreign exchange reserves without being indebted to the domestic banking system, as is the case today. If the average annual interest rate on the public debt in Lebanon had been set at 5% above LIBOR during the period 1993-2006, the cumulated debt service would have reached only $16 billion, compared to the $31.4 billion effectively paid by the Treasury. In fact, in this case, we can estimate the overcharge of interest rates to the Treasury at $15 billion. A calculation of such overcharge, in case of an average interest rate on the public debt during the same period at the level of 3.5% above LIBOR, shows that the amount of debt service during the period would not have exceeded $11.2 billion; in this case the public debt today would be standing at $19.7 billion only, i.e. at less than 100% of GDP instead of 200% as is currently the case.
Resolving the debt trap
During the last few years, the government was able to continue to refinance its huge debt due to two positive factors. The first one is the decline in interest rates since 1999 which contained increases in the annual debt service. In addition, the Treasury receipts were substantially strengthened both by the implementation of VAT and the cancellation of the two cellular phone companies’ BOT allowing the Treasury to cash 100% of their profits. However, in spite of these positive developments, the vicious circle was not broken and the ever-increasing amount of debt is still the biggest obstacle to a return to full economic health.
In fact, to reduce the level of indebtedness, the rate of growth of government receipts should have surpassed the interest rate paid by the Treasury on the public debt. This is why what is needed to get Lebanon out of the debt trap is a combination of an extremely high rate of growth, more interest rate reduction and a well designed and properly timed privatization program.
It should be noted, however, that due to the present level of Treasury indebtedness ($41.5 billion), whatever privatization receipts could be generated, they will not be able to substantially reduce this level. One can anticipate at best an amount of $6 to $8 billion in case the Lebanese government nomenklatura could agree on implementing a privatization program. This amount could stop the debt increase for maybe two years, but no more. In addition, to be effective, this program should be properly planned and implemented. There should be an adequate timing whereby privatization receipts would be an additional element in creating a positive dynamic to get out at once of the debt trap.
To this effect, what is important for Lebanon is to change its economic mentality and for its public and private sector decision makers to realize how much the economic and human potential of the country is remaining untapped. This, in my view, is largely due to the rigidity that has affected the economic vision of Lebanon as being able to grow and develop exclusively through the banking and the real estate sector, in addition to tourism. In fact, reconstruction policies in the 1990s have reproduced and aggravated the vision of Lebanon being ideally and exclusively suited to be a financial and commercial entrepôt for the region. It contributed to strengthen the wrong belief that the economy could only prosper if based on intermediation between supposedly underdeveloped Arab economies and Western or other more developed economies.
Keeping the brains here
In this respect, it should be noted that the reconstruction planners did not take into account all the changes that have affected not only the Arab region, but also the international economy. They also did not realize that the old regional role of Lebanon was over and that globalization and the electronic revolution were rendering intermediaries irrelevant. They did not realize that globalization requires a shift to high value added products and services in high demand in the world economy. Neither did they grasp the fact that the success in exporting such products and services requires any country to keep its best human resources at home instead of exporting them to other countries. Although many successful economic models could have inspired the Lebanese economic policy, like Malta, Ireland, Cyprus, Singapore and other larger economies like Taiwan or South Korea, the weight of the past seems to have been a fundamental obstacle to understand the urgent need for a change.
Creating artificial rent revenues in the country by increasing interest rates to the levels mentioned above was a high cost substitute to the lack of job creation and local economic dynamism outside the real estate sector. The traditional Lebanese wisdom about human resources is still based on the belief that it is more beneficial to the Lebanese economy to export brains than to devote efforts to keep them at home by creating locally new high value added activities securing enough employment opportunities for these brains. The regular remittance flow is viewed as an essential element of poverty alleviation and balance of payment equilibrium. It is not considered to be an economic waste, given the fact that the local economy supports the costs of educating and training these dynamic human resources, while countries receiving this educated manpower are getting the full economic benefits. The “brain exporting country” receives only a residual part of the revenues produced by these brains abroad through the flow of remittances.
This is why the quality and sophistication of economic thinking in Lebanon should be seriously addressed to get out of the debt trap. Now that the era of “crazy” interest rates is over, it is high time to look seriously at the comparative advantages that Lebanon enjoys in many fields. If properly used, these advantages will allow the country to compete successfully in the global market for high value added activities. Lebanon could become a very dynamic exporter of biological agricultural products, high-quality seeds, and plant-based medicine given its famous biodiversity and the existence of many plants with medicinal value. It could also much more develop its software productive capacities; it could attract sub-contracting of off-shored services activities in accounting, financial analysis, medical and biological research. It could also go into producing solar energy equipment in high demand worldwide, as well as into producing equipment for used-water recycling or solid waste treatment. It is only through sustained continuous high growth generated by a substantial increase in Lebanese exports of high value added goods and services that the country could break the vicious circle of ever increasing indebtedness.
There are, however, other actions to be taken simultaneously to get out of the debt trap, mainly reforming our dual monetary system whereby the US dollar and Lebanese pound coexist as legal means of payment. Reforming the tax system, as well as the public debt management, are two other key issues to get out of the debt trap. The part of the public debt, in the hand of Lebanese institutional holders, should also be progressively rescheduled through voluntary agreements between the state, the Association of Banks and the Bank of Lebanon. In fact, to be sustainable, the annual debt service burden should not exceed the level of 25% or 30% of public expenditures against more than 50% on average during 1993-2006.
But all this suppose a change of economic mentality and the adoption of a different reform program than the one developed with the help of international financial institutions. In the mean time, one should hope that the political situation will remain in control and will not spoil any chance of future reform of the Lebanese economy in a new direction.
GEORGES CORM is a former minister of finance and a professor at St. Joseph University in Beirut
In July, a controversy erupted when two Israel journalists traveling under foreign passports came to Lebanon to report on the country a year after the summer 2006 war. The pair, Lisa Goldman and Rinat Malkes, was taken to task by Nour Samaha of the Daily Star, who wrote that the journalists “not only broke Lebanese law, but also violated codes of ethics in journalism and endangered the lives of those they interviewed.”
Goldman defended herself against several of Samaha’s statements. But one phrase in particular stood out in her response: “Ramez Maluf, professor of journalism at the Lebanese American University, is quoted in the article as saying that Israelis interested in news about Lebanon should rely on the wire services. That sounds a lot like ‘let them eat cake.’ Me, I prefer a more substantive meal. Given the tsunami of congratulatory emails I have received from both Lebanese and Israelis, it seems pretty clear that there is a great hunger for human-interest reporting that goes beyond conflict and war — and that the average Lebanese and the average Israeli share a preference for a real meal over cake, too.”
This merits a closer look. Maluf’s point that Israelis should satisfy themselves with wire reports is more a political statement than a professional one. Journalists, at least the better ones, will rarely subscribe to constraints placed on them by governments. Indeed, should they? That doesn’t mean it’s the duty of a journalist to break the law, but one has to be realistic: to ask of individuals whose job it is to gather information that they satisfy themselves with stockpiling wire reports is a bit much.
The matter of Goldman’s ethics or whether she endangered the Lebanese she talked to can be debated. There certainly are dangers to interviewees if an Israeli journalist doesn’t work carefully. However, it is inconsistent to hold against Israelis that they remain ignorant about their neighbors in the Arab World, only to turn around and blame them for trying to remedy that failing. Most Arab television stations have correspondents in Israel, and all broadcasted live last year during the Lebanon war. Goldman’s impulse to be selective with the truth about herself in Beirut came from the lack of a similar opportunity afforded to Israeli journalists.
One of the questions raised by the discussion of Goldman’s and Malkes’ stay was whether it was time to grant Israeli journalists an opportunity to report from Lebanon, in the spirit of open communications. There are pros and cons involved, and the political implications are significant.
First, it’s time to dispel a myth. Israelis or correspondents for Israeli media have long been reporting from Lebanon. Goldman and Malkes did not invent the wheel. The journalists have done so by entering Lebanon on foreign passports, as Goldman and Malkes did, while showing credentials from newspapers of countries with which Lebanon has no problems. So, for example, a journalist might write for an American newspaper, but also file for an Israeli publication. The journalists’ chances of returning to Lebanon may be blown once the Lebanese find out, but that doesn’t change that the loophole is often exploited.
Second, for diplomatic and security reasons it would be absurd to expect either the Lebanese government or Hizbullah to sign off on opening Lebanon up fully to Israeli correspondents. It’s not going to happen, nor can we forget that the Israelis do censor news reports at their end. A free flow of information is unlikely, so we have to think of an alternative.
Is allowing tightly controlled access to Israeli journalists better than the current ambiguity? The answer will provoke hackles from those who believe the Israelis must make scarce. But what if Israeli journalists had been taken on a tour of the destroyed quarters of Bint Jubayl and Beirut’s southern suburbs last year? What if they were shown the bridges and factories needlessly destroyed because Israel didn’t quite know what it wanted to do in Lebanon once the war began? What if they were taken on a tour of Lebanon’s morgues at the height of the bombings?
Oddly enough, Hizbullah would have a much better sense of the latent advantages here than those who insist on remaining politically correct. In fact, once the political implications of allowing Israelis to enter Lebanon under some form of political control are grasped by Israeli officials, it is the officials themselves who might begin protesting the Lebanese sojourns. However, the Israeli media would insist the trips continue, because, as Goldman put it, journalists prefer a full meal to eating cake.
That is assuming of course that the hypocritical equilibrium existing now is not the best solution for all. We call the Israelis scoundrels for entering Lebanon under false pretenses; they call us intolerant for failing to allow them into the country except under false pretenses; and everyone remains happy. Yet the point is being missed: information will cross borders whether we like it or not. Who will best get his information across?
The Cuban missile crisis began in 1961 when the US started to deploy 15 Jupiter IRBM — intermediate-range ballistic missiles — in Turkey, close to the Soviet border. With a range of 1,500 miles and a flight time of about 16 minutes, the missiles threatened several cities — including Moscow.
On October 14, 1962, photographs shot by US reconnaissance planes and shown to President John F. Kennedy revealed similar installations being erected in Cuba, as a response to the American threat. Days later, on October 28, after a dramatic confrontation threatened world peace, Kennedy and Soviet premier Nikita Khrushchev, with the intercession of the Secretary General of the United Nations, agreed both sides would dismantle their installations.
Now 46 years later US President George W. Bush wants to install a missile defense system in the Czech Republic and a radar tracking station in Poland. News of US missiles being positioned so close to Russia triggered a “mini-Cuban missile crisis.”
Russia’s initial reaction was not surprising. As soon as President Vladimir Putin managed to overcome his anger, he said he would direct Russian missiles at European cities in retaliation to the US plans to deploy in Central Europe.
But then the Russian president surprised Bush when the two men met a few weeks later, in June, at the G-8 Summit in Germany. Changing tactics once more and sidestepping his earlier threats to target European cities, Putin suggested that Russia joins the US initiative. Instead of the Czech Republic and Poland being used as bases for the defense system he recommended the use of a former-Soviet base in Azerbaijan. The Russian president had even gone to his Azeri counterpart and already obtained an agreement.
“Interesting,” was how Bush replied to Putin’s offer. That’s the diplomatic way of saying “thanks, but no.” Bush and his advisors probably never gave the Russian offer very serious thought. In any case it did not take very long for the United States to deem the Russian offer invalid on grounds that the Azeri station would not be acceptable from a technical point of view. The Americans said it was outdated.
But the Russian president, whose years in the KGB must have taught him how to remain cool under duress, was not so easily dissuaded.
In early July he flew to the United States and spent a weekend at the Bush family estate in Maine, in a relaxed atmosphere for what was, without a doubt, very stressful talks that even a fishing trip off the Atlantic coast on the Bush Sr.’s speedboat did little to smooth over.
And once again the Russian president came up with a new plan. This time Putin proposed to join the project as a partner and base the tracking station in Russia.
Meanwhile, Bush Jr. kept trying to convince the Russian president that his country has nothing to fear from those missiles. The US president stressed that the defensive missile system is needed to counter eventual threats emerging from Iran, if and when it reaches the point where it can produce its own nuclear weapons.
Why then is Putin so persistent in trying to get Bush to back away from the Czech/Polish project? So adamant is the Russian president to prevent this from becoming a reality that he keeps coming back with a new offer at every meeting. The answer to Putin’s opposition to the Czech/Polish defense plan can be found in two factors; one is of a strategic nature while the other is more emotional, combined with a brisk of nostalgia for the Soviet past.
Strategically, the Russians share the same fears the US has of a nuclear-armed Iran. In fact, Russia has probably far more reason to worry of an Iran with nukes than the US. First, Russia is geographically much closer, needing only short or intermediary range missiles, which Iran already has, should it ever wish to strike at Russia. On the other hand, Iran would need to deploy intercontinental missiles, which it does not yet have, should it wish to strike at the US.
Second, Russia, a federal state, also has its share of problems with Islamist extremists operating from its southern Muslim republics, like Chechnya, who are seeking to break away from the motherland. In that respect Moscow and Washington have equal trepidation that a nuclear weapon would fall into the hands of Islamist terrorists, the consequences of which would be catastrophic for both.
On the emotional level, call it even a level of national pride, Moscow is highly reluctant to see two former Warsaw Pact countries enter into a defense agreement which may be viewed by many Russians as ganging up on Russia. Moscow still has a hard time digesting the fact that its former satellites states are now members of the European Union and, to add insult to injury, also members of NATO.
Still, despite Putin’s ongoing objections Bush said after meeting his Russian counterpart, “I think the Czech Republic and Poland need to be an integral part of the system.”
If for the Russian president the week got off to a bad start with his failure to convince the American president to change his mind and back away from the Czech Republic and Poland, at least it ended on a positive note as he managed to convince the International Olympic Committee to designate the Russian city of Sochi as the site for the 2014 Winter Olympics. This is the first time in the history of the Winter Games that Russia is chosen as a host and the second time, after the 1980 Moscow Summer Olympics, that Russia will host the Games.
Claude Salhani is International Editor and a political analyst with United Press International in Washington, DC. He can be reached at [email protected].
DUBAI: “First Salik violator spotted,” read a prominent headline on one Gulf daily last month. It led into a description of how a renegade Nissan Altima driver had been caught on CCTV crossing one of Dubai’s new toll gates without the requisite badge, just minutes after the system came online at midnight on July 1.
Salik has been gripping the nation for some time — and not just due to the lack of more interesting local news. The new road toll system, which is the first in the Gulf and one of a handful in the Arab world, has found itself at the center of much controversy and criticism.
In short, it works by scanning vehicles at two toll gates on the city’s main drag, Sheikh Zayed Road, charging a little over $1 a time. If drivers want to use the tolled roads, they buy credit for a special badge which is fixed to the windscreen. If you don’t have a badge, you pay a $27 fine every time you go under a toll. You are a Salik violator.
The scheme is expected to generate annual revenues of about $160 million for its creators, the Road and Transportation Authority (RTA), although it is unclear what proportion of that will come from legitimate use and what proportion from fines.
But whatever its business model, the new system’s purported aim is an ambitious one: to tackle some world-class traffic problems in one of the most rapidly-growing cities on earth.
A recent survey found that the average commuter spends one hour and 45 minutes in traffic everyday, a statistic which made Dubai the most congested city in the Arab world. Cairo took second prize. Another study claims that $1.2 billion is lost from the Emirate’s economy every year due to traffic inefficiencies, and that the resulting stress is having a negative impact on the productivity of employees.
Something, then, needed to be done. But Salik has come under heavy fire from many quarters. Many say it has actually made congestion worse, cramming up smaller streets with queues of motorists unwilling to pay for the convenience of the main roads. Cynics say it is another stealth tax imposed by the authorities. Car rental agencies moan that they are losing business and suffering from a constant headache of administrative paperwork.
Others complain that Salik, like many other things in Dubai which sound very sophisticated, just doesn’t function properly. Irate drivers say that customer helplines are constantly busy, that they receive erroneous text messages about the amount of credit in their Salik accounts, and that some have been charged without ever using the tolls. The Salik website has apparently been receiving over a million hits a day, which could make it a fortune in advertising if its owners signed up to Google.
A lot of these issues are probably teething troubles which might iron themselves out over time. And, for now, the newly-tolled roads are less crowded than they used to be at the peak times of day. Yet it’s difficult to see how Salik, or indeed anything, can hope to permanently solve Dubai’s traffic problem.
This is a place where cars are cheap, petrol virtually costs less than water and having an expensive set of wheels is essential. Everyone is too busy making money to care about the environment, and the threat of global warming becomes slightly meaningless to those used to the climate in the Arabian Gulf.
But the real problem, and the reason why introducing Salik at this time makes so little sense, is that there is no practical alternative to driving. Taxis don’t solve anything. You can’t walk anywhere. And the few bus services that exist are unreliable, unpunctual and extremely hot. How can you hope to persuade the western expat to give up his Audi, the Lebanese housewife her Porsche Cayenne or the Emirati his Land Cruiser in favor of a sweaty communal cabin?
The Dubai Metro is currently under construction, and, once it comes into service in 2009, will surely be used widely. It would have been more sensible to postpone Salik until then, offering a practical alternative to driving, but even the metro’s appeal will be limited. It is difficult to imagine a suited executive walking to a metro station to commute to the office, as he would in London, for instance. Weather, the layout of the city, and inflated egos all preclude that in Dubai.
So if there is no way of reducing the number of cars on the roads, then maybe the answer is to build more roads. The RTA says that it is spending about $12 billion on trying to solve traffic problems, that a total of 100 lanes will run across Dubai’s creek by 2020 and that more bus routes will be launched.
Even so, all this will take time, and the never-ending population growth means that Dubai’s traffic woes aren’t going anywhere. As for Salik, it just seems to be one more thing for the city’s residents to moan about.
ALEX WARREN is a freelance journalist based in Dubai
Despite its title, The Secret Israel-Palestinian Negotiations in Oslo (Routledge, Oxford: 2007) is no potboiler, being a recent publication in the scholarly Durham Modern Middle East and Islamic World Series. Rather it looks at the topic against the background of negotiation concepts and strategies, focusing particularly on the timely issue of non-recognition. That was certainly a significant topic in the early 1990s when the book’s events are mainly set; but is an absolutely vital one today given the emergence of Hamas as a key political force and the soap opera currently playing in Palestine and world capitals, starring various forces and governments refusing to recognize each other.
The author Sven Behrendt studied politics and management before receiving a Ph.D. in International Relations. After the completion of his studies he joined the Bertelsmann Foundation and directed a project addressing Middle East issues. He has since 2000 been working for the World Economic Forum where he set up and directed numerous projects focusing on geopolitics and business strategy, including several in the Arab World.
Behrendt’s credentials are thus sound, on both theory and the real life issues of the region, and his description and analysis do not disappoint. The book starts by showing how Israel and the Palestine Liberation Organization were facing challenges in the late 1980s and early 1990s that drove them to start talking to each other. Though Arab-Israeli diplomacy was always there, what made the Oslo negotiations different were direct, face-to-face talks between Israel and the PLO.
Oslo called for withdrawal of Israel from Gaza and parts of the West Bank, affirming a Palestinian right of self-government within those areas. After an interim period, the two sides would negotiate a permanent agreement on deliberately excluded “final status” issues such as Jerusalem, refugees, and Israeli settlements. However, with these core topics off the table, what did Oslo actually accomplish? Most importantly, the two sides had engaged in formal mutual recognition. The Israelis officially accepted the PLO as the legitimate representative of the Palestinian people while the Palestinians recognized the right of the state of Israel to exist, and renounced terrorism and violence.
Though the accord aroused hope for an end to conflict, skepticism abounded. Subsequent negotiations were many, in Europe, the US and the Middle East, ending in the fiasco of the Camp David 2000 Summit, which failed to resolve final status issues. The al-Aqsa Intifada followed that, and the rest, as they say, is history.
In the final analysis, Oslo was an icebreaker. Not that ice breaking is not an honorable activity, or indeed a necessary one. The last chapter in the book is tellingly entitled “The Success of the Oslo Talks — and Why the Process Failed.” Behrendt correctly concludes that the lack of longer-term vision on both sides doomed Oslo, but which was in its own way a successful breaking of the ice.
Where are we today, 14 years later? James Wolfensohn summed it up by ending a recent interview on a note of exasperation: “Israelis and Palestinians really should get over thinking that they’re a show on Broadway. They are a show in the Village, off-off-off-off Broadway. I hope I don’t get into too much trouble for saying this, but what the hell, that’s what I believe, and I’m 73.” For those who may not get the thespian metaphor, “the Village” refers to downtown Manhattan’s Greenwich Village, where small audiences see obscure plays, as opposed to Broadway where big names star in grand shows.
Wolfie is a 21st century Old Testament Patriarch who will certainly not get into hot water over his outspokenness. I on the other hand, neither septuagenarian nor Jewish, hope I can stay out of trouble for repeating something I said, on the record, in late 1995 about Arab-Israeli rapprochement: “The ice has been broken but the temperature is still below zero. It could easily freeze over again.”
With Ehud Barak politically resurrected and Peres occupying the bully pulpit of the Israeli presidency, could we now be in for another, perhaps final, chapter of the Palestinian-Israeli show? Barak, the man who scuttled Camp David in 2000, is now presumably wiser; and Shimon Peres co-orchestrated the breaking of the ice at Oslo, so maybe… With the American position unraveling in the Middle East, and the majority of its inhabitants (including those of Israel/Palestine) fed up with the consequences of Zionism and its antitheses, it may be time for Israel to wind down its failed neo-colonialism. This would first involve real recognition of the Palestinians and their rights, instead of an Oslo-like public relations exercise. In any event, it will be interesting to see what the next phase of Arab-Israeli diplomacy looks like; and I for one would look forward to Behrendt’s sequel.
RIAD AL KHOURI is an economist who relaxes by reading books and sometimes reviewing them