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Oslo’s secrets

by Riad Al-Khouri
written by Riad Al-Khouri

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  

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Petrol rationing in Iran

by Gareth Smith
written by Gareth Smith

With Iranians’ view of unlimited cheap petrol as a birthright, rationing was never going to be easy. But the need for change grew as years of a pump price frozen at 9 cents a liter took the import bill to $5 billion with Iran’s refineries way behind increasing consumption.

Finally, the government of Mahmoud Ahmadinejad bit the bullet, first with a price hike to 12 cents a liter and then with the introduction on June 27 of a ration of 100 liters a month per motorist.

The torching of some petrol stations in protest made great television but has obscured, at least internationally, the palpable fact that the policy is beginning to work.

Anecdotal evidence is clear. Tehran’s streets are less congested and the air quality improved. Hoteliers on the Caspian Sea coast complain of a lack of summer guests. “We’re struggling to get petrol for our tour buses,” said one tourist guide, “and motorists are saving their petrol allocation in case they need it later.”

And with all the usual caveats over government figures, the numbers are starting to add up. The Environment Ministry reported after two weeks of rationing there was a daily reduction of 8.7 million liters in consumption previously running at around 75 million a day. This would shave $1.7 billion from an import bill projected to reach $7 billion this year.

More recent figures suggest the reduction in consumption could be higher. Mostafa Pour-Mohammadi, the interior minister, told parliament in mid-July that between 11 and 16 million liters a day were being saved. And Ali Akbar Mehrabian of the government’s fuel committee put the saving at around 18 million liters, which he said would cut $4 billion from the import bill.

In the face of growing international pressure over its nuclear program, the Iranian government has long seen importing around 40% of petrol consumption as a dangerous vulnerability. Israeli prime minister Ehud Olmert was among those arguing the volatile public reaction to rationing showed that existing sanctions against Iran were working and should be extended.

Hence Mr. Ahmadinejad wants the government to go further in reducing imports — shifting vehicles away from petrol to natural gas, improving public transport and increasing the output of Iran’s refineries.

Like many countries that failed to invest sufficiently in refineries in the 1980s, Iran’s capacity has struggled with rising demand. But Mohammad Reza Nematzadeh, managing director of the National Iranian Oil Refining and Distribution company, has said existing plans for improved refining would take production of petrol from today’s 1.6 million barrels a day to 3 million by 2012.

The government is also pushing for conversion of more vehicles to gas, already used by Tehran’s yellow taxis. Kazem Vazeri-Hameneh, the oil minister, said last month the number of gas fueling stations would reach 1000, from the current 250, by the end of the Iranian year, and the number of converted vehicles would rise from 115,000 to 500,000. The government would target Nissan vans, he said, of which there are 500,000 across the country and whose conversion could save 10 million liters of petrol a year.

Rather than collapsing from internal dissent as a result of growing international pressure, the government of Mr. Ahmadinejad is developing a greater sense of purpose. Many of its members, including the president, spent their formative years in the trenches of the 1980-88 Iran-Iraq war and seem to feel at home in a crisis demanding national unity.

Hence, contrary to expectation, the government decided not to allow motorists to purchase petrol above their allocation at a higher price. However unpopular among Toyota Prado drivers of north Tehran and those running unofficial taxis, the decision was not just counter-inflationary but in line with the government’s commitment to “social justice” and its skepticism about market economics.

Rationing is also a major challenge to the vested interests involved in smuggling petrol out of the country to Iraq, Pakistan, Afghanistan and the UAE. Some put the figure as high as 8 million liters a day and while some smugglers use mules others are well-connected enough to drive tankers.

It remains an open question whether Mr. Ahmadinejad will benefit politically from petrol rationing. It has certainly been a major jolt in popular feeling, even though some Iranians say the system is at least “fair.”

The government has asked parliament to allow three months before judging the success or otherwise of the move. Either way, the decision — which the supreme leader, Ayatollah Ali Khamenei called “historic” — is surely one whose consequences, for good or bad, will play out for years to come.

GARETH SMYTH is the Financial Times Tehran correspondent

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The Russians are coming

by Peter Speetjens
written by Peter Speetjens

Founded by the controversial Russian-born billionaire Arkadi Gaydamak, the Social Welfare Party (SWP) is but the latest gladiator to enter Israel’s increasingly fragmented political arena. For decades the Knesset was dominated by eternal foes Labor and Likud, yet today it is home to a dozen small and medium-size parties, while tens of others failed to meet the minimum amount of votes required to enter parliament.

Within this widely varied political landscape, the distinct “Russian vote” is of growing importance. Since the collapse of the Soviet Union in 1989, some 1.2 million immigrants of Jewish descent were welcomed in Israel. Note, however, that although a Jew is generally defined as someone born to a Jewish mother, the Israeli Law of Return grants anyone with a Jewish grandparent the right to live the Zionist dream. It is estimated that some 300,000 Russian immigrants are not Jews.

Note as well that not all immigrants are Russians. They are mainly referred to as such because of the language they speak, which today is a common feature of Israeli society. Representing at least 20 of the Knesset’s total of 120 seats, the Russians are also known as the “kingmakers” of Israeli politics, as they are able to make or break a coalition. Little wonder then that during the 2006 elections Israel’s leading political parties all ran Russian-language campaigns.

Like other Russian parties, the SWP appears to the right of the Israeli political spectrum. It aims to topple the Olmert government, because of its failures in the 2006 Lebanon war, and promises full integration and social justice for Russian immigrants, most of whom are secular, belong to lower and middle class income groups, and share a sentiment of being second-class citizens.

During past elections, Israel’s Russians have predominantly voted right-wing, and showed a preference for a strong charismatic leader most likely to deliver on the issues of security and stability. The self-made man Gaydamak seems to meet that demand.

Born in Russia in 1952, Gaydamak left for France at the age of 20. Having started as a day laborer, he worked his way up the business ladder by means of a translation and import-export firm working between France and Russia. Part of his fortune, worth an estimated $4 billion, may not have been earned legitimately, as French authorities are keen to interrogate Gaydamak about his role in “Angolagate,” in which hundreds of millions worth of arms were smuggled to the African nation.

Gaydamak expects the SWP to win no less than 40 seats, even though he himself will not run. He has also set his eyes on becoming the mayor of Jerusalem, banking on the fact he owns the Holy City’s leading football and basketball teams.

It remains to be seen if the SWP can indeed win up to 40 seats. Thus, Benyamin Netanyahu’s Russian-media strategist, Michael Falkov, told the Jerusalem Post that Gaydamak lost a lot of popularity trying to acquire the Russian pork-selling supermarket chain Tiv Ta’am and make it kosher. As the Russian vote is fiercely secular, that particular move was not appreciated.

What’s more, Gaydamak is not the first Russian to enter Israeli politics playing the immigrant card. In the mid-1990s, Natan Sharansky, a former Soviet dissident who spent years in the Gulag, founded Israel B’Aliya (Israel on the Rise), which promoted the rapid absorption of Soviet Jews and in 1996 won 7 seats. However, he failed to deliver and after a brief spell as minister under Ariel Sharon only managed to re-enter the Knesset as a Likud candidate.

Sharansky’s position as Israel’s leading Russian politician has now been taken by Avigdor Lieberman. Having previously worked as the Likud Party’s Director General, he participated in the 2006 elections with his Yisrael Baytenu (Israel – Our Home), which gained 11 seats. With the arrival of Lieberman, Israeli hard-line politics became a whole different ballgame.

Lieberman propagates positions considered radical even among the right wing. He was once quoted as saying that Palestinian prisoners should be drowned in the Dead Sea and that he himself would provide the buses. More recently, he called for a loyalty test for Arab-Israelis and for the execution of Israeli MPs who met with Hamas representatives. Despite these and other controversial remarks, Olmert appointed him as Minister of Strategic Affairs, a new cabinet position that solely deals with Iran.

At this point, it is unlikely that Gaydamak will be able to overtake the popular Lieberman as Israel’s leading Russian politician. Yet, whatever the face of the Russian vote may be, it is a vote that is here to stay and one that favors a hard line “safety first” approach in negotiations with the Palestinians and other Arab nations. What makes the Russians different from other right-wing voters is their as fervent disliking of the religious right.

And the latter is arguably the good news, as it is likely to prevent an ultra-right cocktail between Likud, the Russians and the Orthodox Jews to come into existence, for one need not be a genius to predict what that could mean for the future of the Middle East.

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Buying a home in Beirut

by Rana Hanna
written by Rana Hanna

Birds do it, bees do it, even educated fleas do it, let’s do it, let’s … buy a home!” So you’ve decided to do the grown-up thing and buy a house. Now what? Buying a newly built — or half built or even unbuilt — property is indeed a daunting task, not only because of the big sums of money involved (Can I afford it?) but also because of the commitment necessary (Will I still love it in the morning?) and the risk associated with it (Will the market go up or down? Will the building collapse on my head in 20 years?).

The obvious first step is to find the right property. Real estate agents in Lebanon may help, but if you are looking to buy new property, you can easily eschew agents’ fees (2.5% of the final price) as all new projects are advertised clearly, allowing you to contact the developer directly.

The earlier you commit in the project’s development, the bigger the discount you get. That is because developers are usually looking to recoup their investment costs as quickly as possible and are therefore more willing to negotiate prices. Once developers do recoup their costs, they look to maximize their profits. Although buying ‘on spec’ may reap its rewards financially, the risk is greater. You’re expected to pay 30% of the total price up-front upon signature of the contract, although sometimes legal and/or financial problems may hinder the developer from obtaining the necessary licenses and planning permissions, and in some cases you may end up without an ownership deed.

Another risk of buying on spec are the specs themselves. Always ask for a list and sign on it: some developers eager to sell may agree with you on many points such as number of parking spaces available to you or the size of the storage room although some may renege on these agreements. An easy way out of this is to make sure the developer is reputable (in a country this size, that is the easy part) and to check out some of their other projects. Don’t be shy to ask some of the residents how happy they are with their property. Also, visit the site with an architect or an engineer who may point out issues you may not have thought of: they tend to see the minutest details.

When it comes to negotiating the price, that’s when you need someone like my sister. Don’t be afraid to argue, most developers will negotiate between 10% and even 20% of the asking price. But think of the hidden or extra costs that can amount up to $50,000 depending on the property. Firstly, you need to factor in charges that you pay upon signature of the contract (0.3% the value of the property) and 5% of the total cost upon registration of the property (plus another 0.6% in fees and miscellaneous costs) — an extra $31,500 on a half- million dollar property. Extra costs may also be incurred through the building process as some developers will charge for any extras you will want to install (one extra plug in a room can cost $50, electric shutters $500) and can easily amount to around $15,000 in total.

Financing is a different thing altogether. Usually, in Lebanon you are expected to have paid up to 90% of the house price by the time you move in. So unless you can pay up cash, you’d need to get a housing loan. In Lebanon this puts you into a Catch-22 situation as you need a document proving ownership of the property which is usually only given to you by developers after you’ve already paid about 60% of the house price already. Also, there’s a limit to just how much the bank will give you. For example, a salaried employee earning around $4,000 a month can borrow up to a maximum of $115,000 over 15 years which is repaid at a current interest rate of between 8-9%. With current house prices in central Beirut averaging around $2,000 per square meter, you would either need to settle for a 100 m2 home in the city or for a bigger house in suburbia.

So, if you find the idea of buying a new house unnerving, perhaps it is best to do as the birds and the bees do and find a good tree somewhere else!

RANA HANNA has spent the better part of the last two years searching for property to purchase. She is sill looking

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Who is Barak Obama?

by Lee Smith
written by Lee Smith

The 47 year-old junior senator from Illinois emerged as a powerful figure after he delivered the keynote address at the 2004 Democratic Convention while he was still a state legislator. A charismatic speaker whose half-African half-American heritage seem to represent the reality of multi-racial America and the future of the Democratic Party, Obama’s current ascendancy appears to reside in the fact that not only did he not approve the Iraq War but he wasn’t even a member of the Senate when the 2003 vote was called. He was elected to the Senate in 2004.

Obama is where the fantasies of the left wing and the center of the Democratic Party seem to converge. The left never wanted the war to begin with and the center wishes it had never happened this way. Obama, the untainted one, is the candidate who allows them to imagine Iraq back into never-never-land. He is not the anti-war choice as much as he is the non-Iraq candidate.

Nonetheless, the Democratic front-runner is still New York Senator Hillary Clinton, whose most obvious liability is that she voted for the war, a mark on her record that Obama has been eager to exploit. Finally, after the latest debate between the Democratic candidates, Clinton struck back, targeting the principles of her opponent’s foreign policy. In the debate, Obama welcomed the opportunity to meet with world leaders hostile to the US, and Clinton later said that this strategy “was irresponsible and frankly naïve.”

Obama, whose inexperience at the national level means he has no foreign policy credentials to speak of, justified his position by favorably comparing his willingness to engage enemies with the ethos of the current White House. “The notion that somehow not talking to countries is punishment to them — and this is the guiding diplomatic principle of this administration — is ridiculous.”

Here Obama is not irresponsible and naïve, but ignorant. The Bush White House does not withhold diplomacy as a form of punishment, but rather contends that engagement with radical states legitimizes and rewards outlaw behavior. The actions, for example, of Syria and Iran offer sufficient evidence to justify the White House’s rationale.

Obama may be the non-Iraq candidate, but he also seems to have been in a deep sleep the last five plus years, snoring through not only 9/11, but everything else the region has revealed about itself since then. In addition to the timeless clichés of Washington foreign policy circles — like the signal importance of the Arab-Israeli crisis and trying to separate Syria from Iran — Obama also subscribes to the innocent realism of the Baker-Hamilton Iraq Study Group report. The junior senator calls for a “comprehensive regional and international diplomatic initiative to help broker an end to the civil war in Iraq.”

The international actors who might make a difference in Iraq — like France, Germany and Russia — have been transparently clear over the last several years they have no interest in tying themselves down in Iraq to suit US strategic goals. As for the significant regional players who could help, they have either distanced themselves from the project or have done everything in their power to subvert it. Saudi Arabia is uncomfortable being the meat squeezed between the ascendant Shia sandwich of Iran and Iraq and has no Iraq policy. And Iran and Syria obviously have no stake in a stable Iraq, or else they would not have nurtured chaos in the land of the two rivers so assiduously over the last four years. Tehran and Damascus want the US out of the Middle East and will understand any invitations to a US-led conference as a ceremony to accept Washington’s terms of surrender.

Elsewhere, Obama’s Iraq policy is being criticized not for its naiveté but rather its cynicism. In an interview with the Associated Press, Obama argued that, “preventing a potential genocide in Iraq isn’t a good enough reason to keep U.S. forces there. If genocide,” said Obama, is “the criteria by which we are making decisions on the deployment of U.S. forces, then by that argument you would have 300,000 troops in the Congo right now … We would be deploying unilaterally and occupying the Sudan, which we haven’t done. Those of us who care about Darfur don’t think it would be a good idea.”

Obama’s all-or-nothing interventionism as an excuse to ignore a potential full-blown civil war may seem amoral to some, but it illustrates an important development in US thinking. In a long essay outlining his foreign policy positions for the July/August Foreign Affairs, “Renewing American Leadership,” Obama writes, “After thousands of lives lost and billions of dollars spent, many Americans may be tempted to turn inward and cede our leadership in world affairs. But this is a mistake we must not make.”

Even if most of the candidates who have virtually talked themselves out of contention the 2008 elections will depend very much on what the electorate thinks about Iraq. And yet as Obama’s AP interview obliquely suggests, the real consequences of Iraq will not be understood for years to come. Obama’s Foreign Affairs essay essentially argues that liberal interventionism is the right idea, even if the Bush team got it wrong. The big question looming in America’s strategic future is: What if liberal interventionism is not the right idea, no matter who’s running the show?

LEE SMITH is a Hudson Institute visiting fellow and reporter on Middle East affairs 

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Consumer Society

Hooters, Tooters It’s a bad idea

by Executive Staff
written by Executive Staff

The food franchising industry is doing well in the Middle East. Buying a tried-and-proven formula for a hospitality venture has allowed both small entrepreneurs and powerful investors to roll out restaurants in their markets while cutting down some of their development headaches and harvesting customer recognition from the strength of international brands. Examples range from lowbrow individual franchisees of sandwich and pizza delivery outlets to the full-scale regional multi-US-brand operations of Kuwait Food Corporation (TGIF, KFC, et al).

Although franchisees in the region had their problems with copycatting or brand disputes, the franchise concept has on the whole worked smoother than the nation’s consumer goods wrestling battles between exclusive agencies and overpriced import monopolies in one corner and product fakers and unethical traders in the other.

International food franchising formulas have been repeated by local conceptioneers who brought, for example, Lebanese restaurants like Caspar & Gambini or Crepaway to the Gulf. The process is also working in the opposite direction of bringing concepts from the GCC to the Levant.

But do people of the region want restaurants that openly offend conservatives? Would they accept franchise outlets that express an alien culture in highly intrusive manner? The issue arose newly this summer over marketing announcements by a Kuwaiti businessman who wanted to land a Hooters restaurant — trademark: only busty waitresses willing to wear tight orange shorts and dress totally down on top need apply — not in Kuwait but in Dubai.

The man’s announcement immediately drew disbelief and some consternation from readers and commentators. A Kuwaiti columnist suggested that Hooters should “keep their breasts in the West.” Officials in Dubai said there was no record of an application to register the venture there and that they would follow “very closely” any moves to establish the restaurant in the emirate.

Not always welcome

Bringing those international brands into your hometown is not everyone’s cup of tea. In pre-enlightened Syria, state representatives once forced eaters to abandon the Colonel’s coleslaw apparently because of a (later reversed) official aversion to Kentuckian chicken commercialism.

However, most failed franchise operations in developed countries as well as the Middle East arguably did not go down because of protests by gender activists or anxious culture guardians. They faltered because their concepts didn’t vie with customers — in Beirut alone, the list is quite long and includes donut makers, ice cream and frozen yogurt, and regional and international fried chicken vendors.

The apparently wishful-more-than-wistful Hooters impresario, a man by the name Jamal Shaheen, gave interviews in June, during which he said that he was looking for a location where he could open a first outlet in Dubai by the end of 2007 and add further outlets in the following year, also in the emirate. He did not elaborate on his investment into becoming a franchisee or if he had a motive other than money for wanting to set up the restaurant.

After his news sparked contrarian opinions, he was no longer available to answer interview requests on the economics of the projects. According to the information on the company’s website in the US, the firm charges a franchise fee of $75,000 per location; typical costs furthermore include an initial investment of between $800,000 and $1.5 million per restaurant.

Given Dubai’s spiraling rent and other costs, an outlet there is unlikely to require an initial investment at the low end of range cited by Hooters. And by the way, the plan to set up in Dubai was already Shaheen’s secondary roll-out plan. He wanted first to launch in Beirut but dropped the idea because of the difficult development outlook.

The reality test of trying if this particular skimpy waitress scheme will be allowed in Lebanon thus fell flat, although it might have caused less of a controversy here. Teasing attires and self-commercialization of women and men in Lebanon are nothing new.

Whereas regional online discussions on the restaurant project revealed many similarities to accusations and justifications that make the pros and cons in debates on sexist business ventures in the US, the wire to trip the attempt of letting Hooters loose in an Arab market may well be that the regional cultural paradigm enforces a public set of norms also when those norms come with a past of having been breached for centuries or millennia in the off.

Announcing raucous plans for a restaurant in open digression of the norms held up publicly in the region may have greatly impaired any chances that such a venture ever might have had in Dubai and any city of the region. Tooting about Hooters appears to have been a bad idea.

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Editorial

This is Beirut!

by Yasser Akkaoui
written by Yasser Akkaoui

It’s Saturday night at White, the rooftop bar on the edge of the beleaguered Beirut Central District. The affluent 30-something crowd, many of whom live and work in the GCC, dance to the beat pulsating from the huge speakers. At the refrain “This is Beirut! Not Dubai!

” they cheer loudly. They are on holiday and nothing is going to stop the fun.
 

The tourists have stayed away and the political storm clouds may be gathering. The country threatens to be torn apart by internal divisions but the vitality of the Lebanese remains undimmed. The country simmers on the hot plate of chaos but we can still get on down.

It’s a well worn cliché, but on paper Lebanon should never work. And yet in the midst of all the turmoil, the key sectors still perform. Property development marches on, luxury cars still roll out of the showrooms, banks still show healthy balance sheets, the port of Beirut is ranked in the world’s top 100 and the nightlife still throbs to Lebanon’s uniquely sweaty beat. Lebanon is a country that should not make sense, and yet, in its own weird way, it works.

Dubai, on the other hand, totally makes sense. It is organized and stable, its mega-developments tower into the azure Gulf sky. Dubai is wealth central, a Las-Vegas-eque pleasure dome predicated on a master plan and fuelled by blue chip entertainment, premiere sporting events, vibrant capital market and a real estate revolution with global ripples. All that glitters is gold and its there for the taking. The state-owned enterprises led the way — especially in real estate and private equity — and showed the obedient citizenry how it’s done.

In Lebanon, the opposite is true. It is shambolic, divisive and anarchic, but its hunger to work, to trade, to sell and to build is unstoppable. Whenever and wherever there is an opportunity the Lebanese entrepreneur will take it. Lebanon is a nation driven by its private sector initiative and strong merchant class. With this glorious and indomitable DNA, how can we not celebrate Beirut?

From Beirut,

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Feature

MENA: Tourism tracker

by Executive Staff
written by Executive Staff

More Leisure! is the universal battle cry of the region’s governmental economic planners. Irrespective of presence or absence of oil revenues or the varying states of their knowledge economies, most countries in Asia Minor and North Africa have plans for making tourism produce more income and more jobs in the coming 10 to 15 years. The ambitions run so high that many countries want to increase the influx of foreign visitors two, four, or even six and tenfold by the century’s third decade.

Countries like Tunisia and Turkey have already succeeded in staking good claims as easy venues for quick-grill-in-the-sun (and a bit of culture garnish) visits by European herd travelers. Backed by ample supplies of shorelines, new and mostly self-contained resort projects, and natural hospitality of their people, at least half the region’s countries appear eager to “emulate” the sunshine tourism model or create niche tourism destinations.

As home of three major religions and numerous confessional subdivisions, the Middle East is also the global hub for religious tourism, not to forget its once again growing functionality as trade and meeting center for three continents and stopover location in long-haul trips. On the downside risks, tourism is fickle and nothing deters wanted peaceful visitors more (but sadly, seems to attract the other kind all the more) than if a country is enmeshed in senseless power struggles and danger of terror attacks. 

Last month, Executive devoted extensive coverage to Dubai, without doubt the region’s jewel in the crown. This month, we assess the rest from our pick of the hotspots and HOTSPOTS.

Egypt

With 9.1 million visitors in 2006 and more than a tenth of its workforce relying on tourism, Egypt was and is the top spot in Middle Eastern destinations. How can you beat pyramids for recognition value, the real thing that made even a Napoleon gasp? Tourism developments in Egypt remain vulnerable to terrorism, with murderous attacks in a Sinai resort town in April 2006 and the 2005 bombings in Sharm El Sheikh demonstrating the high level of recurring risk. Sunshine and safety thus have been picked as two themes for Egypt’s most recent tourism promotion campaign, which is a testimony to the fact that even a country with a complete line-up of archeological wonders, cruise-worthy river, dive-enticing coral reefs, picture book beaches, and plenty of resorts has to invest in its tourism marketing. Holidaymaking in Egypt is a growing potential for Arab visitors, partly because of expansive Gulf investments in tourism complexes and summer homes. Egyptian tourism promoters have also toured the Gulf recently. However, the country’s main target markets remain elsewhere and Egypt is the Middle East’s sole country which has an official tourism promotion website for industry members and media that operates in more than a dozen languages from Swedish and Russian to English and German – although not yet in Arabic.

Oman

Oman has treasures of nature supporting its aspiration to expand its tourism industry, which is said to have welcomed around 1.2 million visitors in 2006. Adventure tours and family packages are on the agenda of the sultanate which also counts the myth of Sinbad, model of the adventurous traveler, among its assets.

Flying to Oman with the national carrier means traveling in the shadow of an upsized symbolic dagger on the cabin wall but – given the airline’s chosen seat configuration on its 737s – that air trip to Muscat is actually more a menace for the long-legged than a challenge to the faint-hearted.

Tourism projects include The Wave, a 2.5 million square meter development near Muscat on the pristine shores of the sultanate. Construction at the site started last month. Once completed, the tourism paradise will be able to permanently house 4,000 of the world’s wealthy and harbor 300 of their yachts. Golf will be played on a course designed by Greg Norman and one of the four luxury hotels will be managed by Kempinski. A longer-term plan is to build Blue City, an urban and leisure dream, over the next two decades. Cost of the multi-hotel, multi-golf course entailing project is optimistically projected at $15 billion and the first $925 million note for its finance has been sold.

Iran

For a country whose intriguing historic appeal and marvels such as Isfahan, Shiraz, and Persepolis attracted 1.5 million visitors in 2005, Iran has been given a bleak tourism positioning by its current leadership whose motto appears to be ‘we don’t care who likes us’. Having a disputed civilian nuclear program may not be the worst of tourism PR disasters and denial of historic evils is not unique to Iranian ideologues, even though it did turn off well-heeled segments of US and European visitors who had taken a bit of a liking to Iran during the reign of reformist president Mohammed Khatemi. But forcing Ahmadinejadian hospitality on British sailors and sending off every single of the “guests” in attire fashioned to the taste of the current president has caused not only British interest to dwindle to a hefty nil when it comes to any form of Iran tourism. Topping the instructional news off are reports on the state’s latest fashion of coercing women to comply with restrictive interpretations of proper head scarves (show no hair!). With so much effort at state self-presentation, doubling tourist numbers by 2010 is unimaginable. The commercial tourism sector in Iran looks at years of minimal interest, save for those trip itinerary discussions for going to Tehran in some American uniformed and wannabe warrior circles that no-one can wish to see implemented. 

Kuwait

Kuwait’s tourism thrives on paper. The country has a 20-year master plan for tourism development, which was completed at end of 2005 with assistance from the UNDP and UNWTO and spans from vision to action plan. Kuwaiti tourism officials are professionally optimistic about growth of the industry, spurred on by factors such as having less salty beaches than in other locations on the Gulf coast. So far, however, most of Kuwait’s inbound tourism is business travel (estimated at 90%) and the country’s single iconic image is that of Kuwait City and its pointy towers.

During peak time Iraq occupation presence of US troops in the larger area, Kuwait was neighborhood R&R (rest and recuperation) stop for weary liberators but the numbers of American military tourists have gone down. On the other hand, Kuwaitis are world-class in traveling abroad. According to their own tally, 79% journey outside each year and spend upward of 3% of the national GDP on tourist pleasures. Guests from Kuwait spent 52,000 nights in Switzerland last year while it is not known how many Swiss revelers ventured to Kuwait’s emerging attraction, Failaka Island. Budget travelers and backpackers have not figured thus far in the country’s tourism profile but the establishment of low-cost airline Jazeera has helped making air travel to Kuwait more affordable.

Jordan

Claiming 6.5 million tourist arrivals in 2006, Jordan is one of the region’s more experienced countries in the international tourism scene. The country has diversified its visitor base and last year’s arrivals included almost two million Arab tourists. Jordan’s goal is to see 12 million tourists visit in 2010, presumably in an environment of peace and stability in Iraq and elsewhere in the Near East. Terror attacks have challenged the country but the bigger risks for Jordan are concentrated in the regional political situation, as proven in the recent past by tourism downturns in 2003 triggered through the Iraq war and last year through Israel’s summer war on Lebanon. The impact of the Lebanon conflict was a mixed bag for the Hashemite kingdom, which on one hand has seen Gulf tourists redirect their vacations to Jordan because of their fears of potential insecurity in Lebanon but on the other hand led last year to double-digit drops in European tourist visits to Petra and other sites favored by Western tourists. The Aqaba resort developments have recently been complemented by announcements of new projects on the Dead Sea and a project with environmental flavor in the north of the country. The country has made significant gains in attracting lucrative conference and events tourism and has become the Levant’s center for this corporate play on leisure travel. Currently, Jordan is concentrating new tourism promotion activities on Arab countries.

Iraq

Although some highly optimistic reporters recently meant to have detected “swanky hotels” under development in Kurdistan, Iraq remains no tourist’s land. Statements by the World Tourism Organization (UNWTO) in praise of the world’s tourism growth to 842 million arrivals in 2006 for obvious reasons do not even mention Iraq under the rubric of regretting unfulfilled expectations. Lebanon was mentioned in sparse, but sympathetic words. The disaster of the present not withstanding, long-term plans for placing Mesopotamia back on the tourism agenda would be well advised, in the spirit of those noble aims of fostering compassion among nations and support for economic development of a country that is suffering unbearably. For the moment, only the worst cynics will have the nerve to play on the kind of visitors who are drawn to Iraq from terrorist hide holes wherever hatred has become a profession. The one valid travel advisory in place is for international officials: drop in unannounced, speak, use photo-op, and withdraw at speed.

Qatar

Big on projects that seek to carve out a market for stop-over visitors whom Qatar wants to woo in ever-increasing numbers through its hard striving and marketing wise ubiquitous national carrier. Investments in hotels and tourism infrastructure are done according to the big-ticket principle. The country implemented a paradigm for its tourism ambitions in 2006 when it hosted the Asian Games as – by the host’s own reckoning – the best and biggest ever. In further self-promotion, Qatar has taken to the staging of conferences that discuss not only business but also matters that can perhaps not be solved on the conference table but are of definite global concern. Propaganda aside, 2006 was a massive and successful year in Qatar’s tourism strategy by drawing in almost double the number of visitors that had come in 2004. Challenges for the country include the high costs of living and the tight supply of hotel rooms, which currently cater mostly to visitors who come on short business trips.

By 2010, Qatar expects to add a big pearl to its crown of tourism attractions when the Lusail, or Pearl, Qatar mega-project will allow well-to-do residents and visitors to dwell on this artificial island and spend their days cruising in more than two million square feet of luxury retail and recreation space. The Lusail project is already dazzling as a stage of elite events, such as the region’s first masked ball in honor of innovators in responsible energy solutions, held fittingly in the Lusail project’s sales and marketing center, a place named The Oyster. Many more events are planned for the site.  

Saudi Arabia

The kingdom is the world’s leading destination for religious tourism, with over four million pilgrims coming each year and demand that far exceeds what currently can be accommodated in terms of both the usual tourist facilities and the rituals of faith that are the requirement of the Hajj.

Tourism development beyond the religious realm have for quite some time been discussed by Saudi officials who have in recent years come to appreciate the sector’s economic potential and its importance as source of potential employment for the growing Saudi population. UNWTO forecasts that were issued a few years ago put Saudi Arabia in the top spot of all Middle Eastern tourist arrivals by 2016, with an estimate of 22.5 million, ahead of Turkey and Egypt. Target figures cited in an April 30, 2007, study by UK consulting firm Global Futures and Foresight raise the expectations even further, to 45.3 million visitors by 2020.

The growth of pilgrim arrivals is a foregone conclusion and backed by infrastructure projects at the holy sites and in access improvements that range from airport development to an entire new pilgrimage port in the King Abdullah Economic City development. Other inbound tourism, especially from out-of-region, is a less certain proposition. A Saudi tourism commission, established in 2000 with a veritable prince in charge, has been making preparations for the sector’s growth through new seaside and mountain resorts.  

Lebanon

After a May of insurgents and bombs targeting exactly the country’s vacation areas most loved by Gulf tourists, Lebanon’s tourism outlook for 2007 is tending toward nil. Where jubilatory forecasts of 1.6 million visitors and fast growth appeared reasonable in 2006, the picture at the onset of the 2007 summer season is grim enough to keep industry members and government officials from daring a forecast. First-quarter arrivals were 25 to 30% lower than arrivals in the same period of 2006 and an expectation of even one million visitors – allowing for a positive balance in the summer months in reversal of the total tourism crash during the summer war – would be contingent on miraculous improvements in the security situation and the way in which the country appears in international perception.

But that is the problem. Where talkers and worriers focused heavily on their concerns of internal violence, the Lebanese reality was one of coping under avoidance of the – by observers overstated – worst-case scenario of civil war. This means that the risks remain substantial and one cannot assume or exclude anything – but most places in Lebanon are as pleasant to visit and at least as rewarding as they have been in the summers of 2003 and 2004. A fringe benefit for budget travelers: the Beirut downtown has its current shortfalls in atmosphere but there are readily available tent accommodations without any occupants – although the overnighter option is advisable only for people unfazed by olfactory impressions. 

Syria

The road to Damascus is slated for widening. Touting itself as every planetarian’s second homeland, Syria not only wants to more than double the number of inbound visitors from 3.5 million last year to 7.5 million by 2010 – the nation’s far-sighted authorities also are pushing a broad development agenda of new private sector investments in all segments of the hospitality industry and public-private partnerships for the fanciest resort projects.

There is a lot to do for developers, beginning with building hotels in Damascus and continuing with expanding tourism infrastructure into the provinces.

The vast need for shaping the industry is reflected in the number of projects offered in the country’s main tourism investment forum; it increased from 37 in 2005 and 40 in 2006 to 101 in 2007. Government officials said that approved investments in the tourism sector last year were in the $2 billion range, although it remained unclear how much of that was under actual implementation. For the coming years, the ministry of tourism put even larger projects on the table, focusing on the Mediterranean coast, the region around Damascus, and the archeological site of Palmyra. 

Syria’s rulers have staked a lot on tourism in seeking future revenues. The risks in tourism planning include the country’s lack of services infrastructure, the slow bureaucracy, and regional security issues. If Iraq stays down and if Lebanon becomes a target for more aggressions by hell-bent militants, Syria automatically loses a huge part of its attractiveness to foreign and regional tourists.

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North Africa

Tunisia Textile boom

by Executive Contributor
written by Executive Contributor

Bringing in more than 40% of Tunisia’s export earnings and providing employment to well over 200,000 people, the textile and clothing sector in Tunisia is a key driving force of the country’s economy. The sector has also attracted a major part of the foreign direct investment (FDI) that has gravitated to Tunisia in the past decade, with leading international brand names such as Benetton, GAP, Levi Strauss and Playtex all establishing production facilities in the country.

Of the approximately 2,100 firms active in the clothing and textile industries, more than 75% produce exclusively for the export trade, with total overseas earnings of some $4 billion in 2006.

However, the sector is coming under some pressure despite Tunisia’s favorable trade agreements with the EU, by far its biggest market. China’s growing dominance in the international clothing trade since the lifting of quotas and barriers in 2005, especially those of the now defunct Multi-Fibre Agreement, has put the squeeze on traditional Mediterranean manufacturers such as Tunisia and Turkey. So too has the accession of a number of Eastern European countries to the EU, with FDI being drawn to them, attracted by low wages, existing plants and good transport links.

Textile industry focuses on Italy

While other export-oriented industries had a strong year in 2006, with Tunisia’s mechanical and electrical industries posting an increase of 25% in overseas sales, the textile and clothing sector flat-lined, failing to match the overall GDP growth of 5.4% last year.

Though there has been an early surge in exports in the first five months of 2007, with overseas sales up 19% over the same period last year, this has to be balanced by the 4.2% drop in exports recorded for the first half of 2006.

During the textiles and clothing industries showcase annual event, TEXMED, held this year in Tunis in June, sector leaders were told they should step up their efforts to penetrate the lucrative Italian and Spanish markets.

Jean-François Limantour, chairman of the European-Mediterranean textile-clothing managers’ guild, told a seminar on the sidelines of TEXMED that more needed to be done by Tunisian producers to raise their profile in the Italian market. “In particular, there should be greater contacts with organizers of Italian trade shows to increase Tunisia’s profile as a clothing and textiles source,” he said.

However, he offered some solace, saying that Romania’s clothing industry, Tunisia’s main rival in the Italian market, could suffer from an exodus of skilled workers following its accession to the EU at the beginning of 2007.

Limantour also warned that Turkey could pose a challenge to the Tunisian industry, given its potential for expansion.

According to Youssef Neji, chairman and managing director of Tunisia’s Export Promotion Centre (CEPEX), the textiles and apparel sector has to strengthen itself ahead of the end of the quota system for Chinese textile exports in 2008.

Under World Trade Organisation rules, the US and the EU can restrict Chinese exports under two separate types of safeguard mechanisms that can be used until 2008 and 2013 respectively.

“The sector has to meet the objectives of a strategy laid out three years ago to move from being a subcontractor to focusing on partnerships and finished products,” he said.

Finding a niche

Jorge Rodriguez Taboadela, Spanish market advisor for CEPEX, said a sales and promotion approach targeting individual markets was the best course for the Tunisian textiles and clothing sector to adopt.

“In particular, clothing exporters should look to develop specific collections for a target area or country, taking into account culture, tastes and current trends,” he said. “Competition in this market is played on the level of innovation and difference and not on the quality and price levels.” Current developments in the sector show that despite investments in textile and clothing sector have eased off in the past two years, there is still room for development. At the end of 2006, Benetton announced it was to develop a 14,000 square meter finishing facility in the Monastir region at a cost of $29 million, as part of the company’s projected $332 million investment plans. While this represents a vote of confidence in the future of Tunisia’s textile sector, vigilance will be needed to keep this significant employment provider

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North Africa

Morocco Need to build

by Executive Contributor
written by Executive Contributor

Although the Gulf has seen the majority of construction activity in the MENA area of late, Morocco too is beginning to emerge as a favorite for a variety of European and Gulf investors.

The Investment Commission, chaired by Prime Minister Driss Jettou, announced on June 13 the setting-up of three major cement factories at a total cost of Dh8.9 billion ($1.1 billion). These significant investments in the cement industry are designed to meet the increasing demand in the construction and real estate sector.

Although the cement industry still is dominated by foreign capital, two out of the three factories will be Moroccan-owned. The first one is initiated by the Ynna group and will be built in the Settat region. The second one, to be established by the Addoha group, will have two units, one in the region of Beni Mellal and the other one also in Settat.

The Ynna group is investing Dh3.3 billion ($400 million), creating 500 jobs. The Addoha group’s factory, also know as Ciments de l’Atlas, will require an investment of Dh3.6 billion ($430 million), with the creation of 1,000 jobs in its two units.

Spanish firm Lubasa, over the past 50 years specializing in construction, real estate development and environmental management, will set up the third cement factory. To complete this project in the region of Sidi Kacem, Lubasa will invest Dh1.9 billion ($228 million) and create 170 direct jobs and 300 indirect jobs.

The investment commission has also studied many other projects. In total, some Dh25 billion ($3 billion) and the creation of 5500 jobs are at stake.

Most developments are high end

Among others, the commission will soon assess the Loukos construction project, a city planned by Emirati firm Al Qudra and Moroccan firm Addoha. The investment for this new city amounts to Dh1.2 billion ($144 million) and will create 2024 jobs. The investment program includes the construction of apartments, houses, public facilities and shopping malls.

According to a study conducted by the Centre Marocain de Conjuncture (CMC) published in March 2007, the construction and real estate sectors make up 7% of national production for an added value of 5% of GDP. The latest statistics on employment reveal that the construction and public works sector employs around 700,000 people directly, representing 6.7% of the working population. The real estate sector generated Dh2.9 billion in foreign direct investment (FDI) in up to the end of September 2006, which represents 15% of all FDI flow.

“The real estate market is booming, as illustrated by domestic sales of cement at the end of September, which rose by 10% compared to the same period in 2005. The construction and public works sector also created 61,000 jobs by the end of September and the number of mortgages contracted by banks by the end of November rose by more than 25%,” said Leila Haddaoui, project director at CDG Development, a development and construction firm for large-scale urban projects.

In that sense, FDI development prospects in the real estate sector look very promising as illustrated by the real estate boom in high-end products: luxurious condominiums, office headquarters, five-star hotels, tourist resorts and port facilities.

Although there are many who bemoan the lack of maturity in Morocco’s real estate sector, notably the lack of reference prices, the lack of insurance tools and the threat of a speculative bubble, the construction sector continues to thrive.

The housing shortage, combined with the development of tourism projects and the emergence of a new type of professional real estate service industry all point to a promising future for Morocco.

However, while the market is in danger of becoming oversupplied with property for upper and middle income groups, the country is still suffering from an acute shortage of low-cost housing. Morocco’s cities are growing, as increasing numbers of migrants move in from rural areas. In 2000, 53% of Morocco’s population lived in urban areas, a figure that is predicted to rise to 65% by 2012.

While demand for residential property in Morocco is high, the market faces three principal challenges: affordability, limited financing options, and unclear laws regarding landownership and titling issues.

As foreign interest in Morocco continues to grow, the government needs to be careful to ensure that the all-too-common problem of “make it all luxury” is not repeated in a country that needs to house a rapidly growing population. With a housing shortfall estimated at anywhere form 500,000 to 1.5 million, social housing could well be more of a priority.

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