Executive Magazine

UAE – Multimedia boating

by Executive Staff July 1, 2007

written by Executive Staff

Dubai’s history has long been associated with the sea. Todaymore than ever, the city rekindles with its marine past.Driven by sustained regional economic growth and oilabundance, prestigious waterside developments such as thethree Palm developments, the World project, the Dubai Marinacomplex to name only a few, sprout from the desert sands.One company has taken close notice to the trend: the KnotikaMarine Mall (KMM) is a new concept in the marine industryoffering a wide range of products and services.

The mall is headquarters to more than 30 companies with acumulated 70% regional market share. “The Knotika Holdingcompany aims at filling the gap between suppliers andpotential buyers by providing products and services as wellas complementary activities such as learning centers as wellas media and events organization arms, all in relation withthe sea” says Wael Joujou, the company’s CEO.

The activities include a publishing house, a TV station, asea school, a marine store as well as the Knotika ExpressServices. The latter activity offers simple solutions forboat aficionados by combining financial services, insurance,transport and registration in one single package. “Thismakes the purchase process a much easier and enjoyableexperience,” Joujou points out. KMM showcases a wideselection of boats and manufacturers from all fivecontinents, promoting an efficient buying process from theneed identification to the last minute detail.

The young GM explains how boat owners have to undergo anumber of unavoidable steps, all requiring complementaryservices that are rarely provided by one single seller.Knotika intervenes at the beginning of the process byoffering first a wide selection of vessels, then helpingidentify customer needs, providing financial and insuranceservices as well as securing transportation or import forthe boat when needed. The company lends potential customersits technical expertise in screening and hiring crews,locating berths, ship maintenance and charter. “We aim tomake all those services come in one place at a guaranteedcompetitive rate. We also give customers insight into a hugeindustry and support their buying process, acquiring theirtrust by pointing them in the right direction,” underlinesJoujou.

Waterfront property developments boost boatsales

With the recent boom in waterfront property constructionin Dubai and a growing network of marinas expanding acrossthe Gulf area, the marine industry is receiving a tremendousboost, on which Knotika is capitalizing. “The UAE is still apremature market with tremendous potential, where theyachting industry takes at the moment the shape of a hockeystick curve,” says the company executive. He explains thatfor the time being supply remains higher than demand, themajor industry hurdle residing in the limited availabilityof marinas and berth. “The trend is supposed to reverse froma two to a ten year period with suppliers witnessing agrowth of 20 times their present turnover,” he adds.

“Although sales have progressed, the sector is stillunderdeveloped and clients have not been able yet to keep upwith supply,” says Joujou. On the other hand suppliers areincreasingly offering improved products and greaterselections as well as trying to educate buyers. New localentities are joining the industry race with internationalcompanies planning local production bases in the UAE wherelabor costs, land availability, low customs andtransportation fares can make prices more competitive by a20 to 40 % margin.

As for the products in demand in the UAE market, fishingboats are a big hit. “There is a potential market for sailboats … which combine a sport activity with yachting. In thecoming decade, we expect sail boats market share to increaseup to 50% while the remaining market is dominated bymotorboats. For now I would say actual sail boat marketshare is 5%,” Joujou reckons. In the CEO’s viewpoint,smaller boats can act as catalysts, appealing to the “newrich” executives with no real boating experience. Ideally,this activity will be practiced in the new WaterfrontProjects marinas and sheltered bays under development.

As the KMM pilot project proves to be a success, thecompany is expanding in the next few years, reaching the farshores of Jeddah, Qatar, Bahrain, Abu Dhabi, Kuwait andOman. A franchising option is also currently underway, withtwo contracts expected to be signed at the end of 2007.

July 1, 2007 0 comments

Editorial

The New Middle East

by Yasser Akkaoui July 1, 2007

written by Yasser Akkaoui

With the announcement of the creation of SolidereInternational, Lebanese entrepreneurship can once again holdits head high. Again, it has proved its credentials anddemonstrated that it can grow well beyond its borders evenwhen it is burdened by internal crises and politicalinstability. For international investors know that Lebanesebusiness acumen is resilient and operates outside mainstreamMiddle East rhythms and their commitment to investment inLebanese ventures has remained undimmed.

Solidere International is part of a more vibrant, robust andforward looking Middle East, a Middle East fuelled not byconflict and hate, but by a dynamic corporate vision and thehunger to compete at the highest level, to create newcorporate entities and deliver wealth, prestige, innovationand prosperity. Nowhere has this new spirit been moreevident, nowhere has demonstrated more the maturity and thediversity of the region or highlighted its remarkablecorporate development better than the Dubai InternationalFinance Center (DIFC), the Qatar Financial Center and thesoon-to-be built King Abdullah Financial District.

All are responding to a new wave of private equityinvestors, who are forging ahead in a regional bid todiversify what was a vulnerable, one sided, oil-basedregional economy. These hubs are responding to a newappetite. With wise public sector support and clearlydemarcated policy, they can complement one another and evenoffer opportunities for other similar hubs to spring upacross the GCC and across the Middle East.

And finally, into this new zeitgeist comes a new andexciting player, the Arab woman executive. More and more, weencounter senior team members and team leaders, not tomention CEOs, CTOs and CFOs, who are Arab women and who areexcelling in their position. And let’s not forget those Arabwomen who have made it as entrepreneurs, who have shed theapron for the two-piece and are taking their companies tothe forefront of regional and even global business.

They have all cut their teeth in a male-dominated world, inthis most male-dominated culture. They have shown thehighest level of professionalism, impressive business savvyand the desire to succeed in an environment in which toooften the male ego has been the driving force. They havecome in and shown us that a level head, an efficientattitude, determination and an analytical mind are more thana match for the often testosterone-fuelled bluster of theirmale colleagues.

Not only do we accept them, respect them and learn fromthem, they also make us rich!

July 1, 2007 0 comments

Comment

Return to Gaza

by Ben Wedeman July 1, 2007

written by Ben Wedeman

I hadn’t been to Gaza since January. The kidnapping of theBBC’s Gaza correspondent Alan Johnston on March 12 had madethe strip a no-go zone, and during the vicious rounds offactional fighting between Hamas and Fatah it was virtuallyimpossible to report from Gaza in a meaningful way.

But Hamas’ stunning victory in the final round of fightingon June 15, had changed everything. Fatah had been roundlydefeated, and my sources in Gaza told me we could return.

At the border, the scene, once we passed through the finalgate remotely controlled by Israeli border security, wassurreal. Around a hundred people — mostly young men with asmattering of women and children — were huddled by the sidesof the concrete corridor. There was a strong stench ofsweat, urine, human excrement and rotting garbage. Thepeople were mostly members of the defeated Fatah securityservices and their families, desperate to get out of Gaza. Afew spoke to us, and let us film them, and told us Hamas wasrounding up Fatah members and executing them.

Eventually, we passed through the first checkpoint manned byHamas gunmen, and the atmosphere changed. There was order.And the deeper we went into Gaza City, I was struck by howcalm the place was. There weren’t as many cars and peopleabout as usual, but I could hear no gunfire, and some storeswere open.

We drove by the villa of Muhammad Dahlan, once Fatah’s Gazastrongman, now residing in Ramallah on the West Bank. Dahlanwas Hamas’ arch-enemy, a man who, when he headed PalestinianPreventative Security, had mercilessly cracked down on Hamasduring the 1990s, and was believed to be the point man inFatah’s attempt to scuttle the Hamas-led Palestiniangovernment.

The villa was a shambles. Doors and windows had beenstripped, wiring yanked out from the walls. Everything thatcould be carried away was long gone. Three teenage boys werebusy loading up a donkey cart with the marble flooring.Nothing better symbolized the utter humiliation of the menwho were once the ruthless masters of Gaza.

What happened here is a revolution. For the first time in modern Arab history, a militant, revolutionary, Islamic movement has successfully and decisively overthrown the established Arab order. It was made possible by a variety of factors, including direct and indirect assistance from Syria and Iran, and by a single-minded determination to crush Fatah.

But the victory wouldn’t have been possible if Fatah hadn’tdone such a miserable job of managing the affairs of Gaza inparticular, and the Palestinians in general, over the years.When the leadership of Fatah returned to Gaza and the WestBank after decades in exile following the Oslo Accords in1993, they seemed more determined to profit from the new erathan create a viable Palestinian entity.

Their rule was characterized by blatant corruption,mismanagement, heavy-handed oppression and nepotism — allthe ills that have plagued the modern Arab world. They’rethe same ills which the Islamic movement — whether it be theMuslim Brotherhood in Egypt, the Islamic Action Front inJordan or Hezbollah in Lebanon — has been able to capitalizeon. Hamas proved its political power and popularity when ittrounced Fatah in Palestinian parliamentary elections inJanuary 2006. And it has matched its political prowess withmilitary might by crushing Fatah last month, even thoughthey were outmanned and outgunned.

Most of Fatah’s leadership in Gaza had long ago fled to therelative safety of the West Bank. Not surprisingly, almostevery regime in the Arab world is terrified by what happenedin Gaza, and is scrambling to do whatever they can to shoreup the bruised and battered leadership of Mahmoud Abbas inthe West Bank. They see themselves in Mahmud Abbas, and knowthat the forces that bolster them could, if faced by adetermined, focused, well-organized, and well-armed Islamicopposition, crumble just as easily.

That’s the big picture. For many Gazans, the return of orderis a positive change, or at least a relief after more than ayear of sporadic and intensifying factional fighting.

“It’s better now,” Ahmed, an old friend, told me. “Thefighting has stopped. We feel much safer. The problem is noone knows what will happen next. We don’t know if Israelwill allow food in. We don’t know if Israel will continue toprovide petrol or electricity. Today things are fine. Buttomorrow? We just don’t know.”

And that seems to be the worry of most people in Gaza. Thefuture only gets foggier. It’s a tiny, overcrowded patch ofland that always seems to be going somewhere, but neverarriving. One period of uncertainty is followed by another,and another and another.

Ben Wedeman is CNN’s Jerusalem Correspondent

July 1, 2007 0 comments

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The media really are American

by Fadi Chahine July 1, 2007

written by Fadi Chahine

Jeremy Tunstall hit the mark when he called his book,“The Media Are American.” Two of America’s oldest mediaoperators — the News Service and Hollywood — possess a remarkable strength on the world media scene. For decadesthe news-service wires have been and still are dominated by theAmericans and partly shared with Europe.

Although the American slice of the world media pie iswaning due to the growth of the Internet, nevertheless, massmedia is still in the realm of players in the United Statesand Europe. Even today with the internet and the World WideWeb, news content and information is produced anddisseminated by the mainstream Western media outlets, likeReuters, AFP, AP, BBC, CNN and Dow Jones.

Even countries with a longstanding abhorrence for the Westare clients of the Western media. If one is to visit anynews service on a web portal from the Middle East and NorthAfrica (MENA) region, one will find that more than 75% ofnews content on those sites is a product of the dominatingWestern media.

Even smaller and more local print publications the regionuse and rely for their sources of news and information onthese media houses, both in English and Arabic. Majorpublications, like Al-Khaleej, Gulf News, Jordan Times,Tehran Times and others, carry lead stories on their frontpages that are produced by the Western and European press.Even the Arabic press is not immune. Reuters and AFP storiesconstitute at least 50% of news content inside the pages ofBeirut’s dailies Al-Nahar and Al-Safir and the London-based Al-Hayat or theSaudi-owned Al-Sharq al-Awsat.

Although Western news agencies do provide real-time newsfrom the MENA region, their coverage tends to be limited inscope, focusing on conflict, natural disasters and majorevents like the peace process and presidential visits.Insightful and local reporting about the major issuesaffecting regional countries, their economies and businessprospects, is scarce. Analytical and contextual reporting israrer still.

What’s more disturbing is that the American mediastructure, while it sustains a wide array of expressions,has become more concentrated in its control by a very selectfew of large corporations and a certain ethnic make-up. It is inevitable that these corporations/ethnic groupswill have their own agenda to influence the reader, as isthe case in the United States and some European countries.

The point worth emphasizing here is the fact the flow ofinformation for the MENA region is overwhelmingly flowingfrom the West to the East. As such, it is essential forthose of us in the media business to reverse this processand give the opportunity to the people of the Middle East tovoice their opinions, report their news and write theiranalyses for consumption in the Western world in particularand globally in general.

It is sad to see the Middle East with all its riches,culture, talents, creativity, liquidity and intellect,relying on what is mostly American news, discussing anddebating issues that will effect and shape everything aboutthe region. And what’s even worse is the fact that thepeople of the region, whether knowingly or unknowingly, area very active participant in this unfortunate event.

Today, news coverage has to be looked at from a globalperspective but reaching to the local level. However, sincea distinct characteristic of American journalism isisolation it leads a Western journalist to determine goodguys and bad guys in the Middle East based on preconceivedideas and prejudices, or simply straight-out bias in orderto follow a preset agenda.

Most people learn about national and international eventsfrom the mass media — newspapers, radio, and especially,television. Therefore, the media can contribute to conflictescalation, either directly or indirectly. Media coverage ofthe conflict played a key role in turning US public opinionagainst the Arabs, Palestinians and Muslims and in shapingthe current American foreign policies.

The media can also contribute to conflict de-escalation.As such, media houses in the Middle East, publishers,editors and reporters have the duty and the responsibilityto do all they can to reverse the flow of information andmake it stream from the East to the West. We must provide anaccurate view of the conflict through both words andpictures, and we should serve as an example for honest andunbiased reporting by providing both sides of the story evenif it points out some of our own shortcomings.

What the Middle East, Arabs and Muslims need today is anhonest, clear and transparent effort to create additionalspace in the Western media for their perspectives and fornews coverage produced by professional journalists who livein the region and who have the proper background andexperience to provide contextual, honest and fair reportingfor consumption in the Western world. The Jews at-large havedone the same successfully. What’s stopping the Arabs fromaccomplishing this very important goal? We either have thewill and courage or we don’t. There cannot be a grey line inthis struggle. Half-hearted attempts are not enough and willnot work. Clear and credible conviction is required andthose who have this conviction have the responsibility toact and to act now!

Fadi Chahine, is the Managing Editor of Zawya Dow Jones Newswires in Beirut

July 1, 2007 0 comments

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Dreaming in St. Michaels

by Nicholas Blanford July 1, 2007

written by Nicholas Blanford

ST MICHAELS, Maryland, USA: Lebanon’s woes over the past twoyears have been keeping the Washington-based think-tankindustry busy as the country finds itself in the unenviableposition of being a point of convergence for most of thepressing quandaries besetting the Middle East — theArab-Israeli conflict, Iraq, Iran, terrorism, al-Qaeda andfundamentally the axis of resistance versus Pax Americana.Being a locus of multiple crises is bad for Lebanon butoffers plenty of food for thought for the many think tanksthat cram K, L, and M streets in the US capital.

Earlier in June, I was invited by a leading think tank toparticipate in a round table forum in which some 15 expertswere asked to brainstorm an ideal vision of Lebanon 10 yearsdown the road, identify the obstacles preventing that visionfrom being realized and offering suggestions to overcomethem.

The future aspiration for Lebanon derived by theparticipants was of a stable, prosperous, liberal democracywith a freewheeling economy and social welfare safety net.Whether all Lebanese would aspire to such a future forLebanon is questionable, but it certainly suited thecomposition of the group sitting around the table, mainlyWesterners including three Westernized Lebanese.

Still, the participants were in agreement that such autopian vision for Lebanon was most unlikely given thechallenges facing Lebanon both on both the short-term andlong-term.

Perhaps the chief obstacle raised by the roundtable was howto invigorate a sense of nationhood where Lebaneseprioritize loyalty to the state over loyalty to the sect orzaim. There is a will among some Lebanese, mainly theeducated young, to crack the stranglehold on Lebanesepolitics maintained by the neo-feudalistic zuama, be theytraditional landlords like the Jumblatt and Gemayel familiesor the post-civil war generation such as Nabih Berri and theHariris.

The independence uprising in spring 2005 generated for afleeting moment a hope among young street activists thatSyria’s disengagement from Lebanon would catalyze a generalreformation of the political system, giving rise to a newgeneration of politicians beholden to the state rather thanlocal sectarian interests. Of course, those dreams weredashed the moment the last Syrian soldier departed Lebanonthrough the Masnaa crossing and the leaders of the rivalMarch 14 and March 8 factions began cutting deals with eachother to ensure the re-election of themselves and theirlists in the parliamentary polls of May and June 2005.

Then there were the issues of Hizbullah and how to persuadethe Shiite resistance movement to relinquish its arms andserve first and foremost Lebanese interests rather thanfollowing a regional agenda. How to tackle and eliminatecorruption, Lebanon’s relations with the Arab world, Syriain particular, electoral and constitutional reform — allthese were discussed and debated.

For those of us who traveled from Beirut to attend themeeting, the tensions in Lebanon came with us. On touchingdown at Dulles airport in Washington, we learned of WalidEido’s assassination. We were on our way back home when newscame through that rockets had been fired from south Lebanoninto Israel, the first such incident since the end of lastsummer’s war between Hizbullah and Israel.

Yet the conference on the violence wracking Lebanon was heldSt Michaels, a resort for the east coast elite, besideChesapeake Bay, a two hour drive from Washington.

Lebanon felt a long way away when walking down the highstreet of St Michaels. The stars and stripes flags flutteredproudly from the front yards of simple houses of whiteclapboard and shingled roofs. Elderly married coupleswearing baseball caps, baggy shorts and polo shirts wandereddown the street, slurping on ice creams while gazing throughthe windows of a seeming endless array of shops with tweedynames such as Holly’s Haven and Three Crazy Ladies that soldpricey knick knacks. Huge SUVs that would humble the mostegotistical of Lebanese Hummer drivers ambled along thepristine asphalt roads at painfully slow — but legal —speeds.

Barely a car crawled through St Michaels without a yellowribbon motif stuck to the trunk carrying the demand “Supportour Troops.” Every now and then, a sign along the highwayrecorded that the next stretch was dedicated to the memoryof individual soldiers who had died in Iraq or Afghanistan.In one shop, a middle-aged man with steel-gray 1970s haircutand bizarre orange mirrored sunglasses extolled the virtuesof a new kind of body armor called Dragon Skin, apparentlypopular with troops serving in Iraq. “If I was deploying inBayroot, I’d accept no substitute,” he drawled.

After the sterility of St Michaels, it was somehowrefreshing to return to Beirut. As for the think tanksession’s future dream for Lebanon, don’t hold your breath.

Nicholas Blanford is a Beirut-based journalist and author of“Killing Mr Lebanon: The Assassination of Rafik Hariri and its Impact on the Middle East”

July 1, 2007 0 comments

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In Name of the Disappeared

by Peter Speetjens July 1, 2007

written by Peter Speetjens

With an eye on the fate of Alan Johnston, the BBCcorrespondent who disappeared in Gaza on March 12, 2007, CNNrecently interviewed Olaf Wiig. In August 2006, the Fox News journalist had been kidnapped at gunpoint by an obscure Islamist group that demanded the release of all Muslimprisoners in the United States.

Wiig related that he had not been mistreated and that hisbiggest torture was facing the uncertainty, the not knowingwhere he was, why he was there, and for how long he had tostay there before being released, if he was to be releasedat all. Wiig was eventually set free after two weeks incaptivity.

Uncertainty was also the word that constantly popped up ina series of interviews I did with Lebanese mothers whosesons and husbands had disappeared during or after the CivilWar. All of them said it was the uncertainty over the fateof their loved ones that tormented them the most. In fact,most of them said they preferred to know their son was dead,than to not know at all. At least, so they argued, theywould be able to turn the page and move on with their lives.

No doubt, the Argentinean Mothers of the Plaza de Mayo,whose children disappeared under the reign of the militaryjunta, would answer in similar fashion. And so would thefamilies of the thousands that disappeared in countries asvaried as Chile, Algeria and the former Soviet Union.

Although there are differences, Wiig and Johnston, and thechildren of Lebanon and Argentina, all fell victim to whatis known in the jargon as “forced disappearance,” whichapplies to an organization or state that kidnaps, illegallydetains and often tortures a person for political reasons.The victim is imprisoned without trial at a secret location,sometimes for years on end. At a certain point he or she maysuddenly be released, yet it will mostly end in murder,after which the body will be dumped in an unknown location.

For the families involved, the end result is the same, asin both cases the victim vanishes from the face of theearth, while the suspected perpetrators deny any involvementand make sure all physical evidence is destroyed. Seeing theexamples cited above, it is frightening to realize that theWest, lead by the self-proclaimed freedom champions in Washington, has embarked ona path not so entirely different.

On June 8, Swiss investigator Dick Marty submitted hissecond report to the Council of Europe which points at agrowing body of evidence that, ever since 9/11, the CIA haskidnapped hundreds of presumed terror suspects around theworld and flown them to secret prisons in countries such asPoland, Rumania, Morocco, Egypt and Afghanistan. Andapparently it did so with tacit support of its Europeanallies.

Thus, Maher Arar, a Canadian of Syrian descent, wasarrested at Kennedy Airport in New York City and deported toSyria where he stayed 10 months in jail. Khaled el-Masri, a German citizen of Lebanese descent, was arrested inMacedonia and flown to Afghanistan where he was held forfive months. In 2003, Egyptian Abu Omar was snatched by ateam of CIA agents in Milan and flown to Egypt where heremained in jail until February 2007. All three claim tohave been tortured.

These cases are arguably but the tip of the metaphoricaliceberg. Marty’s report was issued one day after six humanrights organizations had published a list with 39 names ofpeople, who at some point were in US custody, yet today areunaccounted for. In other words, they disappeared. Despiterepeated requests by organizations such as Human RightsWatch and Amnesty International, the US government refusesto comment or provide information about their whereabouts.

Lack of transparency and disrespect for basic human rightsseems to be the norm for the Bush administration inconducting its War on Terror. So, most Guantanomo Bay “enemycombatants” have still no clue for how long they will remainimprisoned, as they have never even been charged with anywrongdoings. In fact, it was only in 2006 that a courtruling forced the US government to release their names.

Much less reported in the mainstream media is the factthat in the aftermath of 9/11, thousands of people werearrested in the United States on immigration law violations.Most were Muslims and had overstayed their visa. Of coursethe administration had a legal ground to arrest thesepeople, yet most of them were jailed for months on end andeventually deported without having seen a lawyer or judge.

Hence, Shakir Baloch, a Canadian of Pakistani descent,stayed seven months in a New York jail and was only releasedafter his wife had managed to somehow track him down andfind an attorney.

On August 30, the annual International Day of theDisappeared takes place to draw attention to all thosepeople around the world detained in places unknown to theirrelatives or legal representatives. Let us hope that by thenAlan Johnston has been set free and that the United States,as the self-proclaimed beacon of freedom, recalls thatuniversal human rights are exactly that: universal.

Peter Speetjens is a Dutch writer and freelance consultant

July 1, 2007 0 comments

By Invitation

Role of governments in energizing the future of ICT

by Karim Sabbagh & Eddy Skaff July 1, 2007

written by Karim Sabbagh & Eddy Skaff

Most governments in the Middle East are increasingly supporting the idea that information and communication technologies (ICT) can be made available to all citizens to truly improve their lives. In the not-too-distant future, ICT will positively transform how we interact as consumers with services such as banking, shopping, healthcare,transportation and many other facets of our everyday lives.Leading ICT regions such as Western Europe, North America,and Southeast Asia are already experiencing this paradigm.

The Middle East region, however, is still far from realizingthe full benefits of ICT and the path to true advancementwill continue to be tortuous unless the topic receives fullattention. A number of challenges must be overcome to getICT development on a sustainable path.

“The importance in giving the populations of the Middle Eastaccess to ICT cannot be underestimated,” said Eddy Skaff,Senior Associate at Booz Allen Hamilton (BAH). “In order tobe competitive on the world stage, Middle East markets willhave to prevail over some current obstacles they face, whichthreaten to hinder the successful implementation of anenvironment that supports and sustains ICT and its benefits.Governments in this region can play a key role in makingthese benefits a reality to consumers.”

Singapore is the world leader

The latest Networked Readiness Index, published by theWorld Economic Forum in collaboration with INSEAD,highlights the pivotal role governments play in driving thenational ICT agenda. In this ranking, one countryoutperforms the rest of the world in more than one pillar:Singapore. This underscores the “Singaporean government’sclear vision for ICT and the subsequent leading roleundertaken by the latter in promoting ICT diffusion andpenetration.”

The report shows the Middle East region remaining quitestable in network readiness and highlights several successstories with government-lead initiatives in the UAE (29thplace), Qatar (36th place) and Bahrain (50th place).

The single biggest hurdle is the lack of a holistic ICTdevelopment agenda at a national level. The definition of adevelopment plan at a market level is mostly non-existent in the region. This position does not undermine thesuccessful formulation and early implementations of sectorspecific ICT plans, such as e-government.

Saudi Arabia is a typical example where several governmentagencies are involved in different national IT initiativesand programs. The Communications and Information TechnologyCommission is championing Saudi’s e-government program aswell as several other IT sector initiatives such as theInternet Restructuring Project and Computer EmergencyResponse Team to name a few. The Saudi Arabian GeneralInvestment Authority has become a key player by launchingthe Knowledge Economic City in Madinah, establishing theIntel Capital Fund and signing an agreement with CiscoSystems to invest SR1 billion in the IT sector. Otheragencies have also contributed to the national ICTdevelopment.

Similarly, the UAE boasts several government-championedICT development projects. Dubai’s e-government program,launched in 2000, has been recognized as a success story bypractitioners. Dubai Internet City, Knowledge Village, andDubai Silicon Oasis are aiming to create and develop ICTclusters. The Abu Dhabi Systems and Information Committeelaunched earlier this year the Abu Dhabi Government’s portalalong with a very ambitious e-government project. TheTelecommunications Regulatory Authority, for its part,established an ICT Development Fund.

Such examples underscore the prevailing state offragmentation region-wide, albeit with a drive for increasedcoordination. The accumulation of these siloed initiativesmay be creating an inefficient allocation of resources andsubstantive delays in delivering meaningful services tousers.

How governments can promote ICT

Holistic ICT development agendas at the national levelshould be driven by governments through a complete SectorManagement Lifecycle. (1) Governments should begin bysetting national policies for the growth and development ofboth the telecommunications and IT sectors. (2) Thesepolicies would be translated into long-term master plansthat identify development priorities and programs. (3)Governments should also ensure the availability of adequateregulatory and legal environments to foster a faircompetitive market, regulate distribution of scarceresources, and protect consumers and businesses through aset of e-legislations. (4) Finally, government-ledinitiatives will create the right level of readiness amongthe country’s economic actors.

Telecom regulations are typically entrusted to astructurally and financially independent authority, whilesector development initiatives are usually overseen by anempowered cross-departmental program office reporting to thesenior program champion. However, some roles could also becombined within a single entity to accelerate theimplementation of the national ICT agenda.

“Governments implementing a highly structured program thatincorporates these approaches will more than likely seepositive results,” said Karim Sabbagh, BAH’s vice president.“ICT that is widely available will give Middle Easteconomies the very element they need to maintaincompetitiveness in the near- and long-term future withtechnologically advanced economies throughout the world.”

July 1, 2007 0 comments

By Invitation

Tapping into the GCC Infrastructure Boom

by Imad Ghandour July 1, 2007

written by Imad Ghandour

Investing in a water desalination plant or a school was seenfor a long time to be a government’s job. Private companieswere usually interested to build such projects, but wererarely excited to own them. If seduced enough, a contractormight proceed to operate and finance them under a long-termcontract. But the general population of equity investors —not to mention the hyper private equiteers — were rarelyexcited about a business as stable as a toll road and neverhad the patience to wait 30 years to realize back theirinvestment.

But suddenly all that changed in 2006. Today infrastructurefunds are one of the hottest asset classes. Globalinvestment in infrastructure is rising exponentially, andglobal financial institutions like Macquarie Bank havediscovered how to convert infrastructure stability to a veryexciting investment. Private equiteers have hopped on thebandwagon, and creatively managed to make an asset classwith meager IRRs of 8-15% produce returns as high as 40%.Through creative financial engineering, private equiteershave pressed to put as little equity as possible and financemost of their investments through debt. Consequently,marginal improvements in asset value due to underestimatingdemand or improved margins significantly boosted the privateequity IRRs.

The developed world has build most of its infrastructureafter World War II, and such infrastructure is now comingtowards the end of its natural life. With most countries inthe developed world experiencing budget deficits, there isno appetite to fork out trillions of dollars over the nextdecade to replace the aging roads, ports, and bridges. TheUS, for example, needs between $2 and 3 trillion alone torehabilitate its road and transportation infrastructure.

On the other hand, the rising needs of the Chinese, theIndians, and other Asians for electricity, water, andtransportation, after decades of being satisfied withhumbler lifestyles, have put enormous stress on theinfrastructure of these countries. China is building in2006-7 more than 200,000 Megawatts of generation capacity —equivalent to the total generation capacity of the UK — ashundreds of millions of Chinese buy TVs, refrigerators, andwashing machines. In total, the World Bank estimates thataround $32 trillion is needed to be invested in the globalinfrastructure between 2005 and 2030.

In the GCC, the demand for capital to finance theinfrastructure needs has never been greater. By the end of2006, the GCC’s announced power, water, energy, real estate,and transportation projects financing requirements wereestimated to be around $723 billion according to MEEDProjects. Add to this amount a rough guesstimate for theunannounced infrastructure needs over the next decade, andit is easy to foresee the total crossing the trillion dollarmark. To put this in perspective, this amount is larger thanthe total GCC banking sector.

Despite the petrodollar windfall, GCC governments areasking the private sector to step in, and this is creatingsignificant opportunities for private equity players. Themost attractive opportunities will come from privatizinginefficient state companies, where private equity playerscan combine operational improvement to creative financialengineering to realize significant returns.

Private equity players will also tap into theinfrastructure boom through investing in the limitedinventory of private companies that design, build, operate,maintain, and finance infrastructure assets. These areprivate companies like Metito for building and runningdesalination plants, Madares for operating schools, and ACWAPower for building IWPPs. I will not be surprised to seestellar demand and exuberant valuation for such companiesfuelled by regional — and increasingly international —investors trying to tap into the upcoming GCC infrastructureboom.

Imad Ghandour is head of Strategy & Research — GulfCapital and Chairman of Information & Statistics Committee —Gulf Venture Capital Association

July 1, 2007 0 comments

By Invitation

Dancing around the International Monetary Fund

by Mounir Rached July 1, 2007

written by Mounir Rached

Last March, Lebanon requested to use $77 million (25% of itsquota) of IMF financing as Emergency Post-ConflictAssistance (EPCA) for the first time since it joined thisinternational financial institution on April 14, 1947. TheIMF’s principal function is to provide balance of paymentssupport, particularly when reserves fall to a critical levelthat could jeopardize financial stability, and to monitorreform commitment that supports use of its resources.

The IMF Board in May approved the government’s request whichcoincided with a level of reserves close to $12 billion,equivalent to 20% of deposits; certainly one of the highestin the world in relation to the size of the economy. Thisamount can hardly make a dent in the above quantity ofreserves.

Clearly, the incentive for the arrangement is two-fold: tohave a solid commitment from the government toward itsreform agenda and to provide assurance to donors thatmacro-economic adjustment are adhered to and monitored bythe fund. EPCA then constitutes a catalytic part of ParisIII financing and (if implemented successfully) paves theway for future IMF financing under the standard and morestringent Stand-By arrangement.

Measures require prudence and governance

The risk to the government is that a failure to fulfillits commitment would engender doubt in donors and jeopardizetheir willingness to continue providing financial support aspart of their Paris III pledges of $7.6 billion in thecoming years. These risks for the duration of the programthrough 2007 are revealed in the quantitative programtargets: preserve foreign reserves at $11.5 billion, limitthe primary deficit to LP1.3 trillion ($870 million), anddebt accumulation to LP 2 trillion ($1.3 billion). All thesethree targets are inferior to the outcome of 2006. A fourthquantitative target is to repay LP 2 trillion ($1.3 billion)to the Central Bank. The other hurdle in the program is aset of administrative measures — “Monitorable Actions” —covering fiscal measures, electricity reform, andprivatization. None of these measures requires belttightening, but rather prudence and governance, and a timelydisbursement by donors of pledged resources. This isnormally the case of IMF EPCA programs, setting the pace forthe challenges ahead. The demanding reform will ensue in2008 and beyond. The monetary program is limited tomaintaining a high level of liquid foreign assets combinedwith a an exchange rate peg without creating an imbalancebetween the central bank’s liquidity injections — emanatingfrom its balance sheet cash losses — and money demand.

In the words of the IMF, “the authorities program for 2007 …focuses on maintaining financial stability and containingthe primary deficit while accommodating reconstruction andrelief spending. Keeping the excise rates on gasolineproducts at the levels prevailing in March will be a keymeasure to achieve the deficit objective. EPCA will thusprovide a transition to 2008, when the demanding fiscaladjustment is envisaged to commence. Then, it is perceivedthat the government will be able to embark on acomprehensive economic program that could be supported byfurther IMF financing in the context of upper credit tranchearrangement (Stand-By) arrangements.”

Problems fulfilling promises

What are the inherent risks then? Certainly, the politicalrisk, very well recognized by the IMF, remains the primeimpediment to government capacity to fulfill its commitmentunder EPCA. First, almost one year after the devastating warlast summer the economy remains in a recession. A nominalgrowth rate of 4.5% in economic activity envisaged in theprogram for this year is already beyond reach. While thegovernment met all end-March targets under EPCA, except forthe ceiling on government borrowing from the central bank,the outlook for the rest of the year is bleaker. June andSeptember targets are more foreboding in the ongoingpolitical stalemate and recurrent outbreak of violence.Attaining the revenue target (a 16% rise by the secondquarter) is very unlikely. And the government is alreadyburdened by rising spending to improve security. Failure tocontain the primary deficit to the set target in the secondquarter (by end-June) will in turn necessitate preaching theceiling on government borrowing from the central bank for asecond time. Commercial banks were hesitant to roll overmaturities in the first quarter, and a change in the banks’outlook is unforeseen. The deadline for fulfilling most(four out of six) monitored actions was due by the end ofJune as well, and with parliament not convening, these(including the budget) are yet to be approved. The reform isstumbling at the beginning of the race; to regain momentumit will need exceptionally favorable circumstances, and anend to the political stalemate.

Dr. Mounir Rached is a senior IMF economist and afounding member of the Lebanese Economic Association. The views in this article are those of theauthor and do not represent those of the IMF.

July 1, 2007 0 comments

Capitalist Culture

Summers of our discontent

by Michael Young July 1, 2007

written by Michael Young

Many things can be said about the July-August 2006 war,whose first anniversary we will be commemorating later thismonth. However, for those who lived through it, a singleenduring image remains: that of sudden, irrevocable,traumatic collapse into chaos.

One minute the Lebanese were enjoying the start of whatlooked to be a prosperous summer, the country was awash withemigrants and visitors, and the football World Cup had hadcreated a sense of being hooked into the nodes of acelebrating world; the next minute, Lebanon was being bombedremorselessly, citizens had become refugees in their owncountry, tourists and visitors were taking to the sea, andthe link to the world had been brutally severed with thesudden closing of Beirut Rafik Hariri International Airport.

In what was an instant, Lebanon’s capitalist culture, aculture of openness, of the promotion of free minds and thefree pursuit of profit, had been overturned by one ofconflict and destruction. The country never recovered fromthat transformation, and to this day is paying the price forthe aftermath of that war, which profoundly divided Lebanesesociety.

The mythology of Lebanon’s summer tourism season has beenworn to the bone. The country can be heading to hell in ahand basket, but people will react most sensitively to thefact “summer” is threatened. Somehow, the symbolism of thatthree-month moment cannot be underestimated: it is themoment of Lebanon’s communion with the outside, when a yearof sluggish business can be righted, when politicians take abreak and when people can take a break from politics. Moreominously, it’s also the time when Lebanon has usually beenhit by disaster: the mass entry of Syrian troops in 1976;the 1978 Israeli invasion, followed by that of 1982; thebeginning of the killings after the Syrian withdrawal in2005; the summer war of 2006. The Lebanese psyche seemsforever buffeted by this struggle between profitablenormalcy and debilitating conflict; and most of the timethat psyche is bathed in the hues of a single season:summer.

Today we’re back to the same worries again. Things startedearly this year. In fact, the summer season was the firstcasualty of Lebanon’s proliferating crises and bomb attacks.The bombings in Ashrafieh, Verdun and Aley were all, to alarge extent, designed to suffocate the tourist season itits egg. While not devastating on a human level, at least inlight of what Lebanon endured in the past, the bombings havebeen devastating to the economy. Travel agencies now reportmass cancellations of reservations; restaurants areoperating at well below their capacity, particularly inBeirut; and by 9 p.m., most streets are empty.

Hanoi or Hong Kong?

Once again, the symbolism is stark. In denying Lebanonnormalization, those who planted the bombs went after itsAchilles heel: summer. The pendulum is again swingingbetween a culture of destruction and a culture of opennessand free-wheeling profit. This dividing line has been apersistent one in postwar Lebanon. It was the Druze leaderWalid Jumblatt who summarized it best when he distinguishedbetween “Hanoi and Hong Kong” in the early 1990s. What hemeant, or what he asked, was whether Lebanon would become anemblem of militancy and armed struggle, particularly againstIsrael, as best represented by Hezbollah? Or would thecountry opt for the path laid out by the late Rafik Hariri,who sought to transform Lebanon into a business nexus forthe region, a bastion of liberal capitalism and ecumenicalpermissiveness?

To this day, Lebanon hasn’t found an answer to thatquestion, hence its dilemma as two vastly different projectscontinue to drive apart its political class and its society.Some months ago, after the summer war, a publicity campaignplayed on this perceived difference. The “I Love Life”billboard campaign, which was directed against mainly whatwas seen as Hezbollah’s ideology of war, provoked animmediate reaction from the opposition. In response, it toobegan an “I Love Life” campaign, falling into the trap ofdeploying a discourse shaped by its adversaries. However,more significant was that the opposition was destabilized bythe accusation that it did not love life. Maybe there wassome hope there.

But hope or no hope, for the foreseeable future Lebanonseems destined to remain a front line in the clash between acapitalist culture and a culture that aims to underminethis; between Hong Kong and Hanoi; between a country thatawaits summer impatiently, but then all too often findsitself dealing with an early winter.

Michael Young

July 1, 2007 0 comments