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France enters new era

by Claude Salhani
written by Claude Salhani

The night Nicolas Sarkozy celebrated his presidentialvictory over Socialist Party candidate Segolene Royal atFouquet’s on the Champs Elysee, some 6,000 kilometers away,President George W. Bush must have also been celebrating –albeit in a somewhat more modest manner.

There is good reason to believe the American president musthave been relieved that Sarkozy, who has made no qualmsabout his pro-American sympathies, will be the next tenantat the Elysee Palace. He is an admirer of the Americaneconomic model and wants to inject some similitude of the UScapitalist system into the French business world. Indeed inhis book, Testimony, timed to coincide with his victory, thenew French president states: “I have no intention toapologize for feeling an affinity with the greatestdemocracy in the world.”

Sarkozy reminds the reader of his love for, “the valueAmericans place on work and the desire for excellence youfind everywhere, from CEOs to the most modest workers.” Hegoes on to say that, unlike the French, “who would have youbelieve that work is a sort of punishment from which peopleshould try to escape,” Americans “understand that work welldone is liberating.”

The new French president in fact wasted no time sending amessage to his American counterpart, telling him that the UScould henceforth count on France in times of need. Quite achange from the icy relations President Chirac entertainedwith the Bush White House.

Indeed, Sarkozy may turn out to be Washington’s best friendin Europe, now that Blair is leaving No. 10 Downing Streetin late June and will be replaced by his Chancellor of theExchequer, Gordon Brown. Brown is a very differentpolitician than Blair, and chances are the no-nonsense Scottwill distance himself ever so slightly from Bush and hispolicies, particularly over Iraq.

The irony today is that the two countries accused by formerUS Secretary of Defense Donald Rumsfeld of belonging to an outmoded “old Europe” – France under Chirac and Germany under Helmut Kohl – are now set to become Washington’s best friends with Sarkozy in Paris and Chancellor Angela Merkelin Berlin.

However, he also said that friends also have the right to disagree and that does not make them any less of a friend.One of the first points “Sarko,” as the new French president is often referred to in the French media, brought up was theKyoto Treaty that is meant to regulate global warming and which was signed by most countries, except the US. Sarkozy said in his victory speech that addressing the Kyoto accords would be his first challenge.

The environment is not the only point of contention that will surface between Washington and Paris during Bush’s remaining 600-plus days in the White House. There will be strong disagreements over Turkey, for example. Sarkozy is a strong opponent of Ankara’s entry into the EU and will, in all likelihood, move to prevent Turkey’s accession to theBrussels club. Already in his victory speech last month, Sarkozy spoke of creating a “Mediterranean Union” based on the EU model. Bush, on the other hand strongly supportsTurkey joining the EU because he sees Turkey playing a moderating role in the Middle East. Bush sees Turkey, aMuslim country though one that thanks to its strict separation of mosque and state – so far – has managed to remain moderate in its approach to religion. Sarkozy just sees 80 million Muslims.

Elsewhere, the two will certainly disagree over the war inIraq but should cooperate closely over Afghanistan, whereFrench troops have been fighting the Taliban from the very start. Ditto Syria and Lebanon. One of Sarkozy’s very first meetings on foreign policy after winning the election was to meet with Saad Hariri, Lebanese parliamentarian and son of assassinated former Prime Minister Rafik Hariri.

Finally, Sarkozy is likely to be as opposed as Bush is toIran becoming a nuclear power. So if their will be disagreement over Kyoto and Iraq, there remains plenty of room for cooperation in other areas. It is safe to say that a new era, one of rapprochement between Paris and Washington has begun.

Claude Salhani is international editor and a senior political analyst with United Press International in Washington, DC.

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The ‘Shiitization’ of Syria

by Andrew Tabler
written by Andrew Tabler

The latest conspiracy theory to grip the Middle East is theShiite Crescent – an emerging Iranian-backed Shiite alliance stretching westward from Iran to Lebanon that threatensAmerica’s Sunni allies in the region. In the arch’s keystone, Syria, many say a Shiite takeover is in the works.Syria is majority Sunni Muslim, but it is ruled by the Assad regime, which hails from the Alawite Shiite Muslim sect. Akey part of Tehran’s alleged regional coup are rumors of“Shiitization” – the conversion of Sunnis to Shiite Islam.

Many if not most of the gaggle of growing Syria experts deny Shiitization is happening, but their contradictory statements indicate otherwise. Syrian ParliamentarianMohammed Habash, head of Damascus’ Islamic Studies Center and a major source on Islam in Syria for foreign journalists, told me following last summer’s war in Lebanon that talk of conversions was “Wahabbi propaganda” – a reference to the conservative version of Sunni Islam practiced in Saudi Arabia, Iran’s regional rival andAmerica’s chief ally. He added that Shiitization was a“phenomena,” however, “especially in the Jazeera” – the area of Eastern Syria between the Euphrates and Tigris Rivers.

Shiite converts I have interviewed in Syria over the last few months say that many Sunni Jazeerite families aren’t really converting, but rather returning to their Shiiteroots. Shiites recently celebrated Ashura, the commemoration of the slaying of the Prophet Mohammed’s grandson, Husseinbin Ali, in 680 CE by forces loyal to the Damascus-basedUmayyad Caliph Yazid bin Muawiya at Karbala in present dayIraq. A “Sunni” or traditional leader from outsideMohammed’s family, Yazid ordered Hussein’s decapitation, mounted his dome on a pike and paraded it alongside surviving members of his family throughout the UmayyadEmpire. After brief stops in Kufa and Mosul, the procession headed through the Jazeera to Aleppo, then south towards theSyrian cities of Idlib and Homs before ending the journey inDamascus.

The spectacle backfired, however, turning Hussein’s cause into a local crusade. Small Shiite communities sprouted along the procession’s route, who were later joined by Sunni tribes from southern Iraq familiar with Shiite customs. Some built “maqaam” or shrines. Other Shiite communities in Syria gathered around Ahl al-Bayt (family of the Prophet Mohammed)tombs in Syria. During the Ottoman Caliphate (1415-1918),many Shiites in these communities converted to the dominantSunni Islam to avoid harassment.

Hundreds of years later, Shiite converts say that innovations such as satellite TV and the internet are helping Jazeerites understand Shiite Islam. They also help converts keep in touch with marjaa’iyat, or Shiite “Sources of Emulation” worldwide, including Iran’s Supreme Leader AliKhamanei and Iraqi Ayatollah Ali Sistani.

Shiite religious satellite TV programming has been growing for decades, but converts say the man who moved it to primetime in the region was Hizbullah leader Hassan Nasrallah. His calm and collected televised addresses, even as Israel attempted to bomb Lebanon “back 20 years” last summer, ledSunnis to take a second look at Shiite Islam.

“Hizbullah’s victory broke the ice wall between Sunnis andShiites,” one convert told me. “Many Syrians hosted LebaneseShiite families in their homes during the war. This opened people’s eyes and humanized Shiites.”

Teachers in hauzas – Shiite religious schools – say the recent restoration of shrines and tombs in Syria and the building of more hauzas are paving the way for a Shiite revival. It is here that Iranians have entered the Shiitization fray over the last few years by financing the renovation of tombs of Sayida Sukaina near Damascus and Ammar bin Yasser, a close companion of Mohammed, in theEuphrates Valley city of Raqqa. Iranians support a Shiite school as well, the Damascus-based Hauza of the SupremeLeader.

Before a Shiite crescent moon rises in your mind, Shiite converts admonish that the alliance’s religious base is fragmented. The zealots of the Islamic Republic and Hizbullah await the return of “Al-Mahdi” – the 12th ImamMohammed ibn Hasan. The Assads are Alawites, however, a secular Shiite Muslim sect that reveres the 11th ShiiteImam, Hassan al-Askari. Protecting Syrian Shiite converts’ right to choose a new faith isn’t Shiite brotherhood, but, ironically, the Assad regime’s use of Ba’athism – secular, pan-Arab ideology that has guaranteed freedom of religion forSyrians of all faiths for over 44 years.

There are signs that a Shiite Crescent might not be in theregion’s political stars as well. Many Syrians say they are worried Iraq’s sectarian strife might spread to Syria,especially after the execution of former Iraqi President Saddam Hussein, a Sunni, at the hands of Iraq’sShiite-dominated government. Inside the Iranian-Syrianalliance, Damascus is reportedly unhappy over Iran’s recent dialogue with Sunni Saudi Arabia to end the stalemate inLebanon between Hizbullah and the Siniora government.Tehran, in turn, is rumored to be questioning Assad’s recent peace overtures with Israel. Both sides denied the rift during Assad’s visit to Tehran in February. But only days after Assad’s return, a group of Syrian intellectuals and parliamentarians lambasted Deputy Iranian Foreign Minister Manouchehr Mohammadi in a closed-door (but widely reported)dialogue session. The point of contention? Iranian support for Shiitization in Syria.

ANDREW TABLER is Editor-in-Chief of Syria Today Magazine

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Selling a war

by Peter Speetjens
written by Peter Speetjens

“Even the most brilliant propaganda technique will yield no success, unless one principle is borne in mind: the message must confine itself to a few points and repeat them over and over,” said former Nazi propaganda minister, Joseph Goebbels.

Goebbels may have committed suicide on May 1, 1945, but his golden rule of “simplicity and repetition” is still the backbone of any effective mass communication campaign, regardless of whether or not the slogans are true. As Goebbels said: “A message repeated a thousand times becomes the truth.”

So too was the case with Iraq. Time and again we were told that the war was needed to protect our freedom and security.Saddam had nukes, was in contact with Al Qaeda and threatened the stability of the world. Today, we know that Saddam did not have weapons of mass destruction, was not connected to Al Qaeda and that the intelligence on which conclusions were based was, at best, jaded. When the war started in March 2003, however, one poll showed that 66% ofAmericans thought Saddam was behind 9/11, while 79% though the was close to having nukes. How did they do it?

According to Laura Miller at PR-Watch Quarterly, the techniques used to sell the Iraq war were classic PR strategies. “The message is developed to resonate with targeted audiences through the use of focus groups and other types of market research and media monitoring. The delivery of the message is tightly controlled. Relevant information flows to the media and the public through a limited number of well-trained messengers, including seemingly independent third parties (read: think tanks).”

The campaign to sell the war in Iraq started in 2002, with the establishment of the Office for Global Communication(OGC) as part of the White House. According to White HouseCommunications Director, Dan Bertlett, its aim was to create the American foreign policy message, “so no one, not evenDick Cheney, can freelance on Iraq.” The Times of London reported that the OGC had a $200 million budget to unleash“a PR-blitz against Saddam.”

The message peddled by government officials and spokesmen was one of freedom and fear. Of course, the decision to goto war was taken as early as 9/11 (even earlier think many).At that point, however, the administration had other things on its mind: Al Qaeda, Afghanistan and the question: “why do they hate us so much?” To Washington, it was clear from the start that the latter was an image problem: people misunderstood America’s freedom, and its overwhelming support for Israel had nothing to do with it.

To deal with this, shortly after 9/11, Secretary of StateColin Powell appointed Charlotte Beers as Undersecretary forPublic Diplomacy. Her task, according to Powell, was the“branding of US foreign policy.” Known as the “Queen ofMadison Avenue,” Beers made her name with campaigns for Head& Shoulders and Uncle Ben’s rice before heading two ofAmerica’s biggest ad agencies.

Having defined America as “an elegant brand,” she received an estimated $500 million as her budget and set out to produce brochures, booklets and commercials emphasizing freedom in America, which included a TV campaign “MuslimLife in America,” which (falsely) claimed nothing had changed for Muslims after 9/11, and a glossy poster campaign entitled “Mosques of America.”

Most of her budget, however, went to polls and surveys, which by December 2002 showed that her campaign had failed miserably. All over the Muslim world, the US had gone down in popularity. Beers blamed the Arab media, which she found difficult to penetrate. “We only have one choice in theMiddle East,” she said. “We have to buy the media.” She resigned shortly before the Iraq war for “health reasons.”

Donald Rumsfeld had his own PR star: Victoria Clarke. She too headed several ad agencies and wrote the book Lipstickon a Pig: Winning in the No-Spin Era by Someone Who Knows the Game.

According to John Stauber and Sheldon Rampton, authors of the book Weapons of Mass Deception, it was Clarke who emphasized that, for the American public to buy the war inIraq, it was essential to stress a link with rogue nation states as sponsors of terrorism. The shift from Al Qaeda to nation states was first made in Bush’s State of the Union speech on January 29, 2002, when he defined North Korea,Iran and Iraq as “an axis of evil, arming to threaten the peace of the world.”

In a later stage of the war, and a further attempt to control the message, Clarke masterminded the phenomenon of embedded journalism and established “Batallion Camera,” an army unit of 800 photographers and cameramen, which provided the world with (positive) imagery, but eventually causedClarke’s downfall when it staged the “heroic” rescue ofPrivate Jessica Lynch.

Finally, even the Pentagon itself worked with a PR firm, the shadowy Rendon Group, widely believed to be the brain behind the Iraqi National Congress of Ahmad Chalabi. According to the Chicago Tribune, since 2001, the Pentagon awarded the company at least $56 million in contracts.

It appears “wagging the dog” is now policy.

PETER SPEETJENS is a Dutch writer and freelance consultant

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Beirut on my mind

by Rana Hanna
written by Rana Hanna

Traveling is on everyone’s mind. Try listening to some of the very popular horoscope shows and you will inadvertently hear: “Fi safar?” Any travel plans? As opportunities for educated, professional people diminish in Lebanon, all eyes start to turn abroad. Most of the people looking to travel tend to be young men in search of better opportunities in other countries. But what if you are a young family? How much would it cost you to relocate?

Many couples with young kids now think of moving as a means of offering their children a future filled with security and opportunity rather than political and financial uncertainty.But if, like me, you are a snob, and would only agree to move to Europe (I am not one for grass grown with desalinated water, fake snow or culture that is imported rather than produced) then the question that begets itself is: can we afford it?

Answer: Probably not.

Before we go any further, I must admit that, yes, the vast majority of Lebanese families live on a lot less than the numbers I am going to throw out, but for the purposes of our survey, I have been forced to take the young, upwardly mobile couple as the model.

Such a family in Beirut needs a minimum of $2,500 per month in living expenses. This sum includes rent (three-bedroom apartment in a good area), private school fees, one full-time, sleep-in domestic helper, bills and transportation fees, but it does not include groceries, clothes, cars, travel, etc. The modest amount affords a decent living by all standards, especially with income tax at around 10%. How much would this same family need to satisfy these same conditions abroad?

Take three examples: Athens, Milan or London, all great cities in which to live. Culture, history, beauty, green spaces, organization and respect for the rule of law abound  in these places, but as you can see from the table below, you would need to spend about $6,500 a month to live decently in Athens (albeit not in absolute luxury) and almost double that to reside London. Add to that what you have to pay in income tax (40% average) and you realize you need to be grossing quite an annual yearly income just to ‘live’. Dubai has traditionally been a popular destination for the spirited expat, but even that emirate is now proving beyond the reach of many.

Plus, there are other, immaterial, issues to consider when living abroad, such as proximity to family, distances, traffic, work permits in some cases and even the weather!Sure, in these big cities, you’re at the center of the world rather than in the margins, plus you have peace of mind when it comes to political, financial and economic security. But an increasing number of people are carefully reviewing these considerations and wondering: is it worth it?

The result is a relatively new phenomenon in Lebanon: the split family, when parents choose to live and educate the kids in Lebanon while the breadwinner makes a “Western”salary abroad, mostly either in Europe or the Gulf.Financially, its cheap, and socially, many believe a tighter clan fabric means less crime and apparently no drugs.

Ever wonder where all the money is coming from when staring at the array of Porsche Cayennes and Lexus 4x4s in parking lots? At the last estimate, 25% of GDP is in the form of foreign remittances. So although it can be hard on many couples to be separated and married women sometimes feel like they are single mothers, this arrangement is actually a happy medium between risking it all here and giving it all up there. It also makes more financial sense.

Most conversations about relocating end in the same conclusion: define your priorities. But once your priorities are defined, if you decide to relocate, check your wallet!

RANA HANNA has checked her wallet and decided to stay in Lebanon.

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Iraqi refugee catastrophe

by Paul Cochrane
written by Paul Cochrane

One of the world’s largest refugee crises is underway in theMiddle East. It has been going on for the last four years, but judging by the scant attention the issue receives inWashington DC, London and in the Western media, you wouldn’t think so. I’m referring to the Iraqi refugee crisis.

According to UN figures there are an estimated 1.6 millionIraqis internally displaced, 750,000 in neighboring Jordan,1.4 million plus in Syria, 80,000 in Egypt, and 30,000 inLebanon.

In all fairness to the media, the Iraqi refugee crisis inJordan has garnered token attention, but the equally pressing situation in Syria has not.

As for Jordan, the influx of Iraqis to Syria has been a double-edged sword. Initially the Iraqis that fled were middle to upper class, bringing with them life savings that were duly invested in property, setting up businesses and making a home away from home. But as the situation in Iraq has deteriorated to resemble one of Dante’s cycles of hell, the Iraqis flooding into Jordan and Syria are increasingly cash strapped.

In Syria, this has brought with it misery, desperation and a growing xenophobia towards the Iraqi refugees due to rents doubling in price and food costs rising by an estimated 10%in just two years.

As one Syrian man remarked, even Syrian prostitutes are complaining about the influx because of the number of Iraqiwomen selling themselves on the streets – for as little as150 Syrian pounds ($3).

The refugee crisis is compounding Syria’s internal problems, what with 11.4% of the population living in poverty, 20%unemployed, and a population that is projected to surge from the current 18 million to 30 million by 2025. On top of all that, the Syrian government announced in April that the refugees have cost the state an estimated $1 billion.

Compared to the coverage immigration and refugees get in theEuropean press, it wouldn’t be a stretch of the imagination to visualize the stink the media would cause if, say,Britain’s population had grown by about 8% – the equivalent number of Iraqis now in Syria – in under four years due to a massive influx of refugees. It would rightly be deemed a major international crisis.

But the countries primarily responsible for the real crisis in the Middle East, the United States and Britain, have kept passing the buck and taken in a paltry number of Iraqi refugees.

The Bush administration, recently caving in after a great deal of pressure, said the United States would accept 7,000this year – still a drop in the ocean compared with Syria and Jordan, but a step in the right direction considering less than 500 Iraqis have been admitted since the war began.

Britain is no better, approving just 12% of Iraqi asylum claims, according to Amnesty International, whereas Sweden has a 91% approval rate, admitting 60,000 Iraqis and suspending the forcible return of refugees.

The West cannot of course take in millions of Iraqi refugees, but what it can do is boost aid to humanitarian organizations and the UNHCR in Jordan and Syria until Iraqis can return home.

But just as Britain and the United States inadequately planned for the aftermath of the invasion, the White House and Downing Street have not allocated adequate funds for refugees.

The funds that the international community has earmarked for the Iraqi crisis are primarily for use in Iraq, not for the neighboring countries grappling with the spill-over from the occupation.

“Syrians are complaining that Iraqis are raising the price of rent and oil, but if Syria doesn’t take them, who will?”questioned Dr Nabil Sukkar, managing director of the SyrianConsulting Bureau for Development and Investment.

Indeed. Clearly not the US or Britain, and neighboring SaudiArabia has kept its doors firmly shut, building a US-Mexico border style fence, at a cost of $7 billion, to keepIraqis out.

The Iraqi refugee crisis is going to be with us for the foreseeable future, and it is about time the US and Britain pulled their weight in efforts to rectify what theInternational Refugee Committee has rightly called ‘a humanitarian crisis of historic proportions.’

PAUL COCHRANE is a freelance journalist based in Beirut, regularly contributing to Singapore’s The Straits Times and The Independent on Sunday.

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Time for change

by Lysandra Ohrstrom
written by Lysandra Ohrstrom

On May 8, Minister of Economy and Trade Sami Haddad said he would submit a bill to the cabinet to streamline the existing business registration process in Lebanon by introducing “one of a series of reform initiatives that will help create a business friendly environment in the country.”

Talk of reform may seem particularly hollow as parliament has not been convened since November, but Haddad said the new system could be in place by the end of the year as it does not require amending existing legislation or introducing any new laws. While the reforms fall well short of the legislative overhaul required for Lebanon to enter the World Trade Organization, if adopted, they will significantly reduce the bureaucratic mess potential entrepreneurs must wade through to set up shop.

The plan will standardize the documentation necessary to register a company and will introduce a uniform payment system, which should reduce the time, cost and complexity of current procedures by 45%, said project manager GeorgesNicolas, who oversaw the program as part of an agreementLebanon signed in 2006 with the International FinanceCorporation (IFC), the private sector arm of the World Bank.

The long-term solutions recommended by the IFC – which include reducing start-up costs and initial capital requirements and abolishing the mandatory use of a notary public, sworn translator, lawyer and auditor – would further cut fees to 80% of the current costs, but may be slow to arrive. Nicolas said that his team also proposed a short-term solution that can be introduced in two or three months because it does require changing laws.

The IFC drafted the new procedures based on the results of a survey of 250 Lebanese companies to determine the regulatory obstacles that businesses have encountered.

The introduction of a single standard document, designed by the IFC, is one of the most important improvements of the proposed procedures, said Nicolas. Currently, the procedure costs $2,000 because each business must hire a lawyer to design individual registration forms. “The second most significant solution is one application, one payment, one interface,” he said.

Under the current system, a business owner must make separate visits to pay fees to the Ministries of Finance,Justice, and Economy and Trade, as well as the NationalSocial Security Fund and the Commercial Registry. The singleIFC document can be submitted to all agencies and prospective entrepreneurs can pay all fees and collect all forms at the nearest Liban Post branch.

Though the IFC says it has “encountered absolutely no resistance” from any parties involved, Nicolas acknowledged that the government anticipates resistance from some parties– like the Lebanese Bar Association (LBA) – to some of the long-term solutions. In the past, the LBA has lobbied against legislation that would reduce the need for legal counsel. But, given the limited scope of the first round of measures, any substantial opposition remains unlikely.Though the current proposal reduces the time to start a company, the costs will remain high. Any change in fees must be included in the state’s budget proposal, which needs parliamentary approval.

Aside from the few parties with a vested interest in maintaining the status-quo, few in the private sector or government are in favor of the current bureaucratic labyrinth. It takes an average of 46 days to incorporate a company in Lebanon, according to the World Bank’s annualEast of Doing Business Survey, which ranked the country 116out of 175. In 70 countries, it costs between 0% to 10% of per capita income to establish a business, while in Lebanon it costs over 100% of the $6,200 per capita income. The IFC’s mapping study, for example, showed that incorporating a joint stock company in Lebanon took between 12 to 49 days, and required 17 to 24 different trips, 21 to 25 separate forms, and cost $3,500 to $4,000 in fees to lawyers, notaries, and various state agencies.

The main regulatory obstacles to starting a business cited by the IFC study were the length of time and number of visits required; high registration fees; the inconvenience of trips and the quality of service provided by state agencies; “complexity”; and the difficulty of preparing documents for submission to the commercial registry.

For the new procedures to take hold, the government still needs to sign a Memorandum of Understanding with LibanPost, train employees in relevant agencies, and CommercialRegistry judges must accept the new application package.While the measures seem relatively uncontroversial, some remain skeptical about the government’s willingness to introduce even limited changes in a politically charged environment.

Lysandra Ohrstrom is a journalist on the Beirut Daily Star and a regular contributor to the Lebanon Examiner­

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On the A380

by Richard Quest
written by Richard Quest

It was the sort of invitation most people would avoid at all costs: ‘Please come and spend two hours flying on a plane that seats 550 – and end up where you started.’ But I could barely contain my glee! Of course I accepted. It was a ticket to ride on the Airbus A380 – nicknamed the Superjumbo– over the Pyrénées. I have covered the plane since its conception, but this would be my first chance to experience what flying on board the behemoth was actually like. I was not alone – 200 other international journalists were equally eager for the experience.

First, let me state the obvious. With its twin decks, this plane is big. Very big. In fact, it is enormous. The main deck seats around 350 people, like a Boeing 747. However, upstairs there is room for another 200. That is effectively an A340 on top of a 747! The aircraft is equipped with first class, business class and economy seating. I sit behind the wing in economy. It is a good choice. We lift off – very quietly for a plane of this size – and catch the crosswind.The wings’ ailerons waggle up and down in a demented state as the computers fight to keep the plane stable. It feels like a giant ocean liner on the waves. But then the take-off excitement is over all too quickly and we settle into an amazingly smooth cruise flight. The landing is similar –from the plane’s camera we can see ourselves crabbing towards the airport at Toulouse. Again, we ride the airwaves until we touch down.

So what makes the A380 so special? Is it the two grand staircases? The 15 lavatories? The elevator that can move carts between the decks? Or the fact that it can carry 550tons (considerably more than the 747)? It is all of these things and none of them. It is the fact that a new era of air travel is upon us and no one really knows where it will lead. At the moment the A380 is a flying white whale. With only 166 sold, it is a long way from making Airbus any money.

But Airbus’ chief salesperson says the plane is a‘game-changing aircraft.’ Airbus forecasts the market for very large planes at around 1,600 over the next 20 years and this plane should get at least 800 orders. Since airports are more congested and air travel is growing, demand for more seats between major hubs such as London and Hong Kong, or Singapore and Sydney will grow. That is where the A380comes in. (For the record, Boeing believes the Airbus numbers are all wrong, that the demand will not materialize, the plane will lose money and airlines will opt instead for their revamped 747-8 Intercontinental with a comparatively modest 470 seats.)

If airlines live up to their promises to put bars and lounges on board, the A380 could well become the standard for luxury in the sky. It could change the way people want to fly. Once the aircraft is in service on major oceanic routes, frequent fliers will want to be on board. On the other hand, with so many people on one flight, such irritations as luggage delays and congestion could cause some problems.

So will the A380 be a success? I know the arguments, and I still cannot make up my mind. We do not know yet. Perhaps history is our only guide; 30 years ago, people said exactly the same things about another plane. It was too big. There were too many passengers. To step on board was to tempt fate. That plane was the 747, which went on to sell more than 1,300 for Boeing and became the standard for long-haul flight. Of the A380 experience, I can say, however, that the flight was simply wonderful. To walk up and down the twin staircases, to visit the cockpit, to discover how quiet this plane could be – it was a joy for an aviation geek like me.

Because of Airbus’ appalling delays, this first flight was rescheduled many times. But I did not mind. I have now flown on the biggest passenger plane in the world. Unfortunately,I know it will be a long time before the rest of you get to share the experience. But I have seen the future, and it is big.

Richard Quest anchors CNN’s European morning editions of ‘Business International’, his own monthly interview show, ‘Quest’, and the monthly feature program ‘CNN Business Traveller’.­

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Human development at last!

by Zafiris Tzannatos
written by Zafiris Tzannatos

Not many international meetings close in an optimistic mood.The phrases “failed to agree” or “agreed to meet again” are mentioned far too often at the conclusion of such events.But last month’s meeting of the World Economic Forum was a bit different.

Convened in Jordan, the Forum brought together an impressive list of international and regional leaders at a time of economic boom in the Middle East. Bolstered by oil wealth, the region is enjoying a surge of confidence that can lead to an unprecedented change.

But economic confidence alone is not enough. The Forum discussions recognized that, despite the ongoing regional conflicts, a business-led transformation is taking place, one that is hurtling the region into the globalization process. And it was in this light that investing in education and reorienting efforts towards the creation of aK (knowledge)-economy were singled out as two the big“positives” for which to strive.

This recognition of education as a key driver for the future of the Arab world received massive material support from HisHighness, Sheikh Mohammed bin Rashid Al Maktoum, vice-president and prime minister of the United ArabEmirates and ruler of Dubai. He announced, as a personal initiative, the establishment of the $10 billion “Mohammed bin Rashid Al Maktoum Foundation that will be based in theUAE and aim to build a knowledge-based society throughout the region.”

Despite recent – and commendable – advances, the education record of the region remains disappointing. This is only in part due to the neglect of female education. Another reason is that men may not be tempted to study beyond the point that is required for a public sector job. At universities in some GGC states, there is only one male student for every three female students.

Education alone will not solve the problems of unemployment nor will it necessarily accelerate the modernization of the regional economies. The 14% regional unemployment rates quoted at the Forum are not the result of lack of education or jobs – the presence of the many working expatriates attests. Quite simply education is not something that can bear fruit if there are no incentives or a vibrant economy.

Here is where the Foundation can make a difference, that is, in addition to its focus on education, to help clarify theK-economy vision for the region. In simplified terms, there are two polar approaches for the K-economy: the “enclave”approach that basically buys knowledge, technology and human skills from outside while the nationals work for government and have exclusive business licenses or hold work permits for expatriates.

A more dynamic, and more appropriate, approach is to go for an “innovative society”, a vision that would foster and rely more on local entrepreneurs and less on the government to act as the employer of the last resort or protector of monopolies. The innovative society vision encompasses a dynamic (not license holding) entrepreneurial environment, an efficient government, ability to use and capitalize on technological advances, attractive employment opportunities and a good work environment.

The Foundation’s objectives are in line with the creation of the more promising “innovative society” vision. In addition to education, the objectives include broader knowledge development, the establishment of research centers, support for scholars and intellectuals, and leadership programs for young people in government, non-governmental organizations and the private sector.

What needs to receive equal recognition and attention is that, compared to top-down approaches, the private sector has an important role to play in facilitating the evolution of Arab culture and promoting the role of the individual as an innovator and agent in the region’s development.

Within this context, education needs to be made more responsive to the needs of the modern global workplace. It should impart entrepreneurship, create a willingness to learn from failure and tolerate failure in others, as well as instill a sense of meritocracy and “mutual responsibility” between the state and its citizens (instead of the single responsibility of the state towards the citizen).

The Foundation’s endowment has been hailed as “the biggest in the Islamic world”. It therefore presents a unique opportunity to help define a dynamic vision for the region.It can contribute to the reinvention of the whole education system around the highest international standards, not just enclave international schools or changes in the curricula compared to the more challenging change of minds. It can help build a vibrant environment for businesses, offer rewards and, in turn, benefit from the productive employment to nationals as well as attract firms and people from allover the world.

Professor Zafiris Tzannatos is advisor to the World Bank and former Chair of the Economics Department at AUB. The views expressed are his own and don’t necessarily represent those of the World Bank.

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Labor of love for the UAE

by Norbert Schiller
written by Norbert Schiller

It was recently announced that beginning next year on May1, workers in the United Arab Emirates will be honored liketheir colleagues elsewhere in the world. For until now, theUAE has not recognized Labor Day and it is ironic that acountry so dependent on labor, particularly migrant labor,has never taken the time to thank those whose sweat and hardwork made this tiny patch of sand the economic success it istoday.

On May 1 this year, the UAE Minister of Labor Dr. Ali BinAbdullah Al Ka’abi, no doubt as a prelude to next year’svolte face, made a rare gesture of appreciation,congratulating “all those workers who through dedication andefforts contribute to the economic boom and growth of thiscountry … we aim to provide continuous support for theworkforce in the country by protecting their rights.”

Some would say, “It was about time!” However, let’s nothold our breath. In March 2006, the same ministry announcedthat it was creating a new law permitting the forming oflabor unions by the year’s end. Nothing has so far happened.

All this sudden talk of workers’ rights did not happenovernight by some magnificent epiphany experience by themonarchy. It has taken years of pressure by NGOs, the mostvocal of which has been Mafiwasta (www.mafiwasta.com), whichwants the UAE to sign and adopt the International LaborOrganization’s two core conventions: 87 and 98 “on freedomof association and collective bargaining” respectively,which allow workers to form trade unions and negotiatebetter terms of employment and working conditions.

Despite isolated incidents of industrial action, mainly byconstruction workers, little if anything has been done toadvance the cause of workers in the Emirates, wheretraditionally it has been the investor that the governmenthas pandered to. It has been far worse for domestic staff,many of whom have been physically abused, forced to workwithout pay and have had their identity documentsconfiscated.

And still migrant labor makes up 95% of the UAE work force,with most coming from poor developing countries across Asiaand Africa, and most recently, China to work on the hugeChinese projects. It was only a matter of time beforesomeone said “enough.” In March 2007, 200 workers werebanned from working in the UAE for life after theydemonstrated for better work conditions. The ruling washarsher than normal because the demonstrators were accusedof violence and destroying company property. The workers inquestion received monthly salaries of between $150 to $177,for which they worked upwards of 250 hours and lived incrowded and squalid conditions.

Yes, the shroud that always hid what was not supposed to beseen is being gradually lifted. Twenty years ago, when I wasbased Dubai primarily covering what was known as the “Tankerwar,” one of the conditions that I and other foreignjournalists had to live under was that we were not allowedto report on the royal family and labor unrest. Thenewspapers and television could not even use a Dubaidateline when reporting and instead had to use the vague“Persian Gulf.”

At that time, the UAE was beginning to plan its future anddidn’t need any bad publicity. If you wanted to reportsomething negative, you had to feed the information toanother bureau in another country. Even filming a yachtowned by the royal family from a helicopter (as I found tomy cost when it was grounded by a stern faced official)would lead to trouble with the authorities.

With all the attention paid to the various groundbreakingmarvels that have risen out of this desert and, morerecently, the move by many multinational corporations likeHalliburton to Dubai, it’s no surprise that with all thesuccess there is bound to be more awareness about thesuffering of those who build this magnificent emirate. Ifthe UAE truly wants the world to sit up and take note, it isimportant that government also address the welfare of itsworkers. Happily, it appears that things might be beginningto change.

Norbert Schiller is a photo editor and photographerat large with United Press International (UPI).

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UAE banking executives On forecast for 2007

by Executive Staff
written by Executive Staff

Executive talked to Hani Hamid, Marketing Manager at the National Bank of Umm Al Qaiwain, and Yousef Padganeh, Head of the Basel II Project at Bank Saderat Iran in Dubai, about the outlook for the UAE banking sector this year.

E Is the UAE banking market as competitive as it could be? Specifically, do you expect greater competition this year on prices for core banking products?

NBUQ: Definitely. Prices on interest will vary from bank to bank, so the sector will become more competitive. The sector will become more competitive this year—there are now 52 banks in the UAE.

Bank Saderat: Yes, there is growing competition. The UAE market is highly competitive and will become more competitive because the people are trying to find new markets.

E Is the regulatory environment and enforcement of regulations fair and equitable for all banks in the UAE?

NBUQ: Yes, I think it is—but the UAE needs a credit bureau, which has been talked about for a long time.

Bank Saderat: Yes, it is fair.

E Will the UAE be able to defend its role as leading banking hub in the Gulf against the competition from Bahrain Financial Harbor and Qatar Financial Center? Does the function as banking hub benefit local banks or are there disadvantages?

NBUQ: I think the UAE is one of the strongest banking hubs, so then it will be able to compete. It is competing with the Middle East, not just the Gulf. Local banks compete differently from international banks—a different environment and customers—so they have the edge on international banks for local and Arabic-speaking customers.

Bank Saderat: Yes, if you compare it to a few years ago you will see more and more companies and organizations are coming to the UAE, to the DISE. If we look at the whole Gulf region, the market share will decrease as more banking come to Dubai. Local banks will benefit as we [international banks] are limited—we cannot have more than eight branches, but foreign banks will try to have more branches. Local branches will open more and be more active, so they will benefit.
 

E Should regulators modify their approach to the licensing of local and/or foreign banks in the UAE? 

NBUQ: It could be possible, as I think there are too many banks in the UAE, even foreign banks. UAE has an open market so anybody can come.

Bank Saderat: I am not aware of this. Regulators are supporting local banks more than international banks.

E Is the sector ripe for mergers? Should regulatory authorities do more to encourage consolidation?

NBUQ: I think it is the right time for some merging. With all the money banks made last year, and in 2005 due to the stock market, there was talk before then for mergers, but if the market stays the way it is, or there is a drop in the market, mergers could happen.

Bank Saderat: One thing I am seeing is that Emirates groups will merge. For example, we are seeing new banks, but state banks will not like mergers.

E Are UAE banks valued adequately in the Abu Dhabi and Dubai stock markets? Are 2006 earnings growth and performance reflected in recent share price developments?

NBUQ: In terms of profit it has affected them, but in terms of value at the right level. Looking at the market it is good and healthy. I think the stock exchange will grow this year.

Bank Saderat: The price of the banking stock depends on construction. I think it depends on that area rather than banking. For instance, if Emaar goes up, the National Bank of Dubai will go up.

E UAE banks have been looking east and west for cross-border expansion opportunities. Which markets are the most attractive for expansion in 2007?

NBUQ: I would say Iraq, but that’s not a good market right now. Africa is showing it is a competing market; Sudan and Libya have shown they are good markets. Egypt is also a good market, and there are some international banks are there. Qatar definitely a good market and competitive—

a lot of banks are trying to open there, and in Bahrain. Syria is good, but tere are too many rules and regulations.

Bank Saderat: UAE banks are opening branches in Pakistan and India, and want immediate customers living in Dubai. Some 55% of workers in the UAE are from Pakistan, India and Bangladesh, so there is demand, particularly for retail banking. The other factor is based on trading, where they have the most trade. Some of these investors are looking for property investment so that is why they are opening in Morocco and North Africa. Banks are also trying to get into Iran and Iraq.

E What obstacles do banks find most challenging when pursuing cross-border expansion, and are some of these obstacles higher for UAE banks than for international competitors in the same markets (e.g. regulatory requirements in other markets, competition with European banks in countries like Egypt, acquisition of skilled staff, integration of corporate cultures in takeovers)?

NBUQ: In Egypt, rules are the obstacle, along with money transfers and exchanges. Sudan and Libya are much more open, but politically Sudan is not stable. Libya is an open market.

Bank Saderat: The first problem is regulatory. We should know what the rules are—and then new competition in the market. I also think they should have a good idea of customer needs and wants as they will differ from the UAE. For instance, just now regulations for foreign banks requires UAE-employees, so recruiting can be a problem.

E Do staff shortages create problems for domestic growth of the bank?

NBUQ: It definitely affects a bank’s growth. All banks have been affected by stock markets, and I don’t think there is a problem, but staff exchanges between banks are a problem, which affects banks moving ahead.

Bank Saderat: Getting staff in the UAE is a problem as there aren’t enough people. We may find a few post-grads, but they have no experience. In the long term it should be better.

E Is the growth of Islamic banking the future of UAE banking?

NBUQ: I think it is the future of everywhere, even the UK and now the US. It is a trend they follow, like changing clothes. They have used credit cards, car loans, and now trying Islamic banking. We have already started that here.

Bank Saderat: Islamic bank is rising. HSBC started and others too, so there is a market.


E Do you expect shifts in the structure and importance of corporate banking? Where are the best options to expand and/or diversify financing portfolios for manufacturing ventures and corporate borrowers?

NBUQ: Banks are doing corporate banking but retail banking is a lot more profitable, but I think they should change their policies, as the commercial banking is moving fast and changing, and it is a good banking product.

Bank Saderat: Diversified portfolios will minimize risk, so there will be a shift. We have corporate banking and the target market is changing. Nowadays competition is high so we need to find new markets.

E What are the main challenges in retail operations? Given the rapid changes in costs of living and the scenarios in the housing market, what can banks do to keep their consumer loan portfolios profitable and lending growth sustainable?

NBUQ: In retailing, the most popular products are mortgages, and banks are looking into priority banking due to customers having more wealth. We have 40-50,000 millionaires in the UAE, out of a population of 4 million, so priority banking will make some growth for banks and they are looking at this. Mortgaging is also booming.

Bank Saderat: The main challenge here is that the cost of living is rising. If banks can provide home loans they will benefit, and then what will happen is that people will try and invest in houses. Second, credit card users are rising, so savings will decrease. Loans will increase and repayment times. High rates of loans will also increase. Banks are now offering Dh120,000 loans.

E Could the consumer lending and housing loan segments face problems from rising loan default levels in 2007? What mechanisms will banks use to avert the overheating of the retail lending market?

NBUQ: There have not been many defaults in the market—I have not heard of that many, more in cars than houses. It is a new loan through banks, so not many defaults, and people just sell out the deed. Definitely prices have hiked, and I think the surplus will drop. In three years, you might see more defaults.

Bank Saderat: Default will increase, particularly for homes. We should look at the political situation of the region, and consider that there has been an abnormal increase in property prices. There are also delays in construction times, and people still have to pay off loans. Salaries are also not increasing in relation to rising costs, with housing rising 100%. The onus should be on the government, as banks want profit. If the government increases salaries, that may help.

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