• Donate
  • Our Purpose
  • Contact Us
Executive Magazine
  • ISSUES
    • Current Issue
    • Past issues
  • BUSINESS
  • ECONOMICS & POLICY
  • OPINION
  • SPECIAL REPORTS
  • EXECUTIVE TALKS
  • MOVEMENTS
    • Change the image
    • Cannes lions
    • Transparency & accountability
    • ECONOMIC ROADMAP
    • Say No to Corruption
    • The Lebanon media development initiative
    • LPSN Policy Asks
    • Advocating the preservation of deposits
  • JOIN US
    • Join our movement
    • Attend our events
    • Receive updates
    • Connect with us
  • DONATE
Comment

Chapter 7 and the tribunal

by Nicholas Blanford May 1, 2007
written by Nicholas Blanford

Despite the hesitation of the United Nations secretariat andthe warnings of the Lebanese opposition, the adoption of theInternational Tribunal under a Chapter 7 mandate appearsalmost certain.

The government and its supporters have stepped up efforts tohave the tribunal adopted under Chapter 7, believing thatonce it becomes a fait accompli it will break the politicaldeadlock with the opposition.

There is much uncertainty over the powers and legalparameters of the tribunal which has only helped exacerbatethe tensions surrounding its formation. Hizbullah says it isworried that the US—the main external driving force behindthe tribunal—will use it as a political weapon to settle oldscores, such as reopening “files” dating back to the suicidebombings and kidnappings of the 1980s. Those fears are notwholly without foundation. One senior Christian politiciantold me that was exactly what he hoped would happen once thetribunal is formed so as to undermine Hizbullah’s oppositionrole. Former Prime Minister Omar Karami has suggested thatthe tribunal’s powers be expanded to include the murder ofhis brother, Rashid. If Rashid Karami’s death is included,then there is no end to the number of assassinations,massacres and killings that could end up before thetribunal.

UN officials, however, have said that the tribunal willlimit its work to the series of murders, attempted murdersand bombings that began in October 2004.

International tribunals are a relatively recent phenomenonin international law, a result of greater cooperation amongglobal powers after the polarization of the Cold War came toan end. The first since the Nuremburg and Tokyo tribunals in1945 and 1946 was the tribunal for the former Yugoslavia in1993. Since then numerous ad hoc tribunals have been formedto deal with international war crimes such as those forSierra Leone, Cambodia and Rwanda among others. Critics ofthese tribunals claim they are politically motivated and aform of victor’s justice. Certainly, there can be littledoubt that Lebanon’s tribunal owes its imminent existence tothe exigencies of United States policy toward Syria ratherthan an impartial attempt to discover and prosecute thekillers of Rafik Hariri and his companions.

Much of the ambiguity surrounding the Lebanese version isthat it is a hybrid of several other international tribunalsrather than a direct copy and will be treading new legalground. For example, the tribunals for the former Yugoslaviaand Rwanda were adopted under Chapter 7 from the beginning.There were no local judges sitting on the tribunal andinternational law was adopted for both. The tribunal forSierra Leone included a token local presence and was heldin-country although international law was adopted again. Themixed Lebanese International Tribunal will have equalparticipation of local and foreign judges and will sit underLebanese law (with the exception of the death penalty).Unlike its Sierra Leonean counterpart, however, the Lebanesetribunal will not sit in Lebanon.

Furthermore, the original intention was to establish thetribunal under a bilateral treaty between Beirut and theUnited Nations. The recourse to Chapter 7 only arose whenthe passage of the treaty through parliament became blocked.

Nicolas Michel, the UN’s top legal adviser, has suggestedthat even if the Security Council approves the tribunalunder Chapter 7, it will not be put together until the UNcommission concludes its investigation. That statement wasintended to reassure critics of a Chapter 7 tribunal, buttheoretically the tribunal can begin operating as soon as itis approved by the Security Council, a location chosen andthe judges selected. For example, the tribunal could begintrials of the four generals presently languishing withoutcharge in Roumieh prison. They were detained nearly twoyears ago on the advice of Detlev Mehlis, the then head ofthe UN investigation commission. While, their detention waslegally permissible, their indefinite incarceration withoutcharge nor arraignment in a court of law is not.

In normal circumstances, there should be no need for thetribunal to have recourse to the raft of coercive measuresat the disposal of the UN Security Council under Chapter 7.Indictments issued by the tribunal are legally binding underinternational law irrespective of Chapter 7.

However, Chapter 7 could be applied if any party refused tohand over individuals indicted by the tribunal. AlthoughArticle 42 of Chapter 7 permits the use of military force toimplement Security Council decisions, the UN could opt forthe softer measures contained in Article 41 such as economicsanctions and the severance of diplomatic relations. Even ifthe Security Council was unable to forge a consensus onusing military force, the indicted persons would be unableto travel internationally and could face a freeze of theirinternational assets. However, the down side is that thewhole legal process could grind to a halt, the prosecutionspending, until those indicted are turned over or handthemselves in.

Such is the case with Ratko Mladic and Radovan Karadzic whohave been under indictment by the tribunal for the formerYugoslavia since 1995. The Serbian authorities agreed toturn them over, but both men remain at large, apparently inSerbia, and their prosecution consequently pending.

Nicholas Blanford is a Beirut-based reporter and author of Killing Mr Lebanon: The Assassination of Rafik Hariri andits Impact on the Middle East.

 

May 1, 2007 0 comments
0 FacebookTwitterPinterestEmail
Comment

Region needs real journalism

by Fadi Chahine May 1, 2007
written by Fadi Chahine

Local and foreign observers across the MENA region are inconsensus that the region lacks a key ingredient to anythriving democracy: a pool of professional journalists. Thishas created a drought of oversight and accountability.

While the problem is known, there is hardly any evidenceit is being addressed. Even the institutions that one wouldturn to first, the region’s universities, have failed intheir task. The lack of journalistic standards in the regionhas allowed those universities and colleges that do offer adegree in journalism—which are few and far in between—tograduate students with little practical know how and writingskills based on the standards used in the developed world.

Whether the education was Arabic, English or French, theacademic training afforded to journalism students does notcome close to being equal to the education and trainingavailable in more developed countries, which means that mostof these colleges graduate wannabe journalists.

Governments of the region are keen to maintain theirofficial news agencies, and some of these agencies havestaff sizes rivaling those of international wire services.However, the state influence over the media has been drivenby a desire to control and is a huge obstacle to thedevelopment of journalism as democratic regulative or fourthestate. The dominant culture of unquestioning submission tothe state and any kind of institutional authorityexacerbates the problem. From Lebanon to Sudan, politicalaccountability and scrutiny is nil in the region.

In most countries, governments have either neglected ordeliberately avoided creating training programs to improvethe ability of Middle Eastern and North African journaliststo report effectively about politics, business and economicsand increase understanding among Arab populations of theseissues. Press associations and journalist unions also havenot delivered impulses that would stimulate the creation ofa press corps deserving of the name.

Finally, by not doing enough to nurture young journalistsand reward them for thorough inquisitive reporting anddisclosure of political, social, or corporate wrongdoings,media owners and publishing companies share part of theblame for the absence of a professional press corps. Thus,today very few journalists take a serious stand on issuesrelated to the welfare of the public and maybe one in athousand journalists makes an attempt to hold governments orgovernment officials accountable for their misdoings.

A good number of the region’s journalists find it hard toseparate being responsive from caving, being accountablefrom being a tool, being sensitive from being weak.Journalists are meant to be, by definition, eager forinvestigations of government misconduct. That is supposed tobe their purpose, embedded in their DNA.

A recent study conducted by the Amman-based Higher MediaCouncil (HMC) on the training requirements for members ofthe media showed that journalists lacked the most basicskills of the craft, including proper training for writingand editing skills, use of languages, computers and theInternet.

The study revealed that 35% of media practitioners havenever been involved in any training courses, while only22.7% of those working in the sector have a degree injournalism. Most writers have less than 10 years ofexperience.

In recent years, media institutions like Al Jazeera andinternational news organizations like Reuters, as well asNGOs such as the International Journalism Institute havemade efforts to offer workshops and training programs forpractitioners of journalism in the Middle East. Journalismprograms at some universities receive token support from theUN or have linked up with international programs. But goodas they may be, these efforts are not enough to create apool of journalists who are ready and primed to tackle thebig issues facing the region’s countries.

To start doing this, the Middle East needs a trainingenvironment where centers in all major cities provide thosewho want a career in journalism the understanding of therequired knowledge and skills. This training environmentwill only succeed if it is centered on building journalisticskills that are rooted in practice and suited to addressingthe challenges which working writers face daily in theirwork. It must also empower journalists in building a newjournalistic culture that serves the larger needs of theMENA region.

It is now more than ever that we need new writers, editorsand readers to step forward and speak up. Journalism in theMENA region is calling and good journalists to representpeople who do not have a voice in society. The press mustgive voice not only to those in power, but also to those whoare not being heard.

We need more active inclusion of journalists in continuousmonitoring of governments work, further understanding offree access to information and conflict of interest conceptsand better integration of legal frameworks in journalisticpractice. If we are able to achieve this in the MENA regionthen there is a chance that the media can be triumphant.

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

 

May 1, 2007 0 comments
0 FacebookTwitterPinterestEmail
Comment

The Blonde on the Billboard

by Rana Hanna May 1, 2007
written by Rana Hanna

You must have seen her. She’s blonde, fair andclear-skinned, blue-eyed with a perfect pout and an evenmore perfect nose. She’s staring at you frompractically every billboard in Beirut and urging you to takeout a “Plastic Surgery Loan” from First National Bank, sothat you too can look perfect.

Going under the knife to give you that edge—personally orprofessionally—is no longer a taboo. Beauty is no longergenetic luck. It has become attainable and affordable, andFirst National Bank have just made it even easier to getthere.

In fact they’ve made it very easy. As long as you earnover $600 a month and can afford to pay it back within 24months (with 6% interest), the patient-to-be can borrow upto $5,000 within 48 hours, with no down-payment required.You can have any procedure you want, from laser eye surgeryto orthodontics via laser hair removal and botox. Hate thatgut? Get rid of it!

The ad itself, part of a bigger brand awareness campaign, issomething of a marketing coup and has the whole towntalking. Among the hundred or so daily calls that the bankhas been receiving since the launch of the campaign, areinquiries from CNN and the BBC, who, like everyone else,noticed the blonde on the billboard and decided it was aquirky story.

While many who believe that we should not tamper with whatHe gave us, or feel that as a society we are heading toShallowsville, it would not be fair to accuse First Nationalof exploiting vanity—buying a car is also a style statement.It is merely responding to a demand that reflects the needsof a population that places high value on looking its best.Each year the Lebanese spend a fortune on cosmeticprocedures and First National expects to approve hundreds ofloans. And it’s not only the women. Over a third of thecalls that the bank has received have been from men.

According to FNB, the product is not new and had been indevelopment since 2004 and was scheduled to launch on 28July 2006. The project was delayed because of the summer warbut after the guns fell silent, the bank noticed that demandhad not diminished; quite the contrary, it increased.

It transpired that the war had proved the perfect window fora quick surgical procedure. Social events were kept to aminimum—a combination of decorum and danger had seen tothat—and so there was ample time to recover from a minorprocedure. Others had more pressing needs, especially thoseinjured during the war—burns and facial disfigurement andthe like—and who could not pay for a procedure without aloan and FNB have gone to some lengths to explain this.

Still there is the billboard picture of the perfect blondestaring at me telling me that I can now get the makeover ofmy dreams and live the life I’ve always wanted.

It’s nice to be a looker but is it a factor in success? Wellapparently yes. Many studies have shown a positivecorrelation between beauty and professional success, bettermarketability, better positions in the workplace, highersalaries and even stronger political prospects (baldleaders, for example, are perceived as lacking in that finaldollop of charisma).

In Lebanon, plastic surgery is available on every streetcorner, it is relatively affordable and the doctors areexcellent. And with the country so depressed at the moment,it’s probably a good idea to give yourself a littlesomething to feel good about. The Lebanese have proved, onceagain, to be above all hardship. The trophy wife mantra usedto be “when the going gets tough, the tough go shopping.” Inour case, when the going gets tough, we sign up forRhinoplasty.

RANA HANNA admits to having had plastic surgery

May 1, 2007 0 comments
0 FacebookTwitterPinterestEmail
Lebanon

Retailors join forces

by Executive Staff April 12, 2007
written by Executive Staff

Major Lebanese businesses, such as Aïshti, Bank Audi, ABC, Patchi, MEA, BankMed, InterContinental Phoenicia, Virgin Megastore, Global Refund and CityMall have joined forces in a new campaign dubbed “Bhebak Bil Rabih,” (I Love You in Spring.) Promoting Lebanon as a tourist and shopping destination in a conference held on March 1, business owners highlighted the activities planned, including fashion shows, festivals, prizes, car giveaways and more. Participants took, however, a stern stance against both the Lebanese government and politicians, who were taxed with irresponsibility for their failure to solve the ongoing political deadlock paralyzing the BCD (Beirut central district) since the beginning of December. 

“In this year alone, we have witnessed a 70% drop in activity. We’re currently trying to compile loss estimates, while our lawyers study different options, including a possible lawsuit,” said Tony Salameh, chairman of the Aïshti department stores. “A committee mainly responsible for looking into rental, electricity and tax expenses with a possible waiver of companies’ payments will be also formed.”

Michel Ferneyni, owner of La Posta, said Lebanon’s political situation presented an unfathomable paradox that started first with the “ongoing dialogue” resulting in the closure of the BCD, followed by “pacific demonstrations,” which crippled the country’s economy. According to participants, to date, over 80 companies have closed down, most of them permanently. Rumors also circulated about the Habtoor Hotel being put up for sale.

Paul Ariss, president of the Syndicate of Restaurant Owners, who met recently with leaders from all political factions, announced that the prime minister’s office had formed a committee, including representatives from the economy, tourism and finance ministries as well as leaders of industry associations to look into possible solutions. In addition, he asked the government to subsidize no interest, medium and long-term loans for existing businesses.

“The greatest damage done is not merely to Lebanon’s economy, but to its image as well, as the people are increasingly losing faith in their country,” concluded Ferneyni. “Many employees, even those with a secure job in Lebanon, are opting for a career abroad, and will never be coming back.” 

April 12, 2007 0 comments
0 FacebookTwitterPinterestEmail
Lebanon

Radio Orient goes global

by Executive Staff April 12, 2007
written by Executive Staff

Radio Orient, aka Izaat Al Shark, has become the first Arabic language radio station broadcasting worldwide. In its January issue, Forbes included the station, which is owned by Future TV, as number 17 on its list of the top 40 brands in Middle East. This month, in order to take advantage of its new global reach and maximize its coverage, the station is revamping its grid of programs, bolstered by three major shows as well as a prime entertainment program called “With a Stars.”

Available all over the MENA region through its internet and satellite networks, the radio station is using local channels to retransmit its programs. “In some countries they’re even retransmitted in full,” said Elie Rahme, manager of Radio Orient in Lebanon. The program grid has been modified to take advantage of its new global coverage, including the morning show (airing during peak drive time in Australia), the afternoon show (broadcast in the morning in the US), and the night show. The program “With a Star” features a different Arab star every week, with giveaway prizes that have participants calling in from the all over the world.

Although Rahme did not reveal international market penetration figures, he stated that the international audience participation to the station’s various programs is substantial. “The fact that people call from the United States, Iraq, Australia or Africa provides us with a clear idea of the station’s global reach,” he explained. 

Radio Orient is supported by a staff of 17 employees based in Lebanon, with the sound operators and editors shared with Future TV. The joint features of the TV and radio stations explain the unified overall marketing approach, however, it should be pointed out that they do not share advertisement booking deals. “People advertising with Future TV will not necessarily use our radio network, because each medium achieves a different type of exposure,” explained Fayez Bizri, Future TV’s financial manager.

According to Bizri, Radio Orient complements Future TV’s network by reaching beyond the traditional televised medium. “Whether they’re at work or driving in their cars, most people have access to a radio. This exposure will likely increase in countries where driving distances are longer,” says Bizri.

When asked about the cost of the worldwide reach of Radio Orient, Bizri did not disclose any figures, saying, “It is difficult to tabulate leasing, licensing and marketing expenses involved in the process.” He did state, however, that the most advanced technology had been used to place the radio station on the satellite system.

Further bolstering Radio Orient’s appeal is the growth of Future TV’s network. “The TV station expansion plan includes the addition of a 24-hour news channel – scheduled to air in April or June – which will definitely benefit Radio Orient by providing up-to-the-minute reporting,” said Rahme.

During April, Future TV will witness another major overhaul besides its new expansion plan and program grid, when current Chairman Nadim Munla will be replaced by BankMed executive, Samir Hammoud.

April 12, 2007 0 comments
0 FacebookTwitterPinterestEmail
Financial Indicators

Global economic data

by Executive Staff April 12, 2007
written by Executive Staff

Obesity

Percentage of population aged 15 and above with a MBI greater than 30, 2003 or latest available year

Source: OECD

More than 50% of adults are now defined as either being overweight or obese in no less than 10 OECD countries: the United States, Mexico, the United Kingdom, Australia, the Slovak Republic, Greece, New Zealand, Hungary, Luxembourg and the Czech Republic. By comparison, overweight and obesity rates are much lower in the OECD’s two Asian countries (Japan and Korea) and in some European countries (France and Switzerland), although overweight and obesity rates are also increasing in these countries. Focusing only on obesity, the prevalence of obesity among adults varies from a low of 3% in Japan and Korea to a high of 31% in the United States.

Based on consistent measures of obesity over time, the rate of obesity has more than doubled over the past twenty years in the United States, while it has almost tripled in Australia and more than tripled in the United Kingdom. The obesity rate in many Western European countries has also increased substantially over the past decade.

Gender differences are striking. Over all countries, more men are overweight than women, but in just over half of OECD countries, more women are obese than men. Taking overweight and obesity together, the rate for women exceeds that for men in only two countries—Mexico and Turkey.

Forest

Forest and other wooded land

As a percentage of land area, latest available year

Source: OECD

The percentage of land covered by forest and other wooded land varies widely from country to country: from shares of over 60% in Finland, Sweden, Japan and Korea to 10% or less in the United Kingdom, the Netherlands, Ireland and Iceland.

Long time series are required to capture changes in forest areas. Increases are generally due to active government policies of land afforestation while decreases may be caused by fires, clear-felling of forests without replanting, and conversion of forest land to residential, agricultural and other uses.

The area of forests and wooded land has remained stable or has slightly increased at national level in most OECD countries and has remained stable in the OECD as a whole. However, forest areas have been decreasing at the world level due in part to continued deforestation in tropical countries.

Tsunami aid

DAC member country responses to the tsunami disaster

Millions of US dollars

Source: OECD

The unprecedented humanitarian response to the Indian Ocean tsunami prompted governments, international organizations, private individuals, charities and companies to pledge $13.6 billion to the affected countries. Of that, $5.3 billion was from OECD member governments, and a further amount from private citizens in OECD countries.

Donor governments and the European Commission have committed $1.7 billion to emergency aid and $1.9 billion to longer-term reconstruction projects, to be spent by 2009. More than 90% of the emergency aid—nearly $1.6 billion—was spent in the nine months immediately following the disaster. For reconstruction, $473 million has been spent, leaving $1.4 billion committed and in the pipeline for spending over the coming years.

Together, Indonesia and Sri Lanka have received more than 60% of the funds committed so far.

Government debt

General government gross financial liabilities

As a percentage of GDP

Source: OECD

From 1990 to 1996, government gross financial liabilities were rising in most countries. Since then, government debt has been decreasing as a percentage of GDP in many of the 27 countries in the table. There are, however, exceptions: government debt ratios continued to increase particularly fast in Japan and Korea and significantly in France, Germany and Greece. Korea’s government debt ratio rose by over 7% per year from 1990 to 2003, but this is measured from a very low initial rate and by 2003, Korea’s government debt ratio was still among the lowest in the OECD.

In 2004, government debt ratios exceeded 100% in Greece, Italy and Japan and was close to 100% in Belgium. Most countries were in a band between 40% and 70%, with three countries reporting debt ratios of under 20%—Luxembourg, Korea and Australia.

April 12, 2007 0 comments
0 FacebookTwitterPinterestEmail
Financial Indicators

Regional equity markets

by Executive Staff April 12, 2007
written by Executive Staff

Beirut SE: Blom  (1 month)

Current Year High: 1,625.45  Current Year Low: 1,168.36

Between Feb. 28 and March 16, the BSE saw a spike in hope, as much as spikes go in a coma. The index moved from a year low of 1,168.36 points in late February to 1,248 points on March 16, basically driven up by talks between the opposing sides in the Lebanese political quagmire. As the voices announcing impending solutions faded, so did the traders’ enthusiasm and the third week pushed the BSI lower, to 1,224.19 points on March 26. Research, which Dubai-based investment bank Shuaa conducted on Audi Saradar banking group and concluded with a Neutral recommendation, led Audi to shoot back and claim that the fair value of its stock is significantly better than the $61.09 calculated by Shuaa. Audi shares closed at $63 on Mar 26.

Amman SE  (1 month)

Current Year High: 7,407.15  Current Year Low: 5,267.27

The Amman Stock Exchange moved sideways in a range above 6,200 points to close at 6,219.51 points on Mar 26. Arab Bank made headlines, beginning with having to deny a story in a US newspaper that warmed up allegations from a lawsuit that the bank had been used to finance “terrorism.” Later in March, the bank said it halted negotiations on a share sale to a strategic investor thought to be Emaar Properties, and the Jordanian government was said to be increasing its shareholding in Arab Bank in order to keep the Hariri family shareholders from buying up a controlling stake. The stock saw some lively trading in March, with a downward drift. Real estate firm Taameer Jordan was one of the main volume movers toward the end of March. Its share price regained in the second half of the month what it had given in the first half.    

Abu Dhabi SM  (1 month)

Current Year High: 4,648.80  Current Year Low: 2,899.43

The Abu Dhabi Securities Market could not sustain the gains it had made in late February when it clawed its way above 3,000 points. The index dropped by 4% between March 1 and its close of 2,939 on March 25. At the end of the month, property and energy stocks were on the sunny side of the ADSM while banking values were selling. National Bank of Abu Dhabi, which issued 40% cash dividend and 30% bonus shares on March 22, traded down by 11% in the week between March 19-26. Banking news from neighboring Dubai with its impending merger between Emirates Bank and National Bank of Dubai mean the NBAD will, upon completion of the merger, lose its claim to being the biggest bank in the UAE.

Dubai FM  (1 month)

Current Year High: 6,987.91  Current Year Low: 3,675.93

The DFM had a bad month in March, as its index weakened by almost 13% to a new year low of 3,675.93 points on March 25, from 4,207.51 points on Feb. 25. The DFM’s own shares started trading. Emaar, which pleased some analysts with a lower than expected dividend of 20% but disappointed stock owners with the move, traded down and was pushed even to a 12-month low of AED 10.60 on March 25 after Dubai Holding said it will acquire 28% in Emaar through a land-for-shares deal. Shuaa Capital bought back 3 million shares and the stock jumped 10.8% on a single day with high trading volume before sliding again.

Kuwait SE  (1 month)

Current Year High: 10,812.30            Current Year Low: 9,164.30

The Kuwait Stock Exchange had a period of growth as its index strengthened by almost 6% to 10,341.3 points on March 26 from 9,769.2 points on Feb. 27. Telecommunications events supplied major influences on the KSE. In the beginning of the month, the share price of Kipco got a boost from the company’s extraordinary profit from selling shares in Kuwaiti mobile operator Wataniya to Qatar’s Qtel. Shares of MTC, the leading telco in Kuwait, advanced 15% to KWD 3.20 on Mar 26, from KWD 2.79 on Feb. 28. At the end of March, MTC emerged as highest bidder in the contest for Saudi Arabia’s third mobile phone license.

Saudi Arabia SE  (1 month)

Current Year High: 17,730.96            Current Year Low: 6,916.85

The Saudi Stock Exchange ended a month of modest gains and sideways movements with a splash of cold water. The TASI lost 522 points, or just over 6%, on March 26 in its worst one-day drop since falling 6.3% on July 19 of last year. Sell-offs on March 26 included blue chip companies and leading banks such as Sabic, Al Rajhi Bank, SEC, and the two telcos. For the month, the market moved from 8,356.48 points on Feb. 27 to 8,098.36 points on the evening of March 26. Insurance industry IPOs came in a bundle of five simultaneous subscription offerings worth combined SAR 266 million. The Saudi government created a new $320 million company to operate the SSE, with a long-term view of taking the bourse public. 

Muscat SM  (1 month)

Current Year High: 5,956.46  Current Year Low: 4,657.16

After a slide in February to 5,781.1 points on Feb 26, the Muscat Securities Market went down by 216.73 points, or 3.7%, between Feb. 26 and March 14 before regaining some ground to close at 5616.24 on March 26. The sultanate’s primary market raised new expectations as four companies announced IPO plans. Besides engineering firm Galfar’s OMR 60 million flotation, Oman Merchant Bank and government-owned investment firm Takamul (in May) and Oman Oil Marketing Company are the IPO candidates for 2007. Additionally, Al Omaniya Financial Services will float a two-year OMR 8 million convertible bond.

Bahrain SE  (1 month)

Current Year High: 2,251.15  Current Year Low: 1,996.68

The Bahrain Stock Exchange closed at 2,130.71 points on March 26, down by 0.6% when compared with its level on Feb. 27. The index had dipped lower in the middle of the month but things appeared uneventful and volumes were once again low. Esterad Investment Company moved up 12% in the second half of March and Nass Corp saw some volume toward the end of the month. Mobile phone operator Batelco announced the purchase of 20% in Yemeni network SabaFon for $144 million.

Doha SM: Qatar  (1 month)

Current Year High: 9,878.10  Current Year Low: 5,825.80

The downward movement of the Doha Securities Market slowed but did not cease and the DSM index slipped 3.5% to 6,060.16 points on March 26 from 6,277.1 points on Feb. 27. This performance put the DSM again as the GCC’s largest underperformer for the year-to-date with a drop of 15% since Jan. 1. After dividend events, banking stocks such as Ahli and Commercialbank paced the market’s downward trend in the later part of the month. Qtel, which initiated the purchase of 51% in Kuwait’s Wataniya telecom, stabilized toward the end of the month. Nakilat continued its rise that started in February and gained 18% in March. DSM market authorities suspended a brokerage for one month for violating regulations.

Tunis SE  (1 month)

Current Year High: 2,712.33  Current Year Low: 1,861.15

The Tunisian Stock Exchange in March traded sideways on a high plateau and the Tunindex closed at 2,610.14 points on March 26, about 100 points below its year high from Feb. 9. Tunis International Bank participated as lenders in a 55 million euros project finance facility for a new residential project in Libya, the first such finance arrangement in Libya’s real estate sector.

Casablanca SE All Shares  (1 month)

Current Year High: 11,552.97            Current Year Low: 6,563.27

The Moroccan exchange broke through the 11,000 points line in early March and scaled further index gains to close at 11,478.87 points on March 26 in continuation of its rise which brought its gain for the year to date to a tidy 21%. Morocco’s central bank said it expects commercial banks in the country to be compliant with Basel II rules by this summer. With ongoing reforms, the central bank also hinted that a loosening of restrictions on investing in foreign bourses might be on the books, which might take steam out of the Casablanca Exchange and its extended rally.

Cairo SE: Hermes  (1 month)

Current Year High: 65,135.08            Current Year Low: 41,965.37

The Cairo and Alexandria Stock Exchanges entered the month with a week of downward motion to the 61,000 points level but the index moved back up and closed at 63,859.80 points on March 26. While Telecom Egypt shares made some gains in late March on news of higher 2006 results and a very faint outlook of a secondary 20% flotation in a few years’ time, Orascom Telecom Holding received three regulatory decisions against its MobiNil affiliate and got disqualified from bidding for the third Saudi mobile license, with rumors going wild on the reasons. Al-Watany Bank found several suitors interested in buying a strategic stake. Emaar Properties subsidiary Emaar Misr said it would file a complaint over a CASE decision refusing to list its shares.  

April 12, 2007 0 comments
0 FacebookTwitterPinterestEmail
InsuranceSpecial Report

Islamic Insurance: The concept

by Jihad Feitrouni April 12, 2007
written by Jihad Feitrouni

People have used insurance in the past to protect against impact of damages and risks.

In the absence of the social insurance, which Islamic countries shoulder to counter the effect and impact of damage to a nation and its assets, and as the majority of countries relinquished their responsibilities in reinforcing cooperation between their people, there grew the need to look for an alternative that guarantees to protect against damage and loss. This alternative is insurance companies operating in Islamic countries, similar to those commercial insurance companies operating in western countries.

Since the nature of transactions practiced within non-Islamic commercial insurance companies do not comply with provisions of Islamic shariah (and often insure establishments and companies that practice types of business not in compliance with shariah provisions), it became essential to look for an Islamic alternative, one that adopted cooperative insurance principles in its business transactions. Islamic insurance is known as “a collective insurance contract” by virtue of the fact that every contributor pays a specific amount of money as a donation for the purpose of indemnifying other contributions on the basis of solidarity and takaful.

Insurance operations are managed by a specialized company on basis of proxy wakala against a pre-determined charge. The subject of the contract is the commitment by all those insured to bear the risk sustained by another contributor. Thus, it is a contractual relationship based on solidarity and takaful to spread risk.

The role of insurance companies in the Islamic insurance system is to manage insurance operations by way of underwriting and execution since this is beyond the policy holder’s capabilities due to the large number of contributors. The company enters into agreement with the contributors by which it collects insurance premiums and pays incurred indemnity to those who have sustained damages in accordance with the regulations, principles and criteria dedicated for the purpose, in addition to all other operations which are required within the insurance industry. All these duties are performed in its capacity as a proxy wakeel against a predetermined charge. The company promises, in the name, and interest of the contributors, to either indemnify against a great portion of damages and losses sustained or indemnify it totally.

As for insurance premiums which are collected from contributors, it is usually enough to cover operational costs, pay incurred indemnity amounts or allot to all types of technical reserve amounts.

For the purpose of determining the amount of insurance premiums, formal statistical principles are applied for each type of cover. Should the premiums not be enough to meet the liabilities, the deficit will be covered by the shareholders on the basis of al qardh al hasan or  “Good Loan,” and if the company has a reserve balance as a result of insurance premiums profit surplus, the deficit then will be met by that surplus.

Jihad Feitrouni is the general manager of Dubai Islamic Insurance & Reinsurance

April 12, 2007 0 comments
0 FacebookTwitterPinterestEmail
InsuranceSpecial Report

Region’s insurance market has ups and downs

by Executive Staff April 12, 2007
written by Executive Staff

The insurance industry in the Middle East has been sitting on the launch pad of great expectations for a very long time. Regulatory changes and the growth of Islamic insurance services are central to suppositions that more customers will flock to insurance around the region. In terms of geography, the main carriers of promise are Saudi Arabia and Syria: two severely underinsured countries which both last year implemented legislation opening significant new spaces for insurance providers.

Saudi Arabia is currently buzzing with an insurance gruenderzeit, at least as far as its stock market. All seven companies that staged initial public offerings in the first quarter of 2007 on the Tadawul bourse were insurers, and they offered $162.3 million worth of shares to Saudi subscribers.

The largest of the seven IPOs was that of Medgulf Insurance, the biggest provider in the kingdom after NCCI, the former monopoly provider that pioneered the move of insurance companies to the Saudi stock market when the state-owned company was privatized to 70% through an IPO. Medgulf, which had previously operated in Saudi Arabia through a Bahraini offshore unit, offered 25% of its shares for $53.3 million in late February. Other shareholders in Medgulf Saudi are the companies of the Medgulf Group from Bahrain and Lebanon (together 35%), Saudi Investment Bank (19%), and 21 other investors, most of them Saudi individuals, who hold between 1% and 2% each.   

Medgulf’s late February IPO was preceded by that of Malath Cooperative Insurance and Reinsurance, which offered shares to investors in a $38 million IPO in early February. By taking 47.5% of its capital to market, Malath conducted the largest IPO in the first quarter of 2007 in terms of percentage offered and was the first of 13 insurance providers to fulfill a mandate to take part of their capital public as one of the conditions under which the 13 firms received licenses from Saudi authorities in 2006.

Saudi market looking bright

In March, the Capital Market Authority in Riyadh directed five insurers to undertake simultaneous initial public offerings at the standard share price of SR10 ($2.7) set by the CMA. Subscription to the stocks was open from March 17 to March 26, and the companies offered shares worth a total of just under $71 million.

The five firms that conducted subscription in March were relatively small, offering between $8.3 million and $21.4 million in shares representing between 31% and 40% of their respective capitals for subscription periods that ended on March 26. The companies coming to market are SABB Takaful, and cooperative insurance companies Saudi United, Saudi IAIC, Saudi Fransi and Arabian Shield.

Subscription rates for the five March IPOs were not yet announced when Executive went to print. But the two earlier IPOs got the warm welcome of high demand for their share offerings. Malath reported subscription coverage of 499%, worth $189.4 million. Medgulf reported that its offer attracted subscription requests from 1.4 million persons and demand for shares reached $209 million, or a 400% subscription rate.

The high subscription rates to the two offerings may be indicative that the rulings of Islamic scholars in support of mutual insurance are having more influence than opposing views circulating in Saudi Arabia, which still maintain that all insurance is a game of chance, and thus objectionable under the ban against activities that entail elements of uncertainty and gambling, as well as taking interest from investment portfolios.

While the oversubscription figures signal that the Saudi retail investors regard insurance companies as primary market opportunities that are acceptable under the investors’ religious standards, one cannot easily surmise that the financial attractiveness of insurance IPOs with CMA-mandated issue pricing is a guarantee for the companies’ success in either the retail insurance market or on the bourse.

According to estimates quoted frequently in discussions on the Saudi insurance market, the insurance sector is estimated to value about $2 billion and to have a potential to grow to $4 to $6 billion over the next five-to-ten years (without much adjustment of these estimates in the past two years). This is a minute percentage of the country’s economy, especially when considering that GDP increased to $347.4 million in 2006 and per capita GDP (measured in purchasing power parity) has been growing at rates of more than 5% in 2006 and is expected to grow by another 5% in 2007.

The reasons for optimism on Saudi insurance sector performance in the coming years arise concretely from motor and health insurance requirements, which have become mandatory, and, in general terms, from the kingdom’s economic development and its population growth. There is little evidence to suggest that optimism on the growth of insurance awareness among retail customers and in media, or on vast expansion of insurance sector expertise and human capital, has a strong base. 

While the creation of an insurance sector is seen as an important addition to the financial industry and equity markets of Saudi Arabia, it also seems unlikely that the sector’s arrival will provide a large short-term contribution to widening the institutional investment market or set new milestones in corporate governance. Examples of insurance sectors in other GCC markets over the past few years show them as holding significantly less importance than most other sectors which financial analysts track through sector indices.  

Syrian market grows, too

Just as regulatory forces have been setting the pace for insurance development in Saudi Arabia, authorities in Syria have been infusing a spark of opportunity into their country’s outlook for creating a sustainable insurance industry.  Since last year, insurance firms have received license approvals and started setting up shop in Damascus.

In March, Noor Takaful, a shariah-compliant insurer in Syria whose founding partners include a Kuwaiti-Pakistani insurance joint venture and Jordanian companies, said it would complete a public offering for $15.03 million, or 50.1% of its capital before the end of last month. Similarly, Kuwait-affiliated Syrian insurance company Al Aqeelah Takaful told Executive that it plans an $18.74 million offering for 51% of its capital before the end of spring. Managers at Noor and Al Aqeelah said the firms intend to start operations in April and August, respectively.

The lust for public offerings of financial companies in Syria rests on the foundation of heightened readiness by Syrian authorities to issues operator licenses to insurance providers and is nurtured by tax incentives, which offer firms a 10 percentage point lower tax bracket if they solicit capital participation from the public.

Lebanese insurance firms have been participating in prying open the Syrian market. Arope, a member of the Blom Bank Group, started operations in Damascus in July of last year. While it is too early to look at results of the venture, said Fateh Bekdache, Arope’s general manager in Lebanon, the experience of building something where no private sector insurance existed previously is intriguing. “The start is bumpy,” he said, “simply because it is a new law and a new sector. But it is extremely interesting to start something.”

Like BSO Bank, the Syrian bank linked to the Blom Group, Arope Syria chose to undertake a public offering that brought it tax benefits, which Bekdache cited at a rate of 15% of local taxes instead of 25% of local taxes for companies that prefer a private ownership structure without public offering.

Adir, the insurance daughter of Byblos Bank Group and France’s Assurances Banque Populaire, opted for private ownership in its Syrian venture, which last month received a preliminary license from Syrian authorities and expects to be up and running within six months.

According to Jean Hleiss, Adir’s assistant general manager, the new company will start operating with a $25 million capital and offer general and life insurance products in Syria under the name Adonis Insurance Syria.

Although the Syrian insurance market has been a favorite topic of expansion dreams among Lebanese insurance companies for years, the difficult situation of the Lebanese economy and its repercussions on the insurance sector seem to have somewhat stifled the eagerness for going cross-border. Bank-affiliated firms like Arope and Adir appear to have advantages in venturing east because they are part of groups with deep pockets and have greater access to working capital than standalone operators.

Additionally, having a bank in Syria enhances efficiencies, because the Syrian Insurance Supervisory Commission and the central bank gave “full approval to run insurance operations in the branches of banks,” Bekdache said. Thus, in addition to its head office in Damascus and an office in Aleppo, Arope Syria can base employees in the branch network of BSO and sell its insurance products there.

Lebanon not a fertile growth area

Meanwhile, in Lebanon, insurance growth prospects are faint, at least in the short run. The sector did not take direct hits during the war in July and August of 2006, said Max Zaccar, chairman of Commercial Insurance. “The Lebanese insurance sector was not affected negatively by the war, in terms of premium income,” Zaccar told Executive, adding that marine and transport insurance lines saw small growth in premiums because of greater insurance needs in the summer, and that payment morale among insurance clients actually improved.

Despite the war and political troubles at the end of the year, 2006 was better for Lebanon’s insurers than 2005, added Bekdache. He attributed last year’s satisfactory performance to very good business in the first half and a few good months immediately after the end of the Israeli war.

But for 2007, things are a lot murkier. The main problem is that Lebanese businesses are not making new decisions, because they are waiting for political progress to materialize. Under the circumstances, which include cash flow problems in many companies and private households, “the insurance sector has no new business and companies are fighting over what is there, competing with reduced prices to take slices of business from one another,” Zaccar said.

He added that local insurers also continue to be in a clinch with the Ministry of Economy, over the ministry’s plan to legally mandate insurers to structure companies separately for life and general business, and meet $10 million capital requirements that would only make sense with much more substantial premium incomes than the providers can muster in Lebanon’s $600 million premiums-strong market.   

GCC feeling the pinch

GCC insurance companies felt pressure in 2006, mostly from the downturn in returns for their investment portfolios. As many of the sector companies are highly capitalized and have concentrated on their investment portfolios for the good profits they had in 2005, shifting focus to increase underwriting income quickly does not seem to be an easy path, given that the maturing of regional insurance markets has been following the mantra of the snail, despite all sector talk about rapidly growing insurance industries in countries such as Bahrain and Qatar.

Islamic insurance products will add to the widening of the market, but also in this segment, hype over fast gains and limitless potentials has not been substantiated by the equivalent growth of underwriting activities. In Oman, for example, insurance penetration—the ratio of insurance premiums to GDP—has remained below 1% and the share of life insurance has stagnated below 15% of all premiums, according to a study by BankMuscat.

In all GCC markets, most of the underwriting, moreover, is concentrated in motor and health insurance, exactly the two coverage areas which have more risk and less reward to offer than most other insurance activities. Takaful family and takaful life products, which assist households in creating wealth, may provide a way into greater presence of the benefits that responsible insurance offers to a country, but even by one optimistic scenario for Saudi takaful life insurance growth, premiums would pass the $1 billion mark only by 2015.

The founding wave of new insurance companies thus seems to be the most positive development in regional insurance affairs for the time being. Add to this that multinational insurance firms have shown interest in the market and that a player like Allianz—the world’s number two in the insurance sector—has taken a license to establish a takaful unit in Bahrain. Lebanon also just might harvest some further gains from the interest of multinational players, as the local affiliate of a big international firm is rumored to be in negotiations to buy another firm with several branches in the Middle East, in order to broaden the multinational’s access to the region’s markets.

April 12, 2007 0 comments
0 FacebookTwitterPinterestEmail
Banking & Finance

Money Matters by BLOMINVEST Bank

by Executive Staff April 12, 2007
written by Executive Staff

Regional stock market indices

Regional currency rates

ARAMEX launches 30,000 square foot one-stop shop at Heathrow

Dubai-listed transportation and logistics solutions provider ARAMEX announced the merger of three of its European companies into one 30,000 square foot one-stop-shop at Heathrowairport, outside London. As such, upon the acquisition of UK-based Priority Airfreight and Dublin-based TwoWay Vanguard, ARAMEX unified these two companies with its Heathrow operations at ARAMEX House, its new premises in Heathrow. ARAMEX reported net profits of AED95.2 million ($26 million), up 28% year-on-year.

Al Baraka posts 20% increase in net profits to $123.7 million

Al Baraka Banking Group (ABG), an international Bahraini-based Islamic Bank, recorded net profits of $123.7 million, up 20% from $102.9 million in 2005. The bank’s total assets were at $7.6 billion, up 21% for the same period, while costumer deposits rose 15.3% to $6.2 billion. ABG underwent an initial public offering in June 2006, leading to a 73% increase in shareholder’s equity to $978.6 million. ABG recently signed a memorandum of understanding with the Arab Trade Finance Program (ATFP), thus becoming the program’s eleventh national agency. ATFP will thus provide credit facilities through a line of credit opened at ABG.

Country profile: Egypt

International rating agency Moody’s Investors Service released its latest report on Egypt affirming Egypt’s government bond ratings at Baa3 with a negative outlook in local currency, and Ba1 with a stable outlook for foreign currency bonds. The report stated that Egypt has been experiencing upturns in growth since 2004, mainly boosted by a rise in international oil prices, a strong tourism sector and strong export performance. Moody’s estimates Egypt’s GDP real growth rate at 6.9% in 2006, up from 4.6% in 2005, and forecasts real growth rates of 6.0% and 5.5% in 2007 and 2008 respectively. Moody’s notes that Egypt’s fiscal deficit declined in 2006 for the first time in five years. The reforms introduced since 2004 are starting to materialize as tariffs and taxes are being reduced and privatization is being revived. Moody’s also stated that despite a manageable external debt burden and an important geostrategic position, the government’s weak fiscal position and fast-growing population are the main credit challenges facing the Egyptian government.

April 12, 2007 0 comments
0 FacebookTwitterPinterestEmail
  • 1
  • …
  • 586
  • 587
  • 588
  • 589
  • 590
  • …
  • 696

Latest Cover

About us

Since its first edition emerged on the newsstands in 1999, Executive Magazine has been dedicated to providing its readers with the most up-to-date local and regional business news. Executive is a monthly business magazine that offers readers in-depth analyses on the Lebanese world of commerce, covering all the major sectors – from banking, finance, and insurance to technology, tourism, hospitality, media, and retail.

  • Donate
  • Our Purpose
  • Contact Us

Sign up for our newsletter

    • Facebook
    • Twitter
    • Instagram
    • Linkedin
    • Youtube
    Executive Magazine
    • ISSUES
      • Current Issue
      • Past issues
    • BUSINESS
    • ECONOMICS & POLICY
    • OPINION
    • SPECIAL REPORTS
    • EXECUTIVE TALKS
    • MOVEMENTS
      • Change the image
      • Cannes lions
      • Transparency & accountability
      • ECONOMIC ROADMAP
      • Say No to Corruption
      • The Lebanon media development initiative
      • LPSN Policy Asks
      • Advocating the preservation of deposits
    • JOIN US
      • Join our movement
      • Attend our events
      • Receive updates
      • Connect with us
    • DONATE