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Capitalist Culture

The battle for downtown: Solidere symbolizes much

by Michael Young April 1, 2007
written by Michael Young

Little has excited the Lebanese in recent months, thoughmuch has contributed to their anxiety. However, it was onenews item in February that seemed to hit public moralehardest. From an initial figure of around 250 establishmentsin the downtown area, we learned that around 80 had closeddue to the ongoing sit-in by opposition supporters. A 30%closure rate in three months is ominous by any standard.

A few years ago, I was chatting with the late SamirKassir, when he remarked about an odd habit he had noticedin the Solidere area, particularly its mostly emptynorthernmost quadrant: drivers stopped at red lights, thoughthere was little traffic, and even fewer pedestrians, tomandate such discipline. Why were Lebanese who would havebarreled through red lights in any another part of Beirut solaw-abiding?

Kassir wasn’t sure, but he was toying with the idea thatdrivers were somehow intimidated by Solidere’s modernity.Here was an area of town that imposed esteem, he speculated,that commanded respect.

Was that the case? Maybe it was, maybe it wasn’t, but onething is certain: very few Lebanese fail these days tomention the deep resentment they feel at what has happenedto the downtown area; and the vast majority of them reactnot from a political standpoint, but from the standpoint ofpeople proud of a part of town that had symbolized Lebanon’sbest qualities and its genuine emergence from civil warafter 1990.

This is not the place to discuss the opposition’smotivations in suffocating the downtown area. However, itmakes sense to ask why an action directed against thegovernment has ended up punishing the private sector. Partof the reason—and there are numerous examples of oppositionprotesters arguing precisely this line—is that thegovernment and Solidere have been regarded as synonymous byprotesters. Certainly, the company’s close and ongoingassociation with the state; certainly, too, the hazy barrierbetween what belongs to Solidere and what belongs to theHariri family, have helped reinforce this conviction.However, that doesn’t make it any less fallacious. Inturning Solidere into a hostage to politics, the oppositionhas, intentionally or not, widened its dispute so that it isnow one directed against the Lebanese economy, and moreparticularly against the better outgrowths of free-marketcapitalism.

Downtown once again a battlezone

It doesn’t take much to capture the symbolism of themoment—on either side of the political spectrum. For themajority, a part of town that for a long time embodiedLebanon’s ability to transgress war, has again become afront line in a domestic crisis. Where the late Rafik Haririsought, perhaps excessively, to banish war from the downtownarea (recall that a war memorial planned for the city centerwas, instead, trucked off to the Defense Ministry inYarzeh), those contesting Hariri’s legacy have never broughtLebanon closer to civil war. To borrow from sociologistSamir Khalaf, the reclaimed heart of Beirut may soon be incardiac arrest.

The narrative of the other side is no less evocative, andunconditional. Hariri’s Beirut, because of its exclusivity,was never a valid Lebanese symbol. It was perhaps a symbolof the bourgeoisie and entrepreneurial skill, but one whoseimpact most Lebanese never felt. Far from being therepresentation of a Beirut at peace, it personified acallous, unjust city. How could there be true harmony andserenity if a part of the population was not invited topartake of its postwar pleasures?

Whatever one thinks of either argument, neither reallyaddresses the much more mundane matter that cities are, inone way or another, reclaimed by businesses. Ideas count fora great deal, urban policies and politics the same, butultimately it is money that keeps cities going, and anability to use that money to develop. And neither narrative,as it has played out today, is satisfactorily keeping themoney circulating, even if the Hariri vision was always muchfriendlier to businesses.

Those who saw the Solidere area as the symbol of aresurrected Beirut never paused to wonder whether it wasalso an island that had merely kept Lebanon’s divisionsoutside its boundaries. Why does this matter? Because noprosperous free market can last if it is built on shakyfoundations nationally. If Lebanon is to thrive, then itsdifferent political forces will have to agree to a commonvision for the country’s economic future. The Lebanese arenot there yet. The downtown area may have epitomized postwarpeace, but not everyone bought into this, and that’s afailing that can be put at the door of the policymakers.

On the other side, the opposition seems to have little senseof the advantages of the free market, which doesn’tdifferentiate between political forces. If Solidere loses,so does Lebanon’s economy, and so do all Lebanese. Povertyand unemployment play no favorites. That’s why both sideshave a duty: the opposition should end to its protests inthe downtown area; and the government should oversee aprocess leading to a national consensus on Lebanon’ssocial-economic priorities, by spreading that concernoutside the boundaries of a contested Solidere.

April 1, 2007 0 comments
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Lebanon: Privatization and its fiscal implications

by Mounir Rached April 1, 2007
written by Mounir Rached

The Lebanese government has proudly outlined itsprivatization program in the recovery paper presented toParis III donors, underscoring its crucial role in promotinggrowth, reducing public debt and fiscal deficits. The focusis on the most profitable privatization, the mobile sector,while electricity, the most destitute, is deferred to anundetermined future date.

Contrary to the general perception, these so-calleddinosaurs—or the non-financial public enterprise sector, togive it the boffin name—actually make money for thegovernment in the form of revenues from no-tax revenuetransfers to the treasury and VAT. Income transfers totaledLL8.2 trillion ($5.5 billion) during 2000-2006, mostly fromthe telecom sector. VAT contributions are not separatelycalculated but, at 10% since 2002, should have added sizableamounts to government coffers. EDL contribution has beenlimited only to VAT, due to its perennial losses.

During the same period, government expenditure, in the formof transfers to PES, to EDL in particular, amounted to LL3.5trillion ($2.3 billion). Even without taking VAT intoaccount, the net receipts accruing to the treasury during2000-2006 reached $ 3.2 billion ($5.5 less $2.3 billion).Thus, PES has had a mitigating effect on public finances.

This is not to say that this state of affairs should beapplauded, as the sector has been plagued by a combinationof poor quality, high operating costs and slowing growth,prompting consumers and businesses to call for its drasticreform. EDL alone has been suffering losses close to 40% ofits power generation and MEA (which is much better managed)has yet to make recurrent profits.

High revenues from PES, 28% of the total in 2006, are due tothe high rates (over pricing/taxing). Mobile telephonecompanies charge $0.13 per minute, compared to internationalrates of $0.4-0.5, while EDL’s rates are also high byinternational standards. Public sector privatization wouldlead to a restructuring of revenues in favor of tax receiptsand both would be expected to rise with a growing economy.

A third lump sum source of income would accrue from sale ofexisting PES assets and from licensing. The prime candidatesare telecommunications, electricity and Middle EastAirlines. Licensing, particularly the telecom sector, isexpected to generate most receipts. (The net worth of MTCTouch and Alfa, the two government-owned mobile companies,are not believed to exceed $100 million, as most of theirassets date back to 1994. EDL and Ogero have yet to beaudited, and MEA is burdened with debt.)

According to government sources, mobile licensing couldbring in $2.5-$3.5 billion per license. Two additionallicenses should bring in the same amount. Such high feeswill only be recuperated through high service charges—mobile or kilowatt use—and this will probably have astifling instead of rejuvenating impact on the economy.

An internationally competitive price should guide thedetermination of licensing value. The overriding objectiveof the privatization drive should not be to extract thehighest possible revenue (from sale of assets and licensing)in order to reduce public debt, but rather to provide themost efficient and competitive service to contribute togrowth and eventually enhance government revenue.

A simple proportional adjustment, for instance, in mobilelicensing proceeds, to reflect a reduction in its servicecharge to an international level (to 4 cents from 13 centsat present) could bring down a license value by severalfolds to few hundred million dollars—and rates would stillbe higher than what many countries, determined to providecompetitive service, charge. Furthermore, a priority inprivatization should be to concurrently address the leastprofitable enterprises. Sinking more funds in EDL beforeprivatization could defeat the purpose of reform.

In reality, only reaching a fiscal surplus will reduce debt.Privatization proceeds alone won’t cover cumulative publicfinance deficits—estimated at $11.8 billion—through 2011(see Executive March 2007). Proper accounting stipulatesthat privatization receipts be classified as a fiscalfinancing item, making the that law stipulates theirallocation to debt reduction redundant. The governmentshould focus on improving its public finances throughrecurrent receipts and continued streamlining ofexpenditure, and by seeking to raise the grant element andfiscal support of donors’ pledges. To use privatization as atool to reduce debt and fiscal deficits is a misguidedapproach to reform.

DR. MOUNIR RACHED is a senior IMF economist, and a founding member of the Lebanese Economic Association. The views in this article are those of the author and don’t represent those of the IMF

April 1, 2007 0 comments
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Editorial

The new realpolitik

by Yasser Akkaoui April 1, 2007
written by Yasser Akkaoui

And so to another Arab summit. There was a time when the Arab street would shrug and say “so what?” The most we hoped for was that our leaders would not embarrass us, especially those who used the occasion to showboat and who would leave any feelings of national duty—assuming they had any in the first place—at home.

2002 changed all that. Saudi Arabia, already beginning to feel they had a new, more robust role to play in the region, put forward a peace plan that gave a patina of credibility to an occasion whose high point used to be the arrival of President Khadafy’s female bodyguards. The plan was rejected by the Israelis but five years on, we detect a political change in the wind and the initiative, while not embraced, has not been rejected out of hand.

There are reasons for this. There is Iraq; Saudi Arabia has a new king and new wealth through oil, capital markets and real estate. Because of the terrible outcome of the Iraq war and the American need for regional chums, the Saudis today are closer to the Americans and no doubt feel that the way forward in regaining Arab prestige and dignity, not to mention being taken more seriously by the international community, is through leveraging economic success and consolidating alliances. It is the new regional realpolitik.

That the Arabs are re-submitting a peace plan also restores another important dynamic: Arabs are reclaiming ownership of Arab issues. Palestine is an Arab problem not an Iranian problem and Saudi Arabia, along with the other gulf powerhouses, Qatar, UAE and Kuwait and Jordan can make a difference. They are credible nations that have made economic growth a priority.

And finally we have Syria, the current enfant terrible of the region and a country on whom the international jury is still out. Should the world cozy-up to Damascus or watch the regime wither on the bow? Here Saudi Arabia can also help. As we pointed out in our last issue, Saudi businessmen are already investing in Syria; the next step should be to warn Damascus of the dangers of isolation and the price it may have to pay for its outrageous insolence in Lebanon. It should also remind the regime that the international community will not tolerate its bull-headed belligerence forever.

But can Syria ever be a positive force for good in the region under the current regime?

Sadly, as history has demonstrated, it has yet to prove it can.

April 1, 2007 0 comments
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Formerly a haven of small-town trust, UAE sees rise in crime

by Norbert Schiller April 1, 2007
written by Norbert Schiller

I recently stepped out of my apartment in Sharjah and absentmindedly forgot to lock the door behind me. I have always lived in places where doors lock automatically. I wasn’t gone for very long, but long enough for someone to enter and rifle through all the drawers and take any money that was lying loose. Fortunately, the burglar only got away a bunch of spare change left on a table and both my children’s wallets

We live in a big complex—33 floors with over 100apartments—lived in by relatively well-to-do, conservative expatriate families from the Arab world and Indian sub-continent. I thought the building was secure, but what surprised me the most was that someone would risk being caught in a country that comes down hard on crime. I’m sure that after serving the sentence, the perpetrator (if he were a foreigner) would never be let back into the country again—a serious consideration when so many guest workers are dependent on the Emirates for their livelihood.

Twenty years ago, when I lived here before, there was virtually no crime. There were times where I would be in a rush to get to the bank before it closed and I would unconsciously leave the car doors unlocked with thousands of dollars worth of camera equipment lying on the back seat.Back then, the cops were everywhere. They were bored—it was a time when a small dent on the side of your car would warrant a fine—and we had to be on the lookout. Now, with so many cars on the roads, police have their hands full with real traffic problems. Gone are the days of cruising for dents, or burglars for that matter.

Part of the problem is that the UAE, and in particularDubai, is growing at such an alarming rate that the locals represent less than 20% of the population. Background checks on cheap immigrant workers—from Pakistan, India, andBangladesh—are not as thorough as before. Once inside, if a person then wants to quit his job, it’s harder to keep track of them. They can just disappear, blending into the migrant population. Then there is the criminal element—the pimps, the drug dealers and the human traffickers. Crime breeds crime.

Near my home, they recently opened a Carrefour mega-market. To get there, I need to cross a few streets, one of which is a busy highway. In order to make it safe for pedestrians, an underpass was built; a very good idea in a country where so many pedestrians are lost to traffic accidents each year. However, I was shocked to see women with babies at either end of the pedestrian underpass—In the years before, I had never seen a single beggar. Begging is against the law and punishable by prison and deportation.And then if you think about it, why would anyone have a need to beg in a country that is so prosperous with a foolproof system? Emiratis are looked after, while foreigners are hereto work and therefore have a sponsor that looks after them.

Like Beirut and Cairo, the beggars are not begging for their own well-being; rather they are taken advantage of to make money for small time gangs that protect them in return for a cut of the proceeds. It appears the underworld is moving in.

The bottom line is that as Dubai and all the otherEmirates grow, the small-town feel that once made living here so attractive is all but disappearing; now suddenly, the Emirates are beginning to suffer from the big time problems that plague large cities around the world. Now the talk at dinner parties never drifts too far from the subject of crime—not the lack of it, as was the case in the ’80s.And even though the authorities do not publish figures, it is obvious that crime is on the rise. Everyone seems to have a horror story to tell, from gang rape to petty theft. Even the locals have been arrested and convicted of crimes, ranging from theft to murder. Dubai, it seems, offers more than just tourism and duty free shopping.

Maybe I protest too much. Maybe I’m just getting old. Yes, the UAE is still one of the safest places on earth to live.But my question is—for how much longer?

NORBERT SCHILLER is a photo editor and photographer at large with United Press International (UPI)

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Arab states ignore climate change

by Fouad Hamdan April 1, 2007
written by Fouad Hamdan

“Climate change? What climate change?” These are the twoquestions I often hear when I mention this issue to Arabofficials. If I insist, they get irritated and change thesubject. Others try to play it smart and argue like some USoil corporates, claiming current climate changes are naturalphenomena and not connected to any human activity. Thisdefensive approach is understandable in a region that hasenough political and economic problems, ranging from thePalestinian-Israeli conflict to civil wars in Iraq andSudan, huge discrepancies between poor and rich in mostsocieties and visible pollution in the air of cities as wellas along rivers and coastlines.

But the longer Arab leaders ignore the issue of climatechange, the higher the price Arab societies will pay in thefuture. And this price will be paid with money and humanlives. Sadly, environmental protection is not high on theagenda of Arab governments, the 2005 EnvironmentalSustainability Index found out. Its scores, given to 146countries, are attributed to substantial natural resourceendowments, low population density, and successfulmanagement of environment and development issues. Finlandranked first, followed by Norway, Uruguay, Sweden andIceland. The index put Iraq at 143, Kuwait at 138, SaudiArabia at 136, Lebanon at 129 and the UAE at 110. The threebest Arab states were Tunisia (55), Oman (83) and Jordan(84). Israel landed at 62.

But what strikes me most is the lack of knowledge among Arabdecision-makers about the main causes of climate change, andwhat could be done to stop it. A United Nations scientificpanel agrees that climate change is one of the biggestthreats facing our planet. The main reason is the globalrapid growth in energy production and consumption since the1950s—by burning fossil fuels like coal, gas and oil.Intensive agriculture and the cutting of forests also emitscarbon dioxide (CO2) emissions that heat up the Earth. Theresult is more devastating freak weather events such asflash floods, storms, heat waves, mudslides or droughts.This greenhouse effect also leads to the melting of icepacksin the North and South poles, causing sea levels to rise.

We are heading into global average temperature increases of2 to 3 C°, with rising sea levels wiping countries off themap. Developing nations will be hit first and worst.Meanwhile, the World Health Organization said 150,000 peopledie every year as a result of climate change. In theMediterranean region, climate change has started toundermine efforts for sustainable development.

Last January, the European Union published a report dealingwith the disasters that will take place along the northernshores of the Mediterranean. Assuming a global 3 C° rise,the basin would face crippling shortages of both water andtourists by 2050, and tens of thousands will die of heat insouthern Europe. The annual migration of rich northernEuropeans to the south could stop—with dramatic consequencesfor the economies of Spain, Greece and Italy. If southernEurope will be hit so badly, one can imagine the economicand health impacts climate change will have on the Maghrebstates, Egypt, Palestine/Israel, Lebanon and Syria.

Cairo is among the 22 cities that the UK government’s recentStern report tipped to face increasing risks of coastalsurges and flooding, as the Earth warms by about 3° from the2050s. Floods from rising sea levels could displace up to200 million people worldwide. For Egypt, this means that theNile Delta is under threat.

Arab states need to face that climate change is alreadyhitting them and that they must deal with it. No one issaying that oil and gas should be left untouchedunderground. But to help avert the crisis, a serious globalcut of CO2 emissions should go hand in hand with much lessoil, gas and coal burnt. This does not have to mean aneconomic disaster for Arab oil-producing countries. It couldbe a historic chance to produce hydrogen in a sustainableway with solar power.

Let us imagine all over the Arab world, millions of squarekilometers of solar panels producing hydrogen. This wouldcreate a hydrogen economy, in which energy is stored andtransported by pipelines or tankers. When burning hydrogenin heating systems, energy plants, vehicles or aircraft theexhaust pipes and chimneys will only release water in theatmosphere. Such an energy revolution needs decades ofmassive investments in this technology and in a new globalinfrastructure. Under this strategy, oil countries wouldslowly reduce their oil output while exporting more and morehydrogen. Oil reserves would last longer.

One would assume that hydrogen would be difficult to sell inthe Gulf, the world’s main source of oil. But this isanything but paradoxical. It is a matter of survival,because the cry for sustainability is becoming increasinglyurgent. From Morocco to Iraq and from Syria to Yemen, largeunpopulated and desert areas could be used to producehydrogen from solar energy. Clean hydrogen made there could both save the planet and secure the economic survival of theArab world in the post-oil era.

FOUAD HAMDAN set up Greenpeace in Lebanon in 1994-1999. He is now executive director of Friends of the Earth Europe, a campaign and lobby organization in Brussels influencing the environmental policies of the European Union. He wrote this article for EXECUTIVE.

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“Month of Mayhem” in Iraq

by Michael Holmes April 1, 2007
written by Michael Holmes

This was my eighth visit to Baghdad—in many ways, Baghdad feels like a second home, which I’m not sure is a healthy sentiment—my first being as the war wound down in 2003. I cringed a little when told the documentary would be called“Month of Mayhem.” It proved to be a more than apt title.The previous seven “tours” had allowed me to witness a steady deterioration in the level of security and services—despite my hopes, it was always, always worse. AndI knew this trip would likely be no different. It really becomes a matter of how bad it’s going to be. Before leaving the airport—before leaving home, for that matter—I know there will be bodies, and there will be bombs—it is only a question of who and how many.

A bloody time for Baghdad

As it turned out, this visit would see one of the bloodiest periods since the war began.

Within 10 minutes of reaching the bureau, I was live on air reporting on the battle for Haifa Street, as US andIraqi forces fought Sunni insurgents and al Qaeda elements not more than a mile or so from our office. All day, the air was rent by the sounds of small arms fire, heavy caliber machine gun fire, and missiles fired from the Apache helicopters that swooped low over our heads.

CNN’s Arwa Damon being in town ended up being a boon for me. She was embedded with a Stryker Unit and this allowed me to largely escape the routine of “live shots” from the bureau and embed with the military for much longer than usually possible on a five-week assignment. Embedding with the military has become the safest way of reporting, not just on the war, but on Iraqi civilians. It’s about the only way we can safely meet with ordinary residents, talk to them on and off camera and get first hand accounts of the awful tribulations they endure.

This was a month of massive bombs at universities and market places, of more and more bodies dumped in the streets, hands bound and shot after being tortured in almost inconceivable ways, including the use of electric drills. It was a month when what the US called its “troop surge” began, when the “Baghdad Security Plan” got underway, when the first Joint Security Stations were being set up.

The severity of the security situation is well illustrated by the embed in Adhamiya, an area about six miles from our bureau, but considered by our security advisors too dangerous to drive. Roadside bombs and ambushes are common.

Each time I return, there seems to be a new “worry” among the troops. This time it was the increased sniper activityand the growing threat of EFPs, or explosively formedprojectiles. These are savage weapons—“shaped” charges thatfire out a ball of molten copper, or similar metal. RegularIEDs were described to me by one soldier as “like a shotgunblast.”

“EFPs are like an armor piercing bullet aimed at your head,”he said.

A month of laughter and tears

I met another soldier who’d been “blown up” as he put it, four times, by IEDs, and wounded three. It was his first day back after his latest medical leave, and he was the driver in my humvee. Another soldier told me about an EFP that hit a humvee he was driving. It went through the right rear window of the vehicle, decapitated the soldier sitting there, took the legs off the gunner in the middle, took the head off the soldier in the left rear seat and continued out the window.

And this happened to an “up-armored” humvee.

During that month, we laughed in our bureau—you have to laugh—we had a party or two with our competitors inside ourcompound, we flew in helicopters, drove in Strykers and humvees and Bradleys. And we saw incredible suffering and loss. I left feeling that some positive things were being put into effect. And a stronger feeling that most of those things were about two or three years too late.

I’ll go back, later this year. Because I need to. BecauseI feel honored in many ways to, as a journalist, have the opportunity to cover this story up close. Because, like most of us who come—many for much longer periods than I do—I care.

MICHAEL HOLMES is a co-anchor for CNN International’s rolling newscast ‘Your World Today’

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Lebanon

Al Waseet pushes into region

by Executive Staff April 1, 2007
written by Executive Staff

The market for consumer goods has never been moreprosperous, according to recent advertising businessstatistics. Classified Intelligence reported the market forclassified ads accounted for $30 billion in 2003 in theUnited States alone, a figure that also includes newspapersand online websites. During the same year, the global marketwas estimated at over $100 billion. In the Arab region, AlWaseet classifieds boasts over 4.7 million copiesdistributed weekly and a readership base of over 20 million.With its 26 operations and staff of 5,000, Al Waseet ispresent nine countries across the region.

“Al Waseet provides a medium for people to buy, sell andexchange goods, keeping them updated with the latestpromotions and products featured within eight differentcategories,” said John Fawaz, the company’s managingdirector. Al Waseet includes listings for real estate, jobs,automotive sales, electronics, technology, hobbies and otheritems, and a personal classifieds section entitled BigHeart.

Based in Dubai, Al Waseet International (AWI) is part ofAl Wataniya Group, which owns numerous publications,including Al Balad newspaper, as well as the Layalina, AlHayat and Laha magazines. Operating in Syria and Kuwait,Baladna newspaper, Top Gear, What’s On and Concord OutdoorMedia are also part of the Al Wataniya group. Founded byBashar Kiwan, Mohammed Abdulaziz Al-Otaibi, Sheikh SabahJaber Al-Sabah and Majed Suleiman—who came up with theoriginal concept—AWI’s 26 publications are featured in asmany as 23 cities.

100 Branches by 2012

“Our expansion plan targets 100 branches by 2012, withcoverage spreading beyond the Middle East and Africa,” saidFawaz. In keeping with the company’s growth, an Englishversion of Al Waseet was made available in places likeKuwait, Cairo and Dubai, where there are largeEnglish-speaking populations. To further strengthen its gripon the market, the company also chose to pursue corporateinvestment and franchising deals.

“With AWI’s experience and successful internationalexpansion, no company is more fit to establish a lucrativebusiness model that can be emulated and operated profitablyanywhere in the world. Franchising, therefore, makes a lotof sense for us and has become a crucial step in thecompany’s development. It will undoubtedly take the AlWaseet business model to the next level,” continued Fawaz.

Franchising as a sustainable business strategy dependsprimarily on AWI’s performance in the media advertisingsector. Backed by an efficient market research departmentand advanced computer software, the company is able todetail business processes from marketing protocols todistribution methodologies. In addition, franchisees can gethands-on experience by visiting the Al Waseet Showcase inDubai, a fully functioning Al Waseet branch that serves,according to the company website, as a franchise trainingcenter. The franchise agreement that was recently signedbetween Al Waseet and Nigerian Middle Advertisement Limitedunderscores the company’s approach towards securinginternational stature.

To enhance Al Waseet’s position as a major advertising andmedia player, management has relied on local marketingcampaigns to create brand awareness. Launched regionally,this year’s advertising campaign adopted a unified messagethat was expressed individually according to differentmarkets. “We have the advantage of being a media companythat has companies like Al Wataniya as media partners, whichprovides us with wider coverage. In terms of BTL [below theline strategy], we follow the same marketing approach usedin the FMCG [fast moving consumer goods] business, thusproviding fully-branded materials to various POS [points ofsale] and PODs [points of distribution],” said Fawaz.

The high market penetration and circulation rates indicatethat the company’s marketing approach has thus far been asuccess. Company figures show that 4.7 million copies aredistributed every week, with Saudi Arabia proving thelargest market with a total weekly circulation of 1,050,000copies. In Dubai, Al Waseet’s new English version is showingpromising results with 200,000 copies distributed weekly.The overall Al Waseet market share for the UAE is estimatedat 92.04%; in Kuwait, it reaches 32% and in Syria, 56%.

“With 20 million weekly readers, Al Waseet is currentlythe only regional publication offering such wide coverage,with a cumulative market penetration of 77%. Although westill face competition in many markets, we remainnonetheless leaders in our category,” Fawaz pointed out.

Fawaz added that the very nature of Al Waseet, a massproduct that can be easily positioned in any market,provides an open door to a world of unlimited opportunities.It is for this reason that the company intends to pursuecorporate expansion by identifying new potential markets,opening new branches wherever internal criteria fordevelopment are met.

Focused on small to medium clients

In terms of readership, Al Waseet focuses on small tomedium clients, including corporations and advertisingagencies. In addition to regular ads, Al Waseet alsoprovides mailing services based on geographic location,demographics, nationality, profession and income, withneeds, wants and purchasing habits varying from one marketto the other. Targeted mailing also includes VIP listingsand identifying key figures. “Al Waseet was the first freeweekly classified publication to be distributed door todoor. Today, our regional network is our main competitiveadvantage,” said Fawaz.

AWI is in the process of restructuring call centers toimprove the quality of services and customer satisfaction.It intends to add new products to ranges already offered. The Al Waseet website has also been overhauled and is nowcalled ewaseet.com. “With its new look and features, weexpect ewaseet to provides us with a separate source ofincome and generate revenue once it is launched properly,”underlines Fawaz. The website offers online brandingsolutions, which includes above the line advertising,classifieds and targeted advertising. According to thecompany website, with its 90,000 registered members and200,000 visitors, “the portal serves over 2.2 millionvisitors per month.”

This year, Al Waseet has acquired licensing rights for theGuinness World Records for the MENA and the GCC regions.This includes publishing and distribution activities as wellas management of all related PR events. “Now that we havesolidly established our SOPs [Standard OperatingProcedures], we can say that we are paving the way towardsstock market entry. The IPO is very much on top of ouragenda, but it is not an easy step to take, and requiresmuch preparation,” conceded Fawaz.
 

Al Waseet market share in Kuwait. source: Al Waseetwebsite, Ipsos stat 2006.
Al Waseet market share in the UAE. Source Al Waseetwebsite, Ipsos Stat 2006

 

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Lebanon

Cry of despair for investments: Habtoor blames Lebanon

by Executive Staff April 1, 2007
written by Executive Staff

I came to Lebanon as an investor believing in the law,constitution and state of this country and I believedstrongly enough to invest hundreds of millions of dollars,”said Khalaf Habtoor, founding father and chairman of theEmirati Habtoor Group. “However, despite the existence of apolitical and legal framework, law and order is not beingimplemented. Investments in Lebanon have been significantlydamaged by political, economic and social instability,created by the Lebanese system.”

Habtoor Group is one of the main foreign investors inLebanon, with such assets as the Metropolitan Hotel, theHabtoor Grand Hotel and Habtoorland. Due to the summer warand ongoing political crisis, the hotels have laid off mostof their staff, while the amusement park has closed downcompletely. No wonder, Habtoor on March 20 asked someunsettling questions, as he delivered a message of anger,despair and bitter disappointment.

“Protests, affirmative action and terrorist activities takeplace in many countries. Lebanon is not alone in this,” hesaid. “The difference is that in other countries life is notbrought to a standstill. Did London close down for weeksafter the subway blast? Did Egypt, Morocco and Jordan cometo a complete standstill? No. The situation was contained bythe state, and authorities made sure that businesscontinued.”

Not so in Lebanon, where the seemingly endless politicalcrisis increasingly paralyzes the economy. Emphasizing he isnot engaged in politics on either side of the Lebanesedivide, Habtoor firmly pointed his finger not at theopposition or government, but at the shortcomings of theLebanese system.

“The state should take care of the welfare of the countryand people and should have policies and decisions firmly inplace,” he said. “Lebanon needs foreign investments as itneeds to create employment, and for that it has to ensurepeace, justice to all and security to the investor. Why isthe state unable to protect interests and security, despitehaving a full fledged army and police force?”

According to Habtoor, “a ship has only one captain andcannot navigate a rough sea if the power is diluted.”Lebanon’s lack of unity and true leadership is onlyaggravated by the fact that “local and governmental bodiesact as independent authorities. Each and every corner of thecountry has its own ruler and for every few villages anautonomous municipality functions without state sanction.”

As an example, Habtoor cited he was never told by localauthorities that there was an army firing range next toHabtoorland and, while the Habtoor Grand Hotel was ready foroperation by August 2005, the opening suffered excessivedelays, as an operating license was denied, even though thehotel was built according to prior approval.

Habtoor is not the sole investor with such grievances. Dueto the continuing unfriendly investment climate in Lebanon,a number of Arab and Lebanese investors have approachedHabtoor to join them in suing the Lebanese state at theUnited Nations Commission on International Trade Law.

Habtoor, who was decorated by Lebanon’s president in 2002,blamed the Lebanese and their frail political system for hismisery. “I think that the only fault I committed was that Iever believed in Lebanon.”

April 1, 2007 0 comments
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Lebanon

The ABC Group does retail by the letter

by Executive Staff April 1, 2007
written by Executive Staff

According to the latest figures in the retail real estatemarket, the sector is growing faster in the Gulf than in anyother region. The business website AME Info reports that by2010, nearly 50 million square meters of gross leasable area(GLA) will be available in the area, with the UAE and SaudiArabia taking up 44% and 30% of the pie, respectively. By2009, Dubai is also expected to have the highest retailspending in the GCC, beating out Saudi Arabia, despite itssmaller population. The city is gearing up for this increaseby building giant malls, such as the Dubai Mall, which isbeing hailed as the largest in the world. Hoping to cash inon this growing trend is the ABC Group—operators of the ABCdepartment stores and malls—which is scheduled to open two stores this year in Bahrainand Amman.

From the original store that was located in old Beirut onBab Idriss Street in 1936, the ABC Group has since morphedinto an expansive department store, with two shoppingcenters and a number of additional stores, including twonewly-added cosmetic and perfume outlets, under its belt.Despite the civil war that first claimed the Bab Idriss shopin 1976, followed by the 1982 destruction of the Hamra andTripoli stores, ABC has managed to become a member of theInternational Association of Department Stores (IADS),boasting retail spaces of over 60,000 m2.

Leader in Lebanon

According to figures provided by ABC, the Group enjoysone of the highest brand awareness rates in Lebanon,estimated at 97%, while 76% of consumers shop at one or moreof its locations. Within its first year of operation in2003, the ABC Mall in Ashrafieh was visited by five millionshoppers, with the number of visits to the Dbayeh mallamounting to 2.5 million per year. Branching out with ninedepartment stores into various Lebanese regions, such asBeirut, Zahleh, Kaslik and Tripoli, the company is supportedby a staff of over 600 employees.

The ABC concept as we know it today has shifted away fromits original exclusive focus on retail activities. “Thecompany started first as a regular retail business, addingat a later stage a real estate arm in charge of building,developing and leasing retail space, which resulted in ashopping center, comprising an inclusive ABC departmentstore,” said Robert Fadel, ABC’s director. This shift instrategy was marked by the construction of the Dbayehdepartment store, where for the first time, space was rentedto retail businesses. This move was subsequently followed bythe construction of the 42,000 m2 Ashrafieh mall. Otherservices, such as child daycare, information desks, weddinglists and a car wash were also added to the initial basketof products offered by the Group.

Expansion into foreign markets seemed like the naturalnext step. Prompted by booming Arab markets, Lebanese marketlimitations and a teetering political situation, variousfactors conspired to export the ABC concept to the MiddleEast. In the Jordanian and Bahraini markets, consideredstepping stones in the company’s overall expansion plan, thebusiness model adopted was either inspired from the Lebanonexperience or completely overhauled. “Occupying a 4,500 m2surface, the Amman department store will be similar to theBeirut one, although it will be developed on a smallerscale. The Bahrain 1,500 m2 concept store, however, focuseson women’s apparel, which includes accessories, shoes andlingerie,” added Fadel.

Positioned as mid- to high-end outlets, the ABC departmentstores offer various international brands, such as Carol,Tintoretto, A Priori, McGregor and Kookai, as well as luxuryitems from Chanel and various jewelry designers. The storesalso provide tableware and household items, shoes,accessories, cosmetics and perfumes, which are sold atcompetitive prices. With over 100 international, regionaland local brands holding sales stands at ABC, the group isthe largest retail developer in Lebanon, incorporating over200 tenants. Within the Middle East, the Bahrain and Jordanstores will also be positioned in the middle range of theretail spectrum, with Debenhams on the lower end and HarveyNichols on the higher end. “Besides these two contenders,basically anyone in the fashion industry is our competitor,”said Fadel.

Expansion plans

Collections on display in the Jordan and Bahrain storeswill also differ from the ones available in Lebanon, as aresult of differing store sizes as well as conflictingrepresentation and exclusivity contracts, a problemcurrently under examination by the ABC management. “TheAmman store will, however, include ‘shop-in-shops,’ such asKookaï or Chanel,” Fadel pointed out.

Despite expansion into foreign markets, ownership of thecompany will not be affected. “The company is owned up to80% by the founding family, with the remaining 20% dividedamong 100 shareholders,” explained Fadel. Owners also relyon a flexible structure based on three core activities:operation and services, leasing, and merchandising andmarketing.

Operation and services, the first sector of activity, isunderpinned by support services—including HR, purchasing,MIS, design and in-store marketing, maintenance,warehousing, finance and legal office departments. Store andmall operations are divided by area—including Dbayeh,Tripoli, Zahleh, Hamra, Ashrafieh, Kaslik and Furn elShebbak—and overall mall management. Leasing, the secondcore activity, is dependent on the company’s real estatearm. Lastly, the marketing activity involves events andpromotions, customer relationship management (CRM), marketresearch and communications. Purchasing is in charge ofregrouping ladies’ and men’s wear, shoes, lingerie,children’s wear, home items, appliances, toys andaccessories under one roof.

While the Group’s larger projects in Lebanon requiredmajor investments—the company’s total assets are currentlyestimated at over $100 million—the Bahrain and Jordanventures will require less capital. Including the cost ofmerchandise, the new ABC stores will fall within a bracketof $5 to $10 million and will be backed by staffs of 50 to200 employees. Fadel also expects sales revenue for the twonew outlets to vary between $4,000 and $7,000 per m2, afigure that can be put in perspective when compared to the$3,000 generated by local Lebanese stores. Considered one ofthe highest non-food ratios in Lebanon, ABC’s turnoverrepresents 13% of the $1.5 billion Beirut retail market.

Like any other company with an eye on attractive businessopportunities available in the Middle East, Fadel isconsidering ABC’s expansion into Kuwait, the UAE, Syria,Egypt or the KSA. As for going public, however, he has lessambitious plans. “It will eventually happen, sooner ratherthan later,” Fadel stated, “but there is no definite timeframe yet.”

April 1, 2007 0 comments
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Lebanon

Parking meters Coming to Beirut

by Executive Staff April 1, 2007
written by Executive Staff

This month will see 50 parking meters installed in one areaof the Beirut Central District. The pilot scheme, operatedby Near East Automatic Distributors (NEAD) in an $8 million,2.5-year, World Bank funded project, will then see a further10-20 on Charles Malik and Bliss streets and 50 more in thearea currently occupied by opposition campers. Althoughtargeting commercial areas, NEAD will eventually targetspecific residential zones to offer resident parking permitsin a system similar to that operated in London and othermajor cities.

“The number will eventually rise to 750 throughout Beirut,”says Chafic Sinno, NEAD’s managing director, “We will belocating them in the business districts, where we hope thecustomer will have the social wherewithal to understand andaccept the concept as something that is beneficial.”

The concept is simple. One main meter will dispense ticketsaccording to the “pay and display” system, with LL500 buying30 minutes and allowing a maximum stay period of twohours—perfect, Sinno believes, for the short-term parker.Customers who overstay their welcome will receive multiplefines—or citations—and further non-payment can result in a“booting” or immobilizing if the car is later spotted atother meter locations.

Drivers who think they can simply throw away the citationand disappear will be disappointed. Records are kept and,now that the mécanique renewal process is also under theauspices of the private sector, “wanted” drivers who haveoutstanding fines will not be able to renew their car papersuntil all debts have been cleared.

Handing out fines will be the responsibility of fieldoperators, all of whom will be accompanied by police, whosepresence—especially on the notoriously territorial BlissStreet running the length of the American University ofBeirut—will be welcome.

Those who have had run-ins with the often-threatening andintimidating parking attendants on Bliss might be skepticalabout NEAD’s chances of success on this busy,student-drenched thoroughfare. Even if they do contribute totraffic congestion, most businesses rely on double parkingfor their customers and, until now at least, the policehave, by and large, turned a blind eye.

Sinno is confident that the system will work and isrealistic about how people will react to the newrestrictions. “Listen, on Bliss Street, we will be flexible.We will not penalize very short term drivers if theyactivate their flashers, keep their windows down and ensuresomeone stays in the car,” he explains, adding that the jobwill become easier when the sidewalk is widened, a move thatshould make the street’s double parking culture impossible.He also insists that no one has been bought off in his bidto enforce parking.

“On Bliss, we are going head on,” he explains, “It will notbe easy. They [the shop keepers and restaurant owners] haveno idea we are coming and they will just have to deal withit. The police have been told that they too must cooperate.No one has been paid off. The orders have come from the verytop and we are receiving encouragement from all the seniormunicipal officials. In any case,” he laughs, “my marginsare too tight.”

Sinno confirmed that he had initially recruited 40 fieldoperators and that this number will rise to 150. He isconfident that if an operative is doing his job correctly,he should issue around 70 citations a day. In the firstyear, the government estimates it will generate revenues of$5 million, part of which will be given to NEAD—which hasbeen operating vending machines in universities, hospitalsand big offices for 12 years now—as its operating fee, andpart of which will be used to pay off the World Bank loan.

April 1, 2007 0 comments
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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.

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