Media Special

Creativity above budget: Cristal rewards ideas

by Executive Staff
written by Executive Staff

In late January, the organizers of the MENA Cristal awards were thrown into an unenviable position: just days before the five-day-long awards were set to be open in the Lebanese mountain resort of Faraya Mzaar on January 29, Beirut’s ongoing crisis plunged even deeper, with a violent general strike on the 23rd followed by clashes at the Beirut Arab University two days later. Should they still hold the awards on schedule, despite the risk of continuing violence, or opt to cancel or postpone the event? The decision was not easy, but ultimately their commitment to the event—and Lebanon—won out.

Their gamble was rewarded: tensions cooled, and the MENA Cristal Awards were universally deemed a resounding success. Aside from the event’s primary function—announcing the winners of the Cristal across a wide range of categories—hundreds of delegates from the MENA region and Europe had the chance to trade ideas with other advertising luminaries at roundtables, debates, workshops and presentations, over sumptuous Lebanese cuisine, and even on the ski slopes.

Although only in its second year, the MENA Cristal is fast on its way to becoming the region’s premier advertising award. Since its first edition in Casablanca in 2005, MENA Cristal has expanded from a one-day event to a five-day festival, awarding 61 “Cristals,” nine “Grand Cristals,” and one “Honor Cristal” to entries from 16 countries across the MENA region. MENA Cristal is the daughter of Europe’s prestigious Meribel Festival de le Publicité, and retains close ties to its parent, awarding the same prize, the Cristal, and conducting its judging in Meribel, which is held each December in the French Alps. The decision to hold the second edition of the MENA Cristal Awards in Lebanon was in part drawn from a desire to recreate the atmosphere of the Meribel festival. “We needed to reproduce, as accurately as possible, the concept of … Meribel. We saw early on that it was an excellent idea to organize the Awards in a ski resort, and what’s more, in the Middle East,” explains MENA Cristal CEO and general director of the Meribel festival Christian Cappe in his welcome editorial. Speaking exclusively with Executive, Cappe emphasized his desire to make Lebanon a permanent home for the festival, provided the political and security situation remains stable. Indeed, especially in light of the success of this year’s event, the MENA Cristal team is eager to hold next year’s edition in Faraya as well. As MENA Festival President Dani Richa writes, “The setting of Faraya Mzaar allows everyone to leave competition behind in the city and come in from the cold to work together in the warmth of the fireplace over cognacs and hot chocolates.”

Filling a void

The MENA Cristal was created to fill a perceived void in the Middle Eastern advertising world—the lack of a credible competition to reward and promote regional creativity. Members of the local advertising community particularly stress two aspects of the Cristal as vital, both of which challenge convention in the MENA region. First of all, there is a broad consensus that the MENA Cristal jury does not conflate genuine creativity with having a big budget when evaluating entries.

In awarding the MENA Cristal, “concept comes first,” explained 2007 Jury member Karim Achy, regional creative director for Euro RSCG in Dubai. “The execution comes after. The idea is the queen here—you can’t win just by showing off and having a large budget.” In a region where flashiness is generally rewarded, the idea of putting creativity first comes as a long-overdue breath of fresh air, and should help to foster a stronger creative sector.

The second major coup for the Cristal is the perceived fairness of the selection process. With politics tending to infiltrate almost everything in the Middle East (a problem which has undermined the credibility of many of the MENA Cristal’s competitors), honest judging in any competition is a rare commodity indeed.

Jury members are selected from both creative agencies and clients in Europe and the MENA region; in the latter category, MENA Cristal strives to achieve fair geographical representation as well, with members from the Levant, Gulf, and North Africa. All voting is done by secret ballot—jury members themselves do not know the results until they are announced at the awards ceremony.

“There wasn’t much lobbying at all,” remarked Samer Younes, creative director at Saatchi & Saatchi Beirut. “The best ads won. There were a few categories where I preferred an ad that lost, but it wasn’t unfair—just a difference of opinion.”

Jury member Raef Labaki, the general manager of communications at Nestle Middle East, agreed that the results were fair, citing his own experience as a juror. According to Labaki, the deliberation sessions were productive, positive and open, generally yielding consensus despite the jury’s diverse composition.

Credible, nonpolitical awards

“Internally, I hope the Cristal will help raise standards. We need a credible award in MENA. Everything is political here—if the MENA Cristal can avoid that trap, and be adopted as a benchmark by the whole industry, it could bring the neutrality we really need in the creative sector,” said Labaki.

Among the nine Grand Prix winners, one in particular seemed to capture the essence of the Cristal for jurors and agencies who spoke with Executive: Saatchi & Saatchi Beirut’s “Animals” campaign for the Lebanese Ministry of Social Affairs, which took the Film Cristal Grand Prix. As Labaki explained, “It was a simple idea, but with a strong message that cut right through.”

“Animals” opens with a scene of a mother and baby koala; it then moves on to footage of different animals in affectionate scenes with their offspring, amplified by a simple, emotional musical score. Finally, the series ends with a young girl alone in a corner, clutching a teddy bear, her face badly bruised from being beaten. Then comes the final message: “Some kids wish their parents were animals.” In Arabic, the meaning is even starker, as calling someone an “animal” is a highly degrading insult.

The success of the “Animals” campaign, however, has not been limited to the MENA region: last year, the ad became the first Lebanese entry ever to be shortlisted at Cannes, and it took home the silver at Europe’s prestigious EPICA Awards. Younes, the man behind “Animals,” told Executive that this international acclaim—unparalleled by any other entries in the category—gave them an extra confidence boost going into the MENA Cristal. “We were hoping to win, but not expecting for sure. Still, we felt we were the most serious contender.”

Younes offered a similar explanation to Labaki for why his campaign has been so successfully received—the simplicity of the production, combined with its high emotionality. “Some people have told me they cried when they saw the commercial,” says Younes. “This ad was really a new idea—it wasn’t like anything done before, in MENA or internationally.”

Print campaigns also honored

Another ad frequently cited by jurors and agencies as among their favorites was Grey Worldwide Beirut and City Films’ campaign for the Doha Asian Games. To put it simply, in the words of Achy, the ads were a “big wow.”

Younes also specifically noted the high level of excellence seen among print campaigns coming from the Gulf. “They showed a high level of creativity—JWT’s ads for Amnesty International, Saatchi Dubai’s work for La Vache Qui Rit, of course the Viagra ads from JWT/RMG Connect in Jeddah. There were lots of really fantastic ads at the MENA Cristal, and this pushes the rest of us to do even better.”

Despite its overwhelmingly positive reception, the MENA Cristal still has some hurdles to overcome in the next few years. When asked what it meant to win a Cristal, Karim Kazan, creative director and group head at Impact BBDO Dubai (who won the Pluri Media Grand Cristal for “M&M’s: Mrs. Green Launch” campaign), told Executive, “Well, it’s a new award, but of course it’s always nice to win something local. Hopefully it will grow to be something bigger.” If MENA Cristal is serious about becoming an internationally-recognized credential—rather than a quaint, local prize—as a new player in the game, the awards will need to develop their brand and raise awareness within the creative community.

According to Labaki, another problem this year was that many first-round submissions were not up to quality standards. This resulted in a large number of unsuitable entries that had to be sifted out by jury members and others down the line. “The agencies should have done a better job screening,” he said, but conceded that the problem partially lay in the fact that MENA is a “big region, and the sector is much more developed in some countries than in others.” As less-experienced agencies and clients are brought in to participate in the MENA Cristal Awards, hopefully, through exposure to the best work in the region and industry leaders, they will gain new ideas and a greater understanding of the field, ultimately adopting higher standards themselves. The MENA Cristal is firmly committed to having participants from across the MENA region, regardless of the relative development of their sectors.

For Younes, the only major concern for next year is the need for a more international jury. He believes this would not only would help keep MENA Cristal neutral (and out of local politics), it will add credibility and exposure to the awards’ profile.

Achy also voiced the need for an even-stronger link between MENA Cristal and the international creative community, though he believes its existing European credentials and connection with Meribel have helped it to already “mean a lot” in the advertising world. “The awards have EU standards,” he reiterates. “Idea over budget.” As long as MENA Cristal can stay true to this principle, the future looks very bright indeed.

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Consumer Society

Off-roading with Porsche New SUV a dream

by Executive Staff
written by Executive Staff

Chiclana de la Frontera, SPAIN: One of the perks of working in journalism is going on the occasional press trip. There is an essential quid pro quo to all these arrangements—the client wants to either reward or woo the media—but it is always wrapped in such an elegant package, one forgets that it is all part of a multi-million dollar marketing strategy. The bigger and sexier the product, the bigger the kick for the journalist—and they don’t get much bigger or sexier than Porsche, who last month, once again invited Executive, this time to Spain to test drive the second generation Cayenne, Porsche’s revolutionary SUV. It’s a car which I unabashedly call the family Porsche, a moniker that in no way takes any of the edge or luster off the reputation of this legendary marque. That just means you can let your wife drive it.

The Porsche Cayenne was launched in 2003. In Lebanon, it was unveiled amid much hullabaloo at the Beirut Hippodrome, where, fittingly for such a thoroughbred, the vehicle was put through its paces to demonstrate its off-road capabilities.

It didn’t disappoint. Here for the first time was a company, known for it famous sports coupes, venturing into SUV territory, the traditional preserve of the Americans, Japanese, and of course, the British. But ennui, in Lebanon at least, had set in: the Range Rover had become a cliché, the boxy American SUVs were just a too sauvage for madam and the Japanese models, while very efficient, just weren’t sexy enough.

Enter the aristocrats of Europe, who had identified a niche for an SUV with the all the trappings of the world’s most luxurious European brands—Mercedes, Audi, Volvo and Porsche. They all transformed the SUV into the epitome of urban cool, but only Porsche had the outstanding racing pedigree to give its creation added pizzazz.

Wildly popular in Lebanon

The numbers speak for themselves. Globally, Porsche has sold more than 150,000 units. A few years back, I walked out of a London pub in Belgravia to be faced with four identical black Cayennes parked on the same residential street. It wasn’t the beer. The car was, and still is, the must-have for those lucky enough to afford one. And no one gave a damn if the neighbors had one too. In Lebanon, the Cayenne accounts for over 50% of Porsche’s sales.

The new Cayenne was available globally on February 24. The entry level Sports Utility model is now powered by a 290 bhp six-cylinder engine that has increased in size from 3.2 to 3.6 liters and which now offers an increase in maximum output over the former V6 by no less than 40 bhp. Next up comes the Cayenne S, featuring a natural-aspiration V8 power unit, up by 0.3 liters to 4.8 liters and with a maximum output of 385 bhp, 45 bhp more than before. The über-Cayenne is the eight-cylinder turbocharged beast, pushing out 500 bhp, 50 bhp more than its predecessor. Finally, the new direct gasoline injection has made the Cayenne more fuel efficient—15% more according to Porsche—and faster. The Cayenne Turbo can do 0-100 in 5.1 seconds.

Back in Spain, the elements have served to disrupt the days proceeding. Excessive rain has meant that we can’t try out the car’s supposedly fabulous off-road potential. I don’t mind. The 4×4 facility is an option that I know is there, but most consumers buy cars to drive them and their families from point A to point B and 99% of the time this is done on tarmac, notorious Lebanese tarmac in my case. I must be one of the few international guests here who actually want to see how this beauty performs on the road in the rain.

There are no complaints. The new technological developments are very exciting and will please those who look for safety as well as performance. Porsche’s Stability Management ensures the car reacts even faster when applying the brakes. This prevents the Cayenne from developing potentially dangerous pendulum action (such as when towing), and optimizes the brake effect on loose ground. The new models also come with a rollover sensor, which, in an emergency, triggers both the belt latch tensioners and curtain airbags—there are six other regular airbags by the way—thus reducing the risk of injury for occupants in a rollover.

The Cayenne has certainly not rolled over on its shareholders. Porsche continued to show growth in 2006, a performance Porsche claims has been due to the “ongoing improvement of Porsche’s model mix.” However, the significant jump in the group’s pre-tax profits to 2.11 billion euro is mainly attributable to the sale of auto-roof manufacturers CTS Fahrzeug-Dachsysteme (80.7 million euro), profits earned through the company’s share in Volkswagen AG (203 million euro), and “three-digit million-euro range” proceeds from stock price hedging transactions linked to the acquisition of a share in Volkswagen. The company expects the next major thrust in growth in 2009, with the launch of the new four-door Sports Coupe.

Sales figures are up

Figures in the first four months of the current year of business (which began on August 1, 2006) show that Porsche’s trajectory as a manufacturer of sporty premium cars is continuing upward. Revenue in this period is up 0.7% to 2.05 billion euro; sales show an increase by 0.4% to 25,850 units sold—including 10,350 units of the Porsche 911, with growth in this model series amounting to 8.5%. In the same four months, the Boxster and Cayman are up 53.7%, having sold 7,750 units. Reflecting the end of its first generation lifecycle, the Cayenne was down by 29.2% to 7,740 units but these figures are bound to improve with the launch of the new range.

Staying with the boardroom, Porsche’s main Zuffenhausen plant in built a total of 36,504 units of the Porsche 911—more than ever before. The Leipzig Plant built 35,128 units of the Cayenne and 290 units of the Carrera GT, which reached the end of its production as planned in May 2006. Including 30,000-plus Boxsters assembled in Finland, production increased to a total of 102,602 units, up 12.8% over the previous year. Porsche sales in Germany are up 12.4% to 3,950 units and in the rest of the world by an even more significant 15.3% to 12,590 cars. However, sales in North America are down 17.6% to 9,310 units. Porsche hopes that what it calls “young but fast-growing markets” such as Russia (16 dealerships to date) and China (20 dealerships) will contribute to the overall sales volume.

But who cares about all this when one is behind the wheel or should I say the real business end of the business? One of the most enjoyable things about being hosted by professionals is, well, their professionalism. One evening I wanted to go for a drive alone, not as part of the media pack that marauds Spanish roads during the day (don’t get me wrong—these are fun and it’s great to be with fellow journalists from the four corners of the globe) and so I was handed the keys of the new Cayenne Turbo and headed down to Cadiz. The car simply reeks of luxury—the Napa leather seats are virtually sportscar-like—so there I was snug as the proverbial bug. The new Panorama roof system was open and the BOSE Surround Sound System delivered 350 flawless watts of classic Rolling Stones. Maybe it should have been the Gypsy Kings, but who cared?

Here among the sleepy streets, I was lost in the twin pleasures of driving sheer luxury amid the history of Europe. I remembered that Cadiz was also where, in a 16th century sea battle, Sir Francis Drake inflicted such a damaging raid on the Spanish fleet, he was said to have burned the King of Spain’s beard.

Today, the new generation of Cayennes can lay claim to an equally hot performance.

In Germany, the basic model costs 51,735 euros, the more powerful S version costs 66,610 euros and the premium Cayenne Turbo costs 108,617 euros (including sales tax).

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Media Special

Rewarding creativity Regional ad awards handed out in Lebanon – Q&A

by Executive Staff
written by Executive Staff

Christian Cappe, CEO of the MENA Cristal Awards, president of the 2C Associés and general director of the Meribel Festival de la Publicité, struggled with local political developments to bring the awards show to Lebanon. But the organizers’ tenacity came through, and the ceremony honored the region’s best and more creative minds. Executive caught up with Cappe while he was in Lebanon.

E Describe your involvement with the MENA Cristal awards and the Meribel Festival. What inspired you to create a festival in the MENA region?

The Meribel Ad Festival was created in 2001 and for its first “edition” welcomed 300 delegates. In 2006, we received 850 delegates. This means the staff and I do our best to promote the event, searching new ideas on development and supporting networking between advertisers, clients and producers.

The MENA Cristal Awards was launched in 2005 with the aim of introducing an ambitious competition unprecedented in the Middle East and North Africa, the aim of which was to celebrate creativity in the region. Recreating the success of the Meribel Ad Festival in Europe, the MENA Cristal rewards the best works of the region with the famous “Cristal.” I really believe in this industry and my involvement is total.

E How would you describe the creative and advertising scene in the Middle East?

As Jacques Séguéla, vice president and worldwide chief creative officer of Havas Group and president of the MENA Jury said during the closing ceremony, “the level of creativity in the Middle East was very high this year, and comparable with what we can see in Europe at the moment.” It means that the standard of creativity in the area is improving faster but always keeping what is essential in the cultural identity.

E Do you see a large difference in style, caliber, etc. between entries for MENA Cristal and Meribel? Are there any regional trends that you find particularly interesting?

There is not such a difference between both events in terms of creativity and originality. The MENA region is emerging and proving to the world its capability and credibility in the industry. All the regional trends are being used in an intelligent and original way.

E Were there any entries you found particularly striking?

As organizers, we emphasize advertising and we must respect the necessary neutrality. Only the jury can judge creativity. Jacques Séguéla himself proposed to reward “Nedjma Couverture,” saying that this concept was the future: Interactivity between consumers and clients. So, the creative jury rewarded creativity, in particular the wonderful “Animals” by Saatchi & Saatchi Levant Beirut for the Ministry of Social Affairs, which won the Grand Cristal in the Film Cristal competition.

On the other hand, the Production Jury rewarded the excellence of the production of “In Games” by Grey Worldwide Beirut and City Films for the Asian Games Organizing Committee. This production was comparable to the very highest international standards.

E Did you face any problems in holding the awards in Lebanon, due to the current situation?

To be honest, of course. One of our biggest fears was the cancellation of lots of the delegates but this did not happen; in fact the response was fantastic. We could feel something indescribable. You have to live these emotions to understand. It was a hard mission but with the incredible support of the people from Lebanon and the region, we finally decided to carry on and hold it, whatever happened. I think it was the good decision. In addition, lots of the CEOs, chairmen, COOs of the biggest networks, big clients and producers were in Mzaar Kfardebian. They were happy to support the event and were amazed by the great atmosphere, the high-standard of the conferences and the quality of the winners. If I had to redo it, I would do it immediately.

E The Meribel Ad Festival is held every year in the same location in the French Alps. Will the MENA Cristal awards also adopt a permanent home? Would Lebanon be a likely candidate?

I would like to say yes. The locale of Mzaar Kfardebian is great and I do really hope the political situation will allow us to organize the next one in Lebanon. To be honest, it was quite complicated to do it this year, but the ski resort concept is magical and I am confident in the future. I believe in the MENA Cristal Awards and I believe in Lebanon.

E How have the MENA Cristal awards changed from the first
to second edition? What are some of your goals for next year,
or five years from now?

We consulted with the agencies, clients, production houses and the media to improve the quality from the first ad festival of the MENA region. The result was more competitions: Film Cristal, Outdoor Cristal, Magazine Cristal, Daily Press Cristal, Radio Cristal, Pluri Media Cristal, Cyber Cristal, and Marketing Services Cristal as well as the International Production Cristal to celebrate the work of production houses and technical industries. Our efforts were appreciated and we had the full support of those professionals who want to be involved in this initiative and who want us to develop this competition.

Furthermore, the year the MENA Jury was bigger, with 16 members representing important advertising networks and companies in the MENA area, and headed by Jacques Séguéla, a European with huge experience. For the sake of credibility and transparency, the votes cast in secret and even the jury didn’t know the winners until the ceremonies awards in Mzaar Kfardebian.

E Would you consider this year’s edition to have been a success?

Without hesitation, yes! We were the first ad festival of the year in the MENA region and we had transparency, a quality jury, great winners and exciting peripheral events. Also the fact that we [Séguéla, Dani Richa, President of the IAA Lebanon Chapter and Cappe] were received by Emile Lahoud, president of the republic and Fuad Seniora, prime minister, was a huge honor and great recognition for us.

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Editorial

Keeping the baby and the Baath water

by Yasser Akkaoui
written by Yasser Akkaoui

In 2005, the US and its allies, would have liked, by putting as much pressure on Bashar Al Assad, an internally-inspired regime change in Syria. Part of this strategy was the passing of UN resolution 1559, the architects of which were France, Saudi Arabia, the US and, exerting as much influence as they could, their allies in Lebanon.

But then Hariri was killed and Lebanon was (and still is) subjected to a sporadic campaign of instability and violence, creating uncertainty and confusion among its people.

Plan A therefore went the way of the St. Georges blast and the consensus was that a coalition of the willing, including Saudi Arabia, was drafting a Plan B to seemlessly remove the Baathists with little chance of an Iraq-style scenario developing.

But are they? While many see Syria only as a pariah state that has traditionally helped terrorists and extremists of every stripe set up an office here or launch an operation there, it might surprise many to learn that the regime has embarked full-throttle on a program of economic, judicial, banking and commercial reform.

One of the lesser members of the axis of evil has in fact styled itself as an axis of major investment. Banking licenses—both commercial and Islamic—are being issued with relative abandon and capital markets created. Real estate development is charging ahead with the likes of Emmar and Damac pouring money into mega-projects in the capital Damascus and elsewhere in Syria. Even adventurous Europeans are speculating on Damascene properties.

Yes, business plans for Syria are finding access to capital. Today’s investor community is simply not satisfied with a 10-15% return. The regional developer, financier or speculator will settle for nothing less than 25%, and it’s places like Syria—and Sudan and Kurdistan for that matter—that offer this.

Perhaps Bashar al-Assad believes that a growing economy with heavy regional investment may just be his get-out-of- jail-free card, or perhaps the investors are simply looking to get in on the ground floor with government incentives still on offer. They know their time will come, whoever is in power.

Either way, the money—and the promise of more— appears to be keeping the younger Assad afloat in some fairly choppy seas.

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Consumer Society

Ikea franchise unlikely in Lebanon

by Executive Staff
written by Executive Staff

Ikea has more than 250 stores in 34 countries, with over 310 million people visiting the low-cost home products retailer every year.

In Britain, according to one estimate, almost twice as many people visit an Ikea store on Sundays as attend church.

Not one percentile of Ikea’s annual visitor figures is likely to come from Lebanon anytime soon however, or indeed are Lebanese likely to read one of the 130 million copies of Ikea’s catalogue that were distributed last year. Neither is attendance at Lebanese places of worship likely to be rivaled by people opting to unpack and reassemble one of Ikea’s DIY wardrobes.

But why not? After all, the Swedish-created Ikea has had a presence in the Middle East since 1983 in Saudi Arabia, Kuwait in 1984, Dubai in 1991, and in Israel since 2001. In all locations the store has been a veritable hit, with enough demand in the UAE open a store in Abu Dhabi.

“We would love to be all over the world, and are growing with 20 new stores yearly,” said Charlotte Lindgren, Ikea’s corporate PR and media relations officer.

Stores are opening in China, two a year in Russia, and Japan is Ikea’s latest market.

So what’s wrong with Lebanon as a new store location? Firstly, it costs around $100 million to open one of Ikea’s aircraft hanger size stores, according to Lindgren, and involves a great deal of investment from not only Ikea but also franchisees—a price tag that would be equivalent to some of Lebanon’s larger shopping malls.

And secondly, just like there are no stores in South America or Africa, Lebanon arguably lacks enough people with the appropriate purchasing power necessary to make an Ikea store viable. Products would also have to be imported from Europe, and with the high rate of the euro right now could dampen Ikea’s competitiveness.

Equally, Lebanon does not have the expatriate population of the Gulf that needs to furnish new apartments on a regular basis as people come and go.

Although there would undoubtedly be a Lebanese market for Ikea’s designs, the Lebanese penchant for more traditional furnishings, such as handmade furniture and the ubiquitous Louis XVI style, would be an additional marketing obstacle.

And let us not even go into the state of the Lebanese economy, the political situation, and all the rest that is keeping foreign investors at an arms length.

But perhaps, and it is a big perhaps, some enterprising Lebanese might figure out a formula that could work here. After all, according to some sources, a Lebanese franchiser in Kaslik was interested several years ago in setting up an Ikea outlet.

The idea clearly remained a pipe dream however, and for the foreseeable future it would seem that Lebanese shoppers are to be confined to the traditional outlets, Khoury Home or BHV to supply furnishing needs.

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Capitalist Culture

The intifada will be televised

by Michael Young
written by Michael Young

Going back some 30 years, many Lebanese will recall that their civil war, which began in 1975, was mostly understandable to them through three mediums: newspapers, radio, and the more immediate experience of gunmen fighting in their streets. Television was far behind when it came to informing the public, or shaping its views.

There was a great leap forward in the mid-1980s, when the Lebanese Forces created the Lebanese Broadcasting Corporation. The television station not only allowed the militia to control an influential information platform when no one else did; it also (for those days) offered good entertainment, increasing the station’s popularity. It was a brilliant political gambit; but, most importantly, it was a brilliant financial one too. LBC brought much money to the Lebanese Forces, until the Hariri government’s new law on the audio-visual media in 1994 and the arrest of Samir Geagea formally took the station out of the former militia’s orbit.

Images equal political power

The audio-visual media law represented belated recognition of the political power inherent in owning a mass media outlet. The law effectively divvied up of the audio-visual landscape between major political leaders or institutions, who were granted directly or indirectly the means to get their message across. Prime Minister Rafik Hariri had his Future station, while Parliament Speaker Nabih Berri established NBN. Powerful politicians who didn’t own stations of their own invested in existing outlets, or maintained influence over stations owned by family members, such as Michel Murr in the MTV station controlled by his brother. The official Télé-Liban was gradually downgraded, though not eliminated, because President Emile Lahoud wanted his station.

In fact, Lebanon was going through two processes—both revolutionary in the Middle East: its leaders were embracing a potent new political medium, whose power was greatly enhanced by the expansion of Arab satellite broadcasting in the late 1990s; and they were doing so through private ventures. It was hardly ideal capitalism, since the audio-visual media law was oligopolistic, but it was vaguely capitalism nonetheless. And for all its faults, the audio-visual media sector was far more stimulating than what was on display in most other Arab countries.

But it was not democratic. The most remarkable example of television’s political potential came in 2002. In the Metn by-election that followed the death of parliamentarian Albert Mukheiber, MTV played a central role in mobilizing the then-opposition against a candidate backed by Lahoud and by Interior Minister Elias Murr. The election was a family affair, since MTV was used to support the candidacy of Gabriel Murr, against his niece Myrna, who was backed by Michel Murr, at the time Gabriel’s foe. But beyond that, the by-election was a referendum on the power of Syria and its allies in Lebanon. In voting for Gabriel Murr, many Metn voters were really voting against the Syrian-dominated order. MTV played the role of unifier between the diverse groups that formed the opposition coalition.

Taking mass media seriously

Gabriel Murr won the election, but this was reversed under political pressure. Murr’s victory was a red line that could not stand. The government’s harsh backlash showed how seriously it took the incident—or at least that part of the government allied with Lahoud, which saw Myrna Murr’s defeat as a personal affront. MTV was closed down, never to be reopened. There were obvious limits to what free media meant.

During the 2005 “Independence Intifada,” television stations again played a mobilizing function. That said, the old parameters of what was acceptable were basically respected. The audio-visual media were by and large conciliatory, reflecting the calculations of the members of a political class who did not want to break off contacts with each other. It was not until last year, following the summer war between Hizbullah and Israel, that media became more divisive—dangerously so.

The downside of privatization of the audio-visual media is that stations have become weapons in Lebanon’s internecine conflicts. During the rioting on Thursday, January 25, both Hizbullah’s Al-Manar and the pro-Hariri Future station fueled the worsening crisis. The essence of media liberty, no matter how imperfect, is to remain as objective as possible; or at least to avert violence. However, for Lebanon’s stations to become mere propaganda organs is precisely what capitalist culture in media, but also Lebanon’s best instincts of sectarian compromise, are supposed to avoid.

Michael Young

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Lebanon

Bias in the air – Lebanon’s political media

by Executive Staff
written by Executive Staff

The politics that have become so divisive on the Lebanese streets have reached the nation’s TV screens, prompting Lebanon’s media council chief Abdel-Hadi Mahfouz to blame certain channels for stoking sectarianism and engaging in political insults. “Media institutions are strongly asked to ease tensions and avoid transmitting news that might lead to strife,” he urged.

Lebanon has been plunged into a power struggle for three months now, ever since the Hizbullah-led opposition, mainly comprised of Michel Aoun’s Free Patriotic Movement, pitched their tents in downtown Beirut to call for the overthrow of the pro-Western government of Prime Minister Fuad Seniora.

Over the past five weeks the situation has become increasingly tense, following clashes between pro- and anti-government supporters that have left at least seven dead and 190 wounded. Purchases of automatic weapons have also reportedly risen, and in early February the government seized a cache of arms intended for Hizbullah, raising concerns that the sectarian conflict of Lebanon’s 15-year civil war, which ended in 1990, could return.

The two camps

Lebanese TV channels are split between the two respective camps: among major networks, Hizbullah-backed Al Manar TV, the National Broadcasting Network (NBN) and New TV are all pro-opposition, while Future TV and the Lebanese Broadcasting Corporation (LBC) are pro-government.

Although there are more channels critical of the government than pro, in terms of viewership LBC and Future have the lion’s share. The disparity could be minimized, furthermore, if pro-government Murr TV (MTV), which was kicked off the air by the former government in 2002 for criticizing Syria, returns to Lebanese screens.

“Every Lebanese TV channel has a propaganda leaning,” said Habib Battah, managing editor of the Beirut-based Midle East Broadcasters Journal. “Some try to be balanced, but all have their agendas. It’s pretty clear from the content they produce.”

Lebanon’s media has long reflected the country’s political and religious divisions, but sectarianism has become more pronounced following the war between Hizbullah and Israel last year.

“The interesting thing is during the July war the same footage was used on many channels, supporting Hizbullah. So sectarianism has gotten more derisive, more apparent,” said Battah.

Nabil Dajani, a communications professor at the American University of Beirut, agreed that the media are deliberately inflaming sectarianism, but he believes the blame should not lie solely with media outlets.

“You can’t only blame the media—who is behind the media? Politicians. And it’s the government’s fault for allowing the media to get away with it. There is an audiovisual law that prohibits sectarianism, but this government is delinquent and doesn’t step in,” he said.

Propaganda clips

Sectarianism and the trading of political insults are most apparent in news coverage and on talk shows. “An important event or speech will be covered by one set of media, but not by the opposing channels,” observed Battah.

One example was the demonstration on February 14, 2007, attended by hundreds of thousands of Lebanese to mark the second anniversary of the assassination of former Prime Minister Rafik Hariri. Opposition channels gave sparing coverage of the event, while pro-government channels LBC and Future TV gave extensive live coverage. “The media will also use clips taking (political) speeches out of context,” added Battah.

Future TV, owned by Saad Hariri, a member of parliament and the son of the slain former prime minister, and Hizbullah’s Al Manar TV are regarded by Lebanese media observers as particularly sectarian.

“There is intense rivalry between Future and Al Manar, from guests on talk shows to promo propaganda clips,” said Battah.

However, Nadim Munla, chairman and general manager of Future TV, disagreed that the channel is fuelling sectarianism in Lebanon.

“Lebanon is not going through normal times, so to assume or imply international criteria on Lebanese media during abnormal times is unfair,” he said in response to the Media Council’s recent statements. “All of Hassan Nasrallah’s speeches are live on Future, and we have a daily show that sums up all the news channels in Lebanon,” he added.

Moreover, Munla thinks the media council is “hypocritical” to call on TV channels to curb sectarianism, saying the council needs to start with themselves before pointing fingers, as many of its members are involved in the local newspaper market.

“They are political appointees. It is not impartial so I don’t want a lecture on how to do business,” he said.

Nonetheless, he also stated that the media should be at the forefront of change in Lebanon. Indeed, many channels are airing segments aimed at discouraging sectarianism and violence. One such montage on Al Manar showed a clock ticking back from 2007 to 1975, the year the civil war started. Attached to the clock were images from the recent clashes as well as archive footage, ending with the message “Let’s not go back” in Arabic.

A series of adverts encouraging unity around the idea of “I Love Life” have been aired on the pro-government channels, though the organizers of the campaign have stressed that they are an independent civil society gathering. Tensions are not expected to ease any time soon though, with Future TV to launch a 24-hour news channel and Michel Aoun’s party to launch Orange TV (OTV) later this year.

To the Future

Future TV expects to launch its new channel in the next eight to 10 weeks, “unless there are more unseen events,” said Munla.

The new channel is part of a major restructuring at Future, with new content on the entertainment channel and sales directed more at the Gulf region.

“The last pillar of change was to introduce a 24-hour news channel, the main reason being that in the last two years, we allocated more time to cover the news and current affairs,” said Munla.

He said the channel had regularly violated the time allocated to news, which is supposed to be limited to 20% of broadcast time, due to Lebanon’s turbulent politics.

“That affected our viewing base, and adversely affected our entertainment channel, so we will have a 24-hour news channel,” he added.

The new $10 million channel is considered a financial necessity as a result of the July war, with the conflict and the aftermath costing Future over 25% of its project advertising revenue for 2006. By launching the new channel with a state-of-the-art 1,800 m2 studio, Future TV intends to claw back its profits and regional position among the top five networks. Munla said that by the end of the year, Future hopes to return to “pre-recent event levels” and recover its market share by 2008.

News will be primarily Lebanese, but Future will also allocate 20% of coverage to European and Arab affairs, to boost interactivity and understanding between the two regions.

Meanwhile, OTV, the Aounist outlet, is raising funds through a joint stock company open to the public. Starting with a paid-up capital of $2 million, OTV has raised over $10 million via one million $10 shares to establish a terrestrial and satellite channel, and is currently embarking on a regional road show to whip up demand for the remaining shares.

Although OTV claims it will be objective, the channel’s name, recalling the trademark color of Tayyar, and thus the politics of OTV’s mascot, have prompted scepticism among commentators about how neutral it will really be unless there is greater involvement from foreign investors.

Not all bad news

The divergence of opinion on Lebanon’s TV screens may be perceived as fanning the flames of sectarianism and political divergence, but on a practical level, such a kaleidoscope of opinions can also be seen as indicative of a rather healthy, democratic media environment.

“If freedom of expression is measured in how often the opposition is on pro-government stations and vice-versa, we can be considered a highly democratic media industry,” said Munla.

From a certain perspective, Lebanese networks’ relatively open biases may be less dangerous than the illusion of neutrality propagated by channels in other countries. In Lebanon, viewers have the option of getting comprehensive coverage—they just have to watch news broadcasts from both political camps, and remember that the truth lies usually lies somewhere in between.

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Banking & Finance

Earning extra credit A surge in plastic

by Executive Staff
written by Executive Staff

Plastic is growing in the Middle East with the two leading global brands—Visa (12 million card holders) and MasterCard (undisclosed)—dominating the regional market.

During the 12 months to September 2006, Visa subscribers increased 23%; card sales value rose 22%, while retail sales volume went up 32%. In its results for 2006, MasterCard reported a growth of 46% in issued cards and a 34% increase in value of purchases, to $18 billion, across the South Asia, Middle East and Africa (SAMEA) region.

Denzil Lawson, MasterCard’s general manager for Middle East and Levant, told Executive that as of December 31, 2006, the company’s partner banks had issued 817 million cards for the brand worldwide, an increase of 12.3% over the same period in 2005.

“There is a huge potential for the growth of the payments industry in the region, and we expect that the usage of credit cards will further accelerate as consumers have a greater comfort level about making payments by using their credit cards,” Lawson said.

The United Arab Emirates is a particularly good market for growth in electronic payments. Although it is still a predominantly cash-based society—as are most Middle Eastern countries—it is more mature than others in the GCC in terms of card penetration, acceptance and infrastructure.

But Lawson noted that while the market has shown strong growth, its potential is still relatively untapped with many countries in the region having low card penetration of the banked customer base.

Among recent developments, local governmental bodies in the UAE have shown enthusiasm for automating payments through Visa acceptance—such as the Traffic & Licensing Department, and the Dubai Naturalization and Residency Department E-company.

Dubai eGovernment has teamed up with National Bank of Abu Dhabi (NBAD) to launch a co-branded Visa card that can be used for both eGovernment and day-to-day transactions. The promoters of the service say the new card provides a secure way for both individuals and corporations to conduct e-payment transactions with government departments.

According to MasterCard, the market in the Middle East is receptive to segmentation and this has enabled it to work on some innovative collaborations offering the cardholders card choices and benefits which are meaningful to them.

Ranks of Spending

According to Visa, Saudi Arabia ranks first in Visa card spending in the Middle East followed by the UAE and Kuwait. “GCC cardholders are increasingly taking advantage of the convenience and security of cards for daily shopping,” said Kamran Siddiqi, general manager for Visa International Central and Eastern Europe, Middle East and Africa (CEMEA) in the Middle East.

However, there is a downside. Credit cards can be just too convenient, with many customers forgetting just how punitive card companies can be with late payments. More than one emerging credit market has shown that a rapid rise in credit card market penetration often is followed by serious increases in consumer debt levels and, all too often, defaults.

Credit vs. Debit

The volume of credit card sales in the region is still a drop in the bucket, as MasterCard’s SAMEA turnover of $18 billion demonstrates when compared with the brand’s worldwide transactions, which totaled almost $2 trillion in 2006, generating Gross Dollar Volume (GDV) of $1.9 trillion, an increase of 14.9% over 2005.

“There are is debit card opportunities in Lebanon and Egypt, as well as the opportunity to increase the banked population,” MasterCard’s Lawson said. “Debit cards in the Middle East are predominantly used for ATM transactions. Mature markets see (point-of-sale) growth rates outstripping ATM rates.”

According to statistics provided by Visa International, the ratio of Visa debit card users to credit card users in the GCC is 4 to 1. Statistics also showed that the volume of retail purchase transactions with usage of Visa debit cards is 50% higher than the volume of transactions using credit cards.

That is good news for the card issuers, since credit cards harbor more earnings options and generate better profits to issuers than the debit cards with their remote risk opportunities.

The Visa card business in the UAE has been growing by more than 25% year on year over the last few years, and Visa’s Siddiqi said that by moving away from cash to automated electronic payments, bank deposits are deepened, thereby increasing funds available for commercial loans in the region—a driver of overall economic activity.

“The process also allows for greater transparency and accountability leading to stronger efficiencies and better economic performance,” he said, claiming that Visa’s role is beneficial not only to the financial services sector but also to the economy as a whole. “Recent studies have shown that card payment is a catalyst for economic growth and can help grow a nation’s GDP by 0.5% to 1%,” he added.

Fraud prevention

Although credit card companies are doing all they can to combat illegal activity by introducing chip-and-pin and security numbers, some credit card owners still appear to lose all sense of logic when it comes to giving people confidential information about their cards.

Commenting on fraud, Siddiqi said that Visa takes pride in the fact that the level of fraud associated with Visa card transactions from cards issued in the Middle East is currently one of the lowest in the world.

“This stems from a variety of reasons including the ongoing collective efforts of the industry as a whole. From Visa’s end, we support our member banks with product and technology development and risk management of online payments,” he said, adding that Visa is also actively involved in fraud forums and seminars with both member banks and local enforcement authorities.

“Constant innovation in new technologies such as chip cards also helps to mitigate the level of card fraud risk,” Siddiqi said.

In Lebanon

Economic growth and disposable incomes in the Gulf region are larger than the respective figures in the Levant and North Africa. Between heavily underserved credit card markets such as Egypt or Algeria and the frontrunners in plastic payments in the GCC, Lebanon occupies a position in the middle.

Figures released by Lebanon’s central bank show that the number of credit and debit cards issued at the end of September 2006 reached 1.257 million cards, down 1.9% from the second quarter of 2006, but up 10% on the year.

Banks—especially the retail-focused banks in the top segment of the market such as Audi, Byblos, Fransabank, and Credit Libanais, as well as foreign banks HSBC and Standard Chartered—have ridden the local credit card train in Lebanon for a good while now, building their card programs around the standard parameters of staggered spending limits and special feel-good factors for the wealthiest and most profitable customer groups. But the Lebanese banks have also developed lifestyle cards and co-branded cards that appeal emotionally to air travellers, fashion fans, cigar smokers, compulsive mall goers, or simply central bank employees.

Payment card usage by the resident card holders in Lebanon increased 24.2% to an average monthly amount of $44.4 million in the first nine months of 2006 when compared with the same period in 2005. With an increase of 4.01% to about $850,000 in monthly average, card usage by visitors and non-residents in Lebanon showed much lesser growth last year, hardly surprising in light of the tourism malaise caused by the war last summer.

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Paris III provides some relief but debt situation still perilous

by Mounir Rached
written by Mounir Rached

The exuberant Paris III conference provided $7.6 billion in concessional pledging; certainly, a positive outcome as concessional loans—loans with flexible terms for the borrower—are more favorable than market borrowing in terms of debt service cost. The donors pledged $1.3 billion in private sector loans reflecting their concern that the sector has been constrained by stringent high-cost financing. A key issue is how these pledges, when they are realized, will impact government finances.

Taking away the $1.3 billion earmarked for the private sector through the voluntary intermediation of the private domestic banking sector and $750 million in grants, leaves $5.6 billion available for government financing between now and 2011.

Preliminary reports indicate that out of the $5.6 billion, budgetary support (funds not requiring conditionality) is not expected to exceed $1.3 billion. Of remainder of the financing, $4.3 billion will be tied to the donors’ reform package, implying a rise in spending by an equivalent amount to implement the conditions set by donors.

Debt accumulation with Paris III assistance is therefore expected to reach at least $11.8 billion by 2011 to finance the rise in fiscal deficits reflecting the increased capital spending associated with reform (excluding the additional interest payments associated with debt service). As a result, the total debt could rise to $52 billion and the debt ratio to 167% unless a significantly higher growth rate is realized. Alternatively, debt accumulation without Paris III financing was expected to reach $49 billion, 158% of GDP, as a result of cumulative projected deficits over the same period.

Yes, Paris III disbursements may not necessarily mitigate the debt burden and could indeed make it bigger. However, this is still certainly much better than what would be anticipated without the implementation of a reform program, which would see the debt increase to an unsustainable 180%. This highlights the significance of the reform program, and the need for higher grants in the aid package. Privatization and mobile licensing could further enhance the debt outlook through debt write-offs and enhanced growth potential.

Paris III financing, however, provides added benefits: debt maturity structure and debt service will improve in comparison to alternative sources of financing, mainly market borrowing. Further debt diversification by the government—by practically doubling the official debt—would reduce exposure to market pressure, secure better credit rating on international markets and possibly reduce the vulnerability of the banking sector as the government seek recourse to alternative financing.

The tax and expenditure package designed to bring revenue and expenditure to 25% and 27% of GDP respectively by 2011 is also step in the right direction. The higher VAT and higher receipts from Global Income Tax could compensate for the revenue loss resulting from the European Free Trade Agreement (EFTA) sequenced tax reduction—12% annually to be eliminated completely by 2015— on selected imports originating in the EU. However, VAT needs to be streamlined to preclude tax cascading. Most of the gain in expenditure decline could be generated from terminating transfers to EDL, which make up 3.5% of GDP alone.

The tax on interest income earned by residents and non-residents, estimated to raise revenues by 0.5% of GDP, deserves a careful review as it lowers the effective interest rate earned and may lead investors to reconsider keeping their funds in Lebanon.

Other elements in the recovery documents, such as pension reform, are positive and reassuring, but there are governance and accountability concerns in other areas that are themselves issues earmarked for reform. A well-articulated plan with a comprehensive timetable for all reform is needed if a reform plan is to be held up for public accountability.

The main challenge for the government is to proceed rapidly in implementing the proposed reforms with a high priority placed on accountability, governance and transparency. Allowing access and monitoring by independent citizens’ oversight groups is one way to regain public confidence and ensure a credible and effective implementation of reforms.

Dr. Mounir Rached is a senior IMF economist and 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.

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Middle East coming out as top spot for emerging markets

by Fadi Chahine
written by Fadi Chahine

So, you are an emerging markets investor, or concerned about the volatility in the US or European markets. If you have worries about a slowing of Chinese investments, or you believe a global financial bubble is about to burst, you may want to consider pouring some of your assets into the number one emerging market in the Middle East: Saudi Arabia.

Experts say the safest emerging markets are those which are flush with liquidity. This allows investors to keep investing and buying, even when an emerging market undergoes a correction.

Case in point: Saudi Arabia and the GCC. Although the Saudi stock market and its smaller neighbors experienced substantial corrections in 2006, their fundamentals have remained strong and analysts said the drop was softened by their abundant liquidity. We all know the story of the oil price boom of the past two years and how it swept billions of dollars in windfall revenues into GCC economies, driving their stock markets up.

Until February 2006, GCC bourse indices broadly mirrored the upward price movements of oil. But then the investors caught on to the notion that price-to-earnings ratios of 30 to 40 times have moved beyond reason. It has been well reported how retail investors, who jumped on the bourse bandwagon late, lost their (borrowed) shirts in the downturn.

However, the second half of the story is that the fundamentals of corporate health—at least for blue chip firms—in GCC markets are today better than recent stock prices suggest. This has a lot to do with the way in which the high GCC oil revenues have percolated into the economy and created growth potential.

Should you trust Gulf markets, especially the Saudi Stock Exchange? You may want to take a cue from the prince, and this is not Machiavellian talk. In early February, Al Waleed bin Talal, nicknamed by Time magazine as the Arabian Warren Buffett, announced that his company, Kingdom Holding Company (KHC), has approved a plan to invest around $2.5 billion in the Saudi stock market. The money will mainly go to the banking, media and real estate sectors.

Middle East markets trending upward despite volatility

Still concerned? It is true that some Saudi investors in spring 2006 tried to prop up the Saudi bourse through loudly-announced share buying that slowed the slide but could not stop it. But this is different.

Al Waleed’s modus operandi is to buy strategic stakes in global brand name companies during times of distress on the stock exchange, and to work closely with management to engineer a turnaround. Al Waleed sees the markets in the Middle East, where most of his money was being invested since 2004, as “trending” upward.

Al Waleed’s confidence appears to be well-placed, as the latest figures of corporate earnings for the listed companies have registered strong and consistent growth in the last five years. At $458 billion, the Tadawul Stock Exchange is the fifth-largest in market capitalization within the global emerging market universe, and the most liquid.

After a 32% drop in market capitalization as of early 2006, valuations improved and positive projections are expected for the next five years. SABIC, the petrochemical and construction company for example, is selling at 15 times the expected 2006 earnings, down from a peak of 40. American and European banks, which have long scoured GCC countries almost exclusively to reel in high net worth clients, are increasingly paying attention to the development of these markets. The analysts of these global banks now recommend bouquets of strong but undervalued Saudi companies.

Sound good? There’s just one catch: To invest you must be a Saudi resident. So start making friends in Riyadh.

FADI CHAHINE is the Managing Editor of Regional Press Network (RPN)

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