Bush’s Middle East mission

by Lee Smith January 1, 2007

written by Lee Smith

As every upper level manager knows, you bring the consultants in to buy you some peace and quiet with the shareholders while you’re deciding whether the buy-out clause in your contract turns out to be more lucrative than the year-end bonus. So why did George W. Bush, the Harvard Business School-educated CEO of the United States of America, let the consultants get all the headlines? After the mid-term elections, all anyone could talk about in Washington was the Baker-Hamilton Iraq Study Group.

Leaks from the ISG provided the press with plenty of cannon fodder, as conservative publications went on the offensive against Baker, the man who handed Lebanon over to Damascus, and let Saddam stay in power to become the symbol of anti-Americanism in the region. White House critics on the other hand called it the end of the Neoconservative project in the Middle East, a return to a “mature” Middle East policy, managed by the Bush family’s long-time fixer. Savvy insiders wondered if the formation of the bi-partisan group was some clever plan of the president’s to make the Democrats equally culpable for the meltdown in Iraq. And everyone wanted to know if the study was likely to become the blueprint for American foreign policy.

In the end of course, it was all much ado about nothing, as Bush acted like a proper CEO and tossed the report in the garbage. Jim Baker shouldn’t give up his day job, one White House wag remarked, putting an end to weeks of speculation: the President still makes American foreign policy. And yet after the Democrats won both houses of Congress, and polls show an American public increasingly dissatisfied with Bush’s Iraq strategy, the major question still lingers: what is this president’s foreign policy?

Bush’s legacy rests entirely on Iraq. The problem is that it is precisely this large Arab state that is preventing the White House from seeing how much the ground has shifted during the last four years, partly due to Iraq itself, but largely just because the region is always highly volatile.

After September 11 the Americans were mad at the Sunnis, especially Saudi Arabia. It was Riyadh after all who had provided, unwittingly or not, much of the staffing and financing for the largest terror attack in history. Part of the idea then behind the invasion of Iraq was to rearrange the regional balance, thereby empowering the Shia. But four years after the fall of Saddam’s regime, the US’ major problem in the region is not Sunni jihadism, but the Islamic Republic of Iran. Tehran is at war with the US, and is fighting American allies, interests and troops throughout the region.

The key to understanding this new regional alignment of course is not Iraq, but Lebanon. Israel’s war against Hizbullah drew the lines very clearly, and now Jerusalem is reportedly offering the Saudis a chance to re-affirm the casual alliance contracted during this past summer. Ehud Olmert intends to meet with Saudi officials to kick-start the moribund peace process. Does that mean that a comprehensive peace deal between the Israelis and Palestinians is finally in the offing? Of course not. The point of the exercise is to take the Palestinian file away from Hamas’ Iranian and Syrian sponsors and return it to the Sunnis.

So, if Israel and the traditional Sunni regimes have lined up under Washington’s umbrella, why doesn’t the US know it? Because of Iraq. If the White House sides with the Sunnis, the Shia will make it impossible for US troops there. And thus, the White House is caught in a strange bind – it knows that pro-Sunni policies in the rest of the Middle East will affect its standing in Iraq, but cannot yet admit it is impossible to detach Iraq policy from a larger strategic vision.

And it’s not just the administration that’s stuck; the Baker Study Group is the clearest manifestation of this confusion about the region. James Baker is as close to the Saudis as any other living American and the Saudis obviously do not want the US to engage Syria and Iran. And here he is putting forth advice – withdrawal from Iraq to leave the Sunnis at the mercy of the Shia, while “talking” with Iran and Syria – which would undermine an ally whose vital interests, at least in this case, are perfectly in line with Washington’s: to maintain the position of the US in the Persian Gulf.

The fact is that the Bush administration, its critics and enemies have greatly misunderstood the nature of American power. Remember that Osama Bin Laden said the US was a “paper tiger” because it was flushed out of Vietnam, Beirut, Somalia, etc., and hence Bush says he will not “cut and run.” So what is next? To prove to an obscurantist fanatic like Bin Laden that it is the earth that revolves around the sun and not the other way around?

It is easy to see how the US has failed in Iraq, and it is equally easy to forget the degree of difficulty involved. In a matter of months, the US brought down two troublesome Middle Eastern regimes, and only a country as rich and powerful, capricious and arrogant as America could afford to believe it was in the interest of the world to democratize these places as well. That 150,000 US troops and scores of American diplomats could not bring Jefferson to the land of the two rivers describes the limits of a missionary vocation, not power. So, what is the point in saving Iraq if it costs Washington the world – or worse, American hegemony in the Persian Gulf?

Lee Smith is Hudson Institute visiting fellow and reporter on Middle East affairs

January 1, 2007 0 comments

Consumer Society

Regional retail boom counting on luxury

by Executive Staff January 1, 2007

written by Executive Staff

After several years of sluggish turnover, the global luxury industry roared into life in 2006, with worldwide sales reaching a hefty $150 billion. A testament to the industry’s revival is the number of flagship stores spawning around the globe from such über brands as Louis Vuitton, Chanel, Hermes and Gucci.

By 2010, the Middle East luxury market potential is expected to hit the $100 billion mark as Gucci, Chanel et al make headway into the demand-filled region through local franchisers and retailers. Department stores, including Saks Fifth Avenue and Harvey Nichols, are also opening outlets in the region. In Dubai, Harvey Nichols opened a three storey, 12,500 square-meter store in the Mall of the Emirates, their biggest store outside London. With oil revenues and a growing population, the luxury Arab market has a seemingly insatiable appetite.

Global vision

Enter the Middle East Luxury Group (MELG). Established in 2005, the company is hoping to reap the rewards of this exciting market trend, especially when considering that 40% of all haute couture clients are Arabs. The group, which expects yearly sales of $80 million, believes it is revolutionizing the luxury industry.

“What we are actually providing here is a unified concept in luxury, encompassing everything from clothing to eateries, media and hotel businesses, and we are forcing others to keep up with this trend,” explained Elias Abi Khaled, MELG’s CEO.

The man behind MELG, Bahij Abou Hamzi, who made his name in telecom with his Global and Liban Call services, has so far invested $25 million in Beirut through his company. “The owner’s strong network base gave us contracts with popular brand names,” said Abi Khaled.

MELG’s media arm includes Fashion TV Arabia and Avenue, a fashion magazine that is currently preparing its first issue. The luxury retail activity consists of 13 exclusive brands and multi-brand stores, including Gianfranco Ferre, Vicini, IT, M for Missoni, Exte, and Just Cavalli. The group has also dipped its toes in the hospitality sector with the 109 Café.

“The MELG vision is of a global nature, as we treat the various fashion interrelated activities as one, with complementary functions interacting for the benefit of the whole entity,” explained Abi Khaled, adding that the group intends to expand its line of products and services to eventually include a luxury hotel.

At the moment, MELG employs 150 people and is expected to grow by 100 more within a year, an indication of the group’s aggressive expansion plan. Outlets are scheduled to open in Kuwait, UAE and Bahrain within a year, as well as stores scheduled to open in Qatar, KSA, Egypt and Jordan.

Unique approach

“We avoid franchising for obvious profitability concerns,” says Abi Khaled. “Opening our own points of sales underlines our concern for quality. Each outlet conveys the image of the MELG and we control every aspect of the service.”

Boasting a varied product base within its retail activity, MELG had to face conflicting interests in certain markets, where local exclusivity contracts preempted the company’s representation. As a direct consequence, MELG does not carry a uniformed basket of goods over the region. “Certain brands, including Versace Jeans Couture, Galliano, GF Ferre and Plein Sud, are however available through our multi-brand store,” said Abi Khaled, adding that “within the retail line of activity, outlets are all serviced by the Beirut purchasing platform, as it remains, after all, the fashion capital of the Middle East.”

Abi Khaled believes MELG to be currently among the top five luxury retail companies in the country (the group’s competitors are the El Tayyer group, Villa Moda and Chalhoub) but expects the group to eventually be the only one with an effective regional presence in the Middle East and GCC areas.

“Our goal is to establish a regional identity, which is built through a strong presence in most markets in the Levant and GCC areas,” he said. However, because MELG was first launched in Lebanon, the marketing campaign was kept on hold because of political unrest. “For other countries, one main marketing theme is adopted, which takes into consideration local cultural differences and is adapted to each country individually using TV, print and the group’s monthly fashion magazine, as well as other specialized shows and events.

January 1, 2007 0 comments

Editorial

Tailoring a dream

by Yasser Akkaoui January 1, 2007

written by Yasser Akkaoui

Qatar can look on its hosting of the recent Asian games as a job well done. But the Genesis of the nation’s rise to prominence from being a Gulf backwater is predicated on a vision in which it deliberately chose to differentiate itself from its glitzy neighbor Dubai and Singapore, with its thick seam of Asian diligence.

Where would be the value-added in duplicating a wining formula? Qatar finally chose education and excellence among its new set of core values. Sport and the locally-initiated Aspire campaign – launched through the prism of the Asian games – represents the latter of these values, while Doha is now a hub for foreign campuses of some of the finest international names in education like Cornell and Carnegie Mellon.

Elsewhere, the GCC real estate boom is in full swing and stretching its network across the region. This presents new challenges to those developers who are used to creating from scratch in desert expanses – a la the compound culture from which it could be argued this formula sprung. The nations of the Levant and North Africa are going concerns and any mega developments will need to embrace the cultural, social and ethnic mores of these countries. Citizens – like the SIMs in the SimCity computer game – cannot be imported like the eager westerners brought into the GCC.

But let us not forget that as the second anniversary of the assassination of Rafic Hariri draws near, that he was the granddaddy of these mega projects. Hariri, like the visionary gulf rulers, was weaned on the GCC experience and was imbued with the idea of developing a dream that he could export to Lebanon. The Beirut Central District, the Dbaye Marina and the now Rafic Hariri International Airport were the examples he set and now his template is being rolled out across Jordan and the UAE.

That Lebanon has fallen behind is more to do with its erractic political dynamic. The governments of North Africa, not to mention Syria and Jordan, can execute these projects because the central government can directly control their implementation, by fast tracking laws that directly affect the economic good.

Sadly, in the Middle East, you still need absolute power to get absolute results.

January 1, 2007 0 comments

Lebanon

Pioneering Real Estate

by Executive Staff January 1, 2007

written by Executive Staff

As many developers and investors eyed the Lebanese real estate market cautiously at the start of 2007, Bassil Real Estate Developers (BREI) attracted significant local and regional attention for moving forward with new projects despite political uncertainty. Last month, BREI formally unveiled plans for the seventh edition of its luxury Convivium brand, a $15 million venture with leading Kuwaiti asset management and investment banking organization MARKAZ.

The new ‘it’ neighborhood

With a total development area of 12,000m2, Convivium VII, which will be built in the Badaro area of Beirut, marks the brand’s first departure from the Gemaizeh neighborhood, where Convivium I-III are located and IV-VI are at various stages of completion. In fact, BREI was among the first companies to recognize Gemaizeh’s potential: now, as the company shifts its gaze to Badaro, many people are beginning to speculate as to whether BREI might be, once again, ahead of the crowd. Is Badaro Beirut’s next ‘it’ neighborhood?

According to Patrick Geammal, general manager of Ascot Real Estate in Beirut, Badaro’s potential is enormous. “Karim [Bassil, BREI’s CEO ] is a pioneer to have thought of the area. He’s always a pioneer,” noted Geammal, who believes that BREI’s venture will mark the first step in the development of Badaro. Three to five years from now, he predicts, the neighborhood will be on every developer’s list.

Badaro’s potential, explains Geammal, is built on three factors: its geographic location, its relative affordability, and its pleasant tree-lined mixed-use character.

On the first count, Geammal observed that “Badaro has all the geographic components for success: it is the crossway of Beirut. It’s just minutes from Verdun, Hazmieh or downtown. But it’s also right by Ashrafieh.” Proximity to Ashrafieh leads into Badaro’s second cachet: affordability.

As Ashrafieh and Sodeco have become increasingly expensive (and, to put it simply, full – there is little undeveloped land in the area), people have begun to look elsewhere for residential property. At present, prices per square meter in Badaro range from around $800 to $1,300; in Ashrafieh, average prices for new build are around $2,200/ m2. “In the future, Badaro will simply be a continuation of Ashrafieh,” predicted Geammal. “It’s already starting to emerge as an option: people realize they can get a bigger house on a smaller budget. It’s a normal extension of the market.”

In demand

This effect has already been seen in Sioufi, a residential neighborhood on Ashrafieh’s eastern edge that has seen a boom in recent years. However, Geammal believes Badaro will quickly outstrip Sioufi as the best Ashrafieh alternative. While Sioufi is almost exclusively residential, lacking commercial facilities, Badaro is mixed-use, housing residences, offices and numerous shops, banks and restaurants. Badaro also offers something rarely found in Beirut: an abundance of trees and greenery.

“Badaro gives the impression of Rabieh, but it’s just a bridge away from the BCD,” noted Geammal. “It’s a very interesting spot.”

BREI certainly thought so. The Convivium VII project was tentatively drawn up several months before the four plots in Badaro were bought in October 2006. “It’s a great location, and it goes perfectly with our concept. With the Convivium brand, we don’t want to be everywhere – we only consider places that match the brand’s identity, which means a very specific urban environment,” explained Rania Tueini, marketing and communications manager. The two-building residential project, which will be ideally-situated between the museum and the hippodrome, also includes its own 120-meter-long private garden, which Tueini cites as a way of blending the development in with the neighborhood (one of Convivium’s trademarks). So far, response has been positive: BREI policy demands that 20% of units be sold before any project is launched, to confirm sufficient demand. Construction has yet to begin, and Convivium VII was only just announced – but 35% of available units have already been snatched up by eager buyers.

Say you read it here first.

January 1, 2007 0 comments

Region Uncategorized

Another year Another conflict

by Nicholas Blanford December 28, 2006

written by Nicholas Blanford

If there is one abiding image that symbolized the horrors of the Middle East in 2004, it had to be the harrowing videotaped pictures of doomed hostages in Iraq. The shots of terrified captives pleading for their lives are the antithesis of the optimism expressed by American officials at the beginning of the year that Iraq would become stable with the formal termination of the United States-led occupation in June and creation of an interim Iraqi government. Like other key areas of conflict in the Middle East in 2004, Iraq has dashed even the frailest of expectations.

At the beginning of the year, the Road Map unveiled in Spring 2003 by President George W. Bush was still considered a viable means of charting a peace between Israel and the Palestinians, despite the continued violence in the West Bank and Gaza. Libya announced it was abandoning its weapons of mass destruction program after tiring of its pariah status, setting a strong example to other countries with WMD ambitions, while Syrian President Bashar al-Assad signaled a willingness to resume peace talks with Israel after a four-year hiatus. Elsewhere, a democratic reform initiative from the Bush administration was spurring Arab governments to begin assessing political and social change in their countries.

Saudi Arabia is facing its worst unrest in years with a series of bombings and shootings carried out by Islamic militants seeking to overthrow the royal family.Yet the death in November of Yasser Arafat, the veteran Palestinian leader, spurred a flurry of international diplomatic activity amid hopes of a new beginning for the peace process. But a breakthrough appears remote given the Israeli government’s determination to proceed with a unilateralist agenda and the uncertainty surrounding the emergence of a new Palestinian leadership.

The Syrian-Israeli peace track remains frozen with Sharon clearly reluctant to resume negotiations, particularly at a time when Damascus is subject to a United Nations Security Council resolution and unprecedented international scrutiny. At end of 2004, the carnage in Iraq has developed an ineluctable momentum, which few see ending anytime soon, while Arab governments generally have been hesitant in embracing even minor reforms, despite mounting pressure from the West.

The Iraq debacle

The architects of the US-led invasion of Iraq had harbored ambitions that the overthrow of the Baathist regime and the introduction of democratic rule would engender a domino effect throughout the region, with dictatorships being replaced by budding democracies. The goal may have been noble, but the manner in which it was implemented was grounded in naivety and obtuseness, a fundamental failure to understand the ethnic, social and cultural realities of Iraq.

Early policy decisions, such as the disbandment of the Iraqi army and the de-“Baathification” process as well as questionable military tactics, fueled the budding insurgency in Iraq during the summer and autumn of 2003. From simple hit-and-run guerrilla tactics, the insurgency has evolved over the past year into a fluid multi-dimensional guerrilla war which shows little sign of diminishing despite – or even because of – the measures undertaken by the Iraqi authorities and their American allies.

The formal end of the American-led occupation in June and the hand-over to an interim Iraqi government did nothing to quell the insurgency. Ayad Allawi, the interim prime minister, is known as the “mayor of Baghdad,” an ironic term that still probably overstates the reach of his influence, which by the end of the year barely stretched further than the barricaded Green Zone in the heart of the capital.

Oil exports, the revenues of which were supposed to help fund reconstruction, have been decimated by the near daily attacks against Iraq’s oil infrastructure. US officials predicted before the war that Iraqi oil would generate $50 to $100 million in two to three years. But some 250 attacks since the end of the war have resulted in revenues of only $17 billion. The absence of Iraqi oil from the international market is a significant factor in the soaring oil prices of recent months which have reached in excess of $50 a barrel.

The violence is laying bare the country’s ethnic and sectarian seam lines, provoking concerns that Iraq may eventually splinter into three or more states. The Shiites are the most vocal champions of Iraq’s territorial integrity and have been at the forefront of the call for nationwide elections. Comprising some 60% of the population, the Shiites expect elections to transform their demographic advantage into real power after decades of being marginalized by the minority Sunni elite.

The Kurdish question

That ambition, however, causes unease among the Sunni and Kurdish communities which each represent 20% of the population. Despite Kurdish leaders’ stated allegiance to a united Iraq, separatist sentiments run deep among the Kurds, which the ongoing turmoil in the rest of Iraq is doing nothing to abate. Indeed, the Kurds have been steadily reasserting their authority over the oil-rich city of Kirkuk, home to a volatile ethnic mix of Kurds, Turkmen and Sunni and Shiite Arabs.

The prospect of an independent Kurdistan continues to alarm neighboring Turkey, which has threatened to intervene militarily in such an event. Turkey and northern Iraq’s other neighbors, Syria and Iran, fear that their own sizeable Kurdish communities will begin agitating for greater rights if an independent Kurdish state emerges in Iraq. That concern hardened in March when Syrian Kurds rioted for several days in the Hasake region of north east Syria.

The Sunni minority

The Sunnis, who populate the mainly desert and agricultural heartland, fear marginalization in a future Iraq dominated by Shiites. A key element in neutralizing the insurgency is to encourage the emergence of a new Sunni polity to replace the outlawed Baath party, which can participate in the political process. As it is, the most popular Sunni representative gathering at present is the Muslim Clerics Association, a religio-political group of hard-line Sunni clerics, who are at odds with the interim Iraqi government, oppose the presence of foreign troops in Iraq and have called for a boycott of the nationwide elections scheduled for January 30.

In preparation for the January elections, the US military launched a number of operations in October and November to break the back of the insurgency. But the insurgents have generally avoided a direct confrontation with the Americans, choosing to regroup and stage attacks elsewhere in the time-honored fashion of guerrilla warfare. Under the present circumstances, a military solution to the insurgency appears remote because there are insufficient coalition troop numbers to police the country and the newly formed Iraqi security forces are proving unreliable.

The unrelenting diet of suicide car bomb attacks, kidnappings, roadside ambushes and the brutally effective tactic of beheading hostages has forced aid agencies, charities and foreign businesses to abandon the country, undermining the ability of the international community to help in the reconstruction process.

Although Iraq has become synonymous with the decapitations of foreign hostages, the practice began this year in neighboring Saudi Arabia with the videotaped execution of an American, Paul Johnson, by extremist militants, who have seen to it that Saudi Arabia has been rocked by a wave of kidnappings, shootings and bombings since May 2003. The Saudi security forces have launched a crackdown on the militants, arresting hundreds of suspects, often during bloody shootouts.

The Palestinian-Israeli conflict

For most of the year, peace between Israel and the Palestinians has rarely looked more remote. The much heralded Road Map was essentially ignored by Israel and the Palestinians, while the US was too preoccupied with Iraq and the presidential election to actively coax the two sides back to the peace table.

Sharon, supported by Washington, refused to deal with the Palestinians while Yasser Arafat remained head of the Palestinian Authority. The veteran Palestinian leader was pronounced “irrelevant,” threatened with assassination and confined to his crumbling headquarters in Ramallah. Four years of fighting have left the PA and its security apparatus in tatters and in no position to rein in the numerous autonomous militant groups that have filled the vacuum. Israel continued its policy of assassinations, killing in March Sheikh Ahmad Yassin, the blind and crippled spiritual leader of the Hamas movement, and a month later Abdel Aziz Rantissi, the head of the Hamas politburo.

The absence of a negotiating partner to suite Sharon’s requirements left him free to pursue his unilateralist agenda of building a concrete barrier separating the West Bank from Israel and preparing for a withdrawal from the Gaza Strip. Sharon’s plan to abandon the Gaza Strip along with four settlements in the northern West Bank has caused considerable controversy in Israel. The right wing strongly opposes any dismembering of Jewish-only settlements. The left wing found themselves in the awkward position of being obliged to support a plan that reduces the level of occupation while still not fully trusting Sharon’s motives.

With his government divided over the plan, Sharon traveled to Washington in April to seek the support of his ally, George W. Bush. The Israeli premier was rewarded with a commitment from Bush that there would be no right of return for millions of Palestinian refugees that Israel could keep some of the settlements in the West Bank and would not have to withdraw to the 1967 “Green Line” border. It was an unprecedented public concession to Israel from an American president, legitimizing the illegal colonization of an occupied land and prejudicing the final status talks in Israel’s favor.

Arafat’s death encouraged speculation of a potential new beginning to the peace process. But given the fragmented nature of the Palestinian polity, the transition to a new leadership could be marked by intra-Palestinian violence, which would delay any resumption of negotiations with Israel.

As for Sharon, he remains committed to his Gaza withdrawal plan and is in no hurry to resume peace talks with the Palestinians. That much was clear from a revealing interview given by Sharon’s senior advisor, Dov Weisglass, to Israel’s Haaretz newspaper in October. Weisglass admitted that the Gaza disengagement plan was “formaldehyde” to freeze the peace process with the Palestinians, “all with a [US] presidential blessing.”

Road to Damascus

Sharon’s reluctance to discuss peace with the Palestinians extends to the Syrian track. From December 2003, Bashar al-Assad has been dropping hints with increasing frequency that he is willing to resume unconditional negotiations with the Israelis. Assad’s interlocutors believe the Syrian president is genuine and Israeli military commanders have recommended taking advantage of Syria’s diplomatic isolation to cut the best possible deal. But Sharon, so far, has refused, saying that Damascus must first curtail its support for militant Palestinian groups and Lebanon’s Hizbullah.

Syria’s bargaining position has rarely been weaker. The US slapped limited sanctions on Damascus at the beginning of the year as part of the Syria Accountability Act, which calls for a Syrian withdrawal from Lebanon, cooperation on stabilizing Iraq, abandoning its alleged WMD program and ending its support for “terrorist” groups. Terminating Syria’s influence over Lebanon was elevated from a fringe issue in Washington to a stated policy goal of the Bush administration in 2004.

Syria’s approval for an extension to Lebanese President Emile Lahoud’s mandate led in September to the US and France co-sponsoring a UN Security Council resolution demanding Damascus cease interfering in Lebanese affairs. Resolution 1559 also demands a withdrawal of Syrian forces from Lebanon, the disarming of Hizbullah and Palestinian militias and the deployment of Lebanese troops to the southern border with Israel.

Damascus has made a greater effort to beef up security measures along its 600-kilometer desert border with Iraq to prevent infiltrators joining the insurgency. But the US has ruled out granting Damascus leeway in Lebanon in exchange for greater cooperation over Iraq.

Diplomacy and democracy

The unrelenting violence in Iraq and the Palestinian territories has overshadowed faltering attempts in early 2004 to promote political, economic and social reform in the Arab world. The Bush administration’s Greater Middle East Initiative, a framework for Arab reform, was widely criticized as an unwarranted meddling in Arab domestic affairs. It was also derided for failing to cite the Arab-Israeli conflict as a root cause for the region’s ills. The adverse reaction of Arab governments led to a revised and diluted version of the initiative being unveiled at the Group of Eight (G-8) summit in June.

Still, Arab regimes felt compelled to address the subject of democracy at the Arab League summit in May. The gathering produced the Tunis Declaration, a lukewarm pledge to promote human rights, freedom of expression, judicial independence and widen the role of women in society. Some countries are tinkering with minor democratic measures: Saudi Arabia is planning to hold its first municipal elections in February, and Kuwait is close to finishing a publications bill abolishing censorship in the local press.

The process of democratizing the Arab world received another boost in December when Arab foreign and finance ministers and G-8 representatives met in Morocco to further the Bush administration’s reform project.

December 28, 2006 0 comments

Financial Indicators

Life expectancy at birth: totalNumber of years, 2003

by Executive Contributor December 20, 2006

written by Executive Contributor

Life expectancy at birth remains one of the most frequently quoted indicators of health status. Gains in life expectancy in OECD countries in recent decades have been due to a number of important factors affecting mortality rates, including rising living standards, improved lifestyle and better education, as well as advances in access to care. Other factors, such as better nutrition, sanitation and housing also played a role, particularly in countries with developing economies. Higher national income is generally associated with higher life expectancy at birth across OECD countries, although the relationship is less pronounced at higher levels of income.

Foreign-born persons with tertiary education
As a percentage of all residents with tertiary education, circa 2000

n In many countries, foreign-born persons represent a significant percentage of persons with tertiary education. Many OECD countries “gain” more than they “lose” from migration of the highly educated. The table shows foreign-born persons with tertiary education living in or from OECD countries as a percentage of the number of residents with tertiary education.

Gross and net national income per capital
US dollars, current prices and PPPs, 2003

Per capita gross national income (GNI) and net national income (NNI) are often preferred by analysts when comparing income levels. GNI is defined as GDP plus net receipts from abroad of wages and salaries and of property income. Guest-workers and other migrant workers who live abroad for twelve months or more are considered to be resident in the country where they are working. Property income from abroad includes interest, dividends and all or part of the retained earnings of foreign enterprises owned fully or in part by residents.

Partner countries and regions of OECD merchandise trade
As a percentage of total OECD merchandise trade

Distribution of household disposable income among individuals
Measure by Gini coefficients

The distribution of incomes within a country is important for two reasons. Inequalities create incentives for people to improve their situation through work, innovation or acquiring new skills. However, crime, poverty and social exclusion are linked to inequalities. Income is defined as household disposable income. It consists of earnings from work, property income such as interest and dividends, and pensions and other social security benefits; income taxes and social security contributions paid by households are deducted. The equality of disposable incomes among individuals ranges from 0 in the case of “perfect equality” (each share of the population gets the same share of income) to 100 in the case of “perfect inequality” (all income goes to the share of the population with the highest income). Household income is adjusted to take account of household size.

Households with access to a home computer
Percentage of all households, 2004 or latest available year

The table shows the number of households that reported having at least one personal computer in working order. The second part of the table shows the percentage of households who reported that they had access to the Internet. In almost all cases, this access is via a personal computer, either using a dial-up, DSL, fiber optic or other broadband access.

World CO2 emissions from energy use, by region
Million tons

Carbon dioxide (CO2) makes up the largest share of “greenhouse gases.” The table refers to emissions of CO2 from burning oil, coal and gas for energy use. Carbon dioxide also enters the atmosphere from burning wood and waste materials and from some industrial processes such as cement production. Emissions of CO2 from these sources are a relatively small part of global emissions and are not included in these statistics. The Revised 1996 IPCC Guidelines for National Greenhouse Gas Inventories (see below) provide a fuller, technical definition of how CO2 emissions have been estimated for this table.

Foreign direct investment (FDI) is a key element in the rapidly evolving process of international economic integration. FDI creates direct, stable and long-lasting links between economies. FDI is an additional source of funding for capital investment. Foreign direct investment (FDI) is defined as investment by a resident entity in one economy with the objective of obtaining a lasting interest in an enterprise resident in another economy. The lasting interest means the existence of a long-term relationship between the direct investor and the enterprise and a significant degree of influence by the direct investor on the management of the direct investment enterprise. Absolute control by the foreign investor is not required, and ownership of 10% of the ordinary shares or voting stock is the criterion used. Inward stocks are the direct investments held by non-residents; outward stocks are the investments held in other economies.

December 20, 2006 0 comments

Financial Indicators

by Executive Contributor December 20, 2006

written by Executive Contributor

The Beirut Stock Exchange entered 2006 with its most auspicious start since reopening a decade ago. Trading volumes soared to new heights and the Blom Index rallied by about 50% in January. Backed by regional investor appreciation, shares of the big banks and of Solidere reached valuations that had been fanciful theories in earlier years. Banks Audi and BLOM used the felicitous time for capital increases, issuing new shares and GDRs; other companies enthused about IPO opportunities. The Beirut market lost some of its verve in the spring time crash season of regional bourses, but suffered less than its peers in the GCC. It took a war between Israel and Hizbullah to create a trough in July and August, and further hideous political assaults by forces unknown and known to drive the index in November 2006 below year-end 2005 levels.

Beirut SE: Blom (1 year)
Current Year High: 1,934.21 Current Year Low: 1,013.97

On the Amman Stock Exchange, the 2006 trading story mirrored the goings-on of Gulf stock markets, even as the Hashemite Kingdom’s economy experienced the high flying world oil prices, inversely to the GCC countries, as the year’s biggest financial burden. In late November, the ASE Index shrank to its lowest level of the year, some 3,400 points below the market’s 2006 peak on January 8 and 31% down from the start of the year. Investor confidence throughout 2006 didn’t spark sufficiently to re-ignite the fire that had driven the ASE upwards during all of 2005. This notwithstanding, investments by highly liquid Gulf companies, creation of new financial and real estate ventures, and a lively period of company formations in the Jordanian economy set positive accents in a challenging year. Besides the market-ruling Arab Bank, Jordan Telecom (where France Telecom at long last acquired a controlling stake) supplied talking points in 2006.

The Abu Dhabi Securities Market lost almost 42% between the beginning of January and the last November weekend, but still fared better than its sister exchange in Dubai where the DFM Index dwindled by 65% over the same period. But different to the DFM with its flotation move, ADSM management in the last quarter of 2006 busily denied rumors that a partial privatization and flotation of the state-owned bourse were on the books. Where ADSM and DFM managements appeared to agree was in stating that a merger of the two exchanges was not a near-term option, even as numerous voices in and around the UAE have been in consensus that consolidation into a broader and stronger unified bourse would be a good thing and eventually inevitable if the Emirati exchanges want to remain attractive in the longer term.

The high point of the year for the Dubai Financial Market came in the middle of November when institutional and individual investors queued up to buy the 680 million shares that the DFM made available in its own initial public offering. At par value of 1 Dirham per share, the region’s first IPO of a stock exchange operator attracted subscriptions worth AED 190 billion for general subscription, which represented almost 43% of the AED 1.6 billion IPO. Analysts attributed the intense investor interest in the DFM IPO to the attractiveness of primary markets but did not suggest that overall trading activity on the Dubai exchange was prone to strengthen in the near term. The past 12 months to late November 2006 saw the DFM lose over 900 points from peaks it had reached almost exactly a year earlier.

The Kuwait Stock Exchange braced the storms of 2006 with somewhat less violent appearing Index movements than the UAE and Saudi bourses. It also testified to its reputation as one of the region’s more mature exchanges by achieving a 12% increase in traded companies in 2006. Nonetheless, the KSE’s rapid slide from its year-high of 12,054 points on February 4 to less than 10,000 points on March 14 gave many individual market participants the shakes and brought about several demonstrations in which Kuwaiti retail investors demanded government intervention to prop up the exchange. After achieving gains between end of July and late October, the KSE disappointed somewhat in November by moving into a downward period for the fourth time in 2006 and once again dipping below the 10,000 points line, but its year-to-date contraction of around 15% at end November was quite presentable relative to its main competitors in the GCC.

The Saudi Stock Exchange is the trendsetter for Gulf markets by the power of its underlying economy, its trade volumes and its market capitalization. When the Tadawul Index was still on the rise early in 2006 to its peak of 20,655 points on February 15, it was moving contrary to the correction mode that already ruled in neighboring markets. But just as analysts warned of the abnormally high price to earnings ratios of Saudi stocks in late February, the SSE got caught on a 60% slide between March and November. Volatility dominated and market interventions by big players proved futile, illustrating instead the market’s transparency problems and its immaturity. Noteworthy measures by the authorities included admission of resident foreigners and an SSE-wide stock split in March and April, and licensing of new brokerages throughout 2006.

Not the main stage of Gulf stock developments, the Muscat Securities Market in 2006 stayed its course in the bandwidth of 4,700 to 5,800 points where it already had been trading in during the second half of 2005. The spring time meltdown of GCC bourses affected the Omani bourse but the correction was less pronounced than elsewhere, and from mid August until the end of October, the MSM was moving up nicely, climbing more than 1,000 points. While local traders say the Omani market has a lot of potential and is not governed by rumors and similar volatility drivers, the sultanate still many have fewer companies that will attract international and regional attention than other GCC markets. Nonetheless, by the last weekend of November, the MSM was the Gulf’s solitary bourse reporting an index gain—nearly 12%—from the start of the year.

Muscat SM (1 year)
Current Year High: 5,799.77 Current Year Low: 4,657.16

The Bahrain Stock Exchange started 2006 with a meteoric rise of more than 9% to its year-high of 2347 points at the beginning of February, only to take a hard fall directly afterwards that brought its index down 13% within less than two months. Another volatile period followed from April through mid August, after which the BSE however regained a relatively solid posture that positioned it by end October in positive territory compared with the start of the year. In November, the market again fell in step with the downward trend of the region’s other bourses, reporting in 2% lower year-to-date on the last weekend of the month. In a noteworthy change of its capital markets operating framework, Bahrain from September 2006 implemented a new law that established the Central Bank of Bahrain as single regulator for the kingdom’s financial services industry.

Qatar’s capital markets showed only short periods of gains in 2006 mixed into a persistent southward trend that pushed the Doha Securities Market Index 44% lower over the course of 11 months. The DSM, which had peaked already in September 2005, reached its highest point of the past 12 months in December of last year and, similar to the DFM, ended November 2006 on levels we had last witnessed two years earlier, in November 2004. The structure of the DSM’s portfolio of listed companies is still in need of development and analysts saw indications that the market will remain range bound for a while. However, from the third quarter of 2006 onward, licensing of finance firms and banks at the new Qatar Financial Center made significant progress and the creation of this parallel financial services center is expected to contribute to the listing of new companies on the DSM.

Petite but très chic: the Tunisian bourse is North Africa’s smallest, but like its Moroccan counterpart, it advanced steadily throughout the year and could report a 44% index gain between January 1 and November 27. The Tunindex reached 2,326.80 points and the TSE achieved a market capitalization of $4.274 billion. This is little over half of the market cap of the Beirut Stock Exchange, the region’s second-smallest, and equals just about one and a quarter percent of the Saudi Stock Market’s market capitalization. Another area where the TSE appears somewhat diminutive, is the creation of news, at least as far as news that make it to the region’s English-oriented markets.

The Casablanca Stock Exchange dropped by some 1,850 points or more than 20% between May 8 and June 14 of this year, but in the larger picture of its development over the past 11 months, this was a mere breather in a bull run that drove the index up by 65% between the start of the year and the last November weekend when the CSE crossed the 9,000 points line and rode to a new high for the year—a feat irrespective of the question if those round numbers, often cited as “psychological barriers,” have any real significance in the region’s fast-paced markets. Traditionally driven by banking and finance stocks, the CSE saw lively trading action this year with one highlight being the telecom sector and new IPOs that widened the bourse’s scope. At the end of November, construction supplies firm Fenié Brossette and industrial equipment trader Société de Réalisations Mécaniques embarked on the CSE’s two latest IPOs.

With Egypt’s economic strengthening throughout the reform-minded past two years, the Cairo and Alexandria Exchanges benefited from privatization action and diverse investor interest that pushed the Hermes Index up by well over 6% at the last November weekend when compared with the end of 2005. CASE was by and large buoyant in the second half of 2006, after essentially sliding in the first half and reaching a year low of just under 42,000 points in late June. The Hermes’s rise from this level to above 59,000 points at the end of November marked one of the region’s most impressive second-half performances and when viewed over the past two years, the index was over 250 higher. Telecommunications and banking stocks were among the bourse’s attention grabbers in 2006 and the market expects further impulses from privatization and IPO activities.

December 20, 2006 0 comments

Levant

Jordan’s real boom in real estate

by Executive Contributor December 20, 2006

written by Executive Contributor

Jordan is set to become the latest in a long line of Middle Eastern countries to experience a boom in its real estate market, with the tourism, office and residential sectors all enjoying an unprecedented growth spurt.
Towards the end of 2006, a number of the region’s major investment and property development companies have announced new large-scale projects in Jordan, building on the sound foundations laid over the past few years as the country’s real estate market started to take off.
In early November, the Saudi Arabian construction firm Saudi Oger and rights holder Saraya Aqaba signed the final agreements for the second stage of development of Jordan’s single biggest property project.
The new tourism development, to be built at the Red Sea port of Aqaba, has a price tag of $995.7 million and will include shopping, dining, entertainment, freehold accommodation and cultural facilities, all built around a man-made lagoon.
At the same time, Jordanian developer Union Land Development announced plans for a 35-story mixed office and accommodation tower block in central Amman, with construction due to be completed within two years.

UAE comes to town
Not to be outdone, a day or so later UAE developer DAMAC Properties announced that it had already sold out two of its four projects in downtown Amman, one a 35-story tower and the other an eight-story residential complex, and was starting work on a third development, a nine-story residential tower.
Peter Riddoch, DAMAC Properties’ chief executive officer, said that the Amman developments were driven by his company’s belief that the Jordanian capital would become a true hub for business and tourism throughout the region and beyond. Having already invested $150 million in the Jordanian property market, Riddoch said there were more projects in the pipeline.
One of the reasons behind Jordan’s property boom has been the strong growth enjoyed by the country’s economy over the past three years. While figures for 2006 are down on the preceding two years, 6% compared to the 7.2% for 2005 and 8% for 2004, the Jordanian economy is continuing to expand at a healthy rate.
Another underlying cause is a general shortage of accommodation and office space, especially in the capital, Amman. This problem is compounded by a lack of land for development, with the shortage in the city center being particularly acute.

High-rises on the horizon
According to Omar Maani, the mayor of Amman, the only viable option is high-rise developments, a feature that is already beginning to appear on the capital’s skyline. He believes they are an essential component of thriving, modern cities and represent smart growth.
Encouraging investment in the construction of high-rise buildings will both address real and emerging market demands and meet the needs of investors, he said.
However, Maani believes that there will have to be an extensive overhaul of Amman’s planning regulations, which date from 25 years ago, with a modern master plan and real estate development guidelines drawn up before wholesale construction can begin.
It was necessary to modernize land planning and the regulatory regime, together with an upgrade in infrastructure to accommodate growth or else both Jordan’s citizens and investors would face serious consequences, he said.
The municipality is finalizing an interim growth strategy that Maani said will provide a necessary bridge to facilitate development in a controlled manner until the master plan is adopted in the next few months. This will streamline planning approval and clear the way for granting permission for the new generation of tower block investment projects, the mayor said.
Though Jordan’s real estate and construction boom is generally viewed in a positive light, there is something of a downside. Increasing demands for material and rising wages for construction workers were estimated to have risen by 15% in 2006; both are factors in pushing up real estate prices and inflation. While inflation hovered around the 3.5% mark for the past two years, and averaged 1.7% for the two years before that, the rise in Jordan’s consumer price index is expected to top 6% for 2006.
Despite the inflationary concerns, and some worries that lower-income Jordanians may be priced out of the market, the growing interest of international developers in the property sector is being seen as a sign the country is set to build on the economic stability and growth of previous years.

December 20, 2006 0 comments

Levant

Iran ascendent

by Executive Contributor December 20, 2006

written by Executive Contributor

by investing
in Syria

Iran is fast becoming one of the major overseas investors in Syria, with projects worth more than $800 million already in the works and other schemes in the pipeline for 2007. Over the past few years, Iran has invested heavily in Syria’s energy, construction, utilities and automotive sectors and has now added tourism developments to the list.
The strength of Syria’s economic ties with Iran was underscored at the end of 2006 during a visit by Iranian Foreign Minister Manouchehr Mottaki. While regional and political developments dominated his meetings with Syrian leaders, Mottaki found the time to address the economic side of the bilateral relationship.
Describing the level of economic links between Syria and Iran as determined and positive, Mottaki said that his government recognized the great potential for cooperation between the two countries and wanted to map out new strategies to expand on this even further.
Tehran sets no limits to the expansion of cooperation between the state and private sectors of Iran and Syria and is ready to provide facilities in this regard, he said.
Syrian Prime Minister Mohammed Naji Ottri was just as enthusiastic, saying that both countries wanted to make use of the potential of the other and were seeking to put in place further mutually beneficial projects for sustainable development.

Iranian investment growing
While in Syria, Mottaki paid a visit to one of the larger developments being carried out with Iranian assistance, a $200 million water management project in southern Aleppo. The cornerstone of the scheme is a 5.3 km tunnel with a radius of 5.4 meters to carry water from the Euphrates Dam to the farmlands on the Aleppo plain.
In what could be the largest Iranian investment to date in Syria, the two countries, along with Venezuela, announced in late 2006 that they had formed a consortium to build an oil refinery in Syria. The project, budgeted at $1.5 billion, foresees the construction of a refinery with the capacity of processing 140,000 barrels of oil per day.
Iran has a number of other projects in Syria, having recently announced plans to construct 50,000 housing units in the Adraa district outside of Damascus and establish an industrial zone near Hisya in central Syria. Elsewhere, work is nearly complete on a cement factory in Hamah, with production due to start in early 2007.
Another Iranian investment is set to start production by the beginning of 2007, with the first Iranian designed Samand cars rolling off the assembly lines at a new $60 million facility, a joint venture between Syria and the Iran Khodro Company (IKCO).
According to Mahdi Tashakkori, the project director, the first phase of production will see 10,000 cars built annually, rising to 30,000 when the plant goes to a full three shifts.
The project is part of the Iranian firm’s push to establish a wider sales and production base, Tashakkori said.
IKCO will coordinate the project within the framework of offering technical knowledge and production line machinery as well as the establishment of the project alongside with the development of National Samand’s brand in the Syria and Arab countries’ markets, he said.

An incentive for Syrians
An incentive for Syrian buyers of the Samand will be Damascus’s decision to drop sales taxes, thus putting the cars in the same price range as similar size imported saloons, an incentive that was also attractive for the plant’s Iranian investors.
Syria has also announced it would import 5,000 buses from Iran as part of measures to upgrade the country’s public transport network, with the first 1,200 vehicles to be delivered in 2007.
Tourism ventures are another area where Iran is keen to play a role in Syria. In late September, Iran’s Amiran Investment Group announced it was considering establishing a major tourism resort complex on Syria’s Mediterranean coast near Lattakia that would include hotels, chalets and associated facilities.
Both governments have said they want to see greater cultural ties and encourage pilgrimage tourism between the two countries as well as promoting the more traditional holiday tourism.
Meanwhile, with Damascus enacting new legislation and regulations to encourage foreign capital inflow and open up the country’s economy, Syria is becoming increasingly attractive to Middle East investors, with a number of Gulf states moving into the finance and banking sector.

December 20, 2006 0 comments

Levant

Insuring Syria Risky business

by Executive Contributor December 20, 2006

written by Executive Contributor

Syria is set give life to long-declared plans to expand the country’s insurance industry, issuing licenses to two newly established companies in mid-October, with more firms expected to enter the market in 2007.
In line with many of the private banks that have been launched in Syria, both new firms have strong links to the Gulf. The main offshore shareholders in the Syrian-Kuwaiti Insurance Company are Kuwait’s Gulf Insurance, the United Gulf Bank, the Damascus-based Kuwaiti United Company for Investment in Syria, and the Kuwait Projects Company, with the other bank, the Arab Insurance Company-Syria, being backed by UAE investors. In both cases, overseas corporate shareholdings have been limited to 49%, with the remainder set to be sold off in an initial public offering (IPO).

Islamic insurance
Three other firms, Syrian Qatari Insurance, Nour Insurance and Al-Aqila Insurance, have also been given initial clearance to set up shop in Syria by the Syrian Insurance Supervisory Commission (SISC), the nascent sector’s regulatory watchdog. All are looking to start active operations in 2007 after being given the nod in October 2006, with licenses expected to be issued by the end of the year. The three firms have Gulf backing and intend to attract customers by promoting takaful, the Islamic model of financial services for funds investments.
As with the opening up of the banking industry to private concerns, the path to liberalizing the insurance sector has been somewhat long and winding. Though initial plans by the Syrian government to clear the way for private insurance companies to operate were floated in early 2003, it was not until June 2005 that a decree to that effect was issued. The first private insurer, Mottahida, only got the formal go ahead to start writing policies in the middle of 2006.
There has been some private insurance activity in Syria prior to this. The Syrian International Insurance Company (SIIC), whose main shareholders the Beirut-based Blom Bank and its insurance affiliate Arope Insurance, was formally granted a license for limited operations by the SISC in February. This followed Blom’s entering the local banking sector in 2005 through the Bank of Syria and Overseas.
Until the opening up of the sector, the country’s sole insurer was the state-owned Syrian Insurance Establishment, set up in the mid-1950s. While it provided comprehensive coverage for most of the traditional policy areas, including health, automotive, fire and accident for private citizens and commercial policies for businesses, there was little pick up. This was in part due to the public not seeing the need for such services, especially in the field of health coverage, as most medical services were state-provided anyway.

Ranked last in the region
According to industry studies, Syria is ranked last among regional countries in terms of insurance coverage, with less than $140 million invested in policies. This can be both a good and a bad thing for the infant sector in the country. While the Syrian insurance market is almost virgin territory for insurers, there is less awareness of the need for insurance in the community, among both businesses and the public; an awareness will have to be developed in order to build a sustainable client base.
While there is optimism among the companies entering the sector, with projections that the market could be worth $500 million in a matter of years, it is notable that most have only raised the $17 million minimum capital required under Syrian law.
The push by the Syrian government to encourage broad-based insurance coverage can be seen not just as a move to protect both private individuals and businesses, but as part of Damascus’s campaign to attract foreign investment to the country and to have the cashed-up insurance companies use funds from policies for new developments. Speaking at the launch of Mottahida in June, Finance Minister Mohammed al-Hussein said that the entry of insurance companies was a major step towards supporting the Syrian economy.
With the potential that Syria’s new insurance firms could have to invest, the industry could become another plank in the government’s program to build a broad-based economy with more focus on the private sector.

December 20, 2006 0 comments