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GCC

Power talks

by Executive Contributor November 3, 2006
written by Executive Contributor

Qatari-Indian ties to deepen

In its push to diversify its economy and expand investment and business activities abroad, Qatar is reaching out to India – and India is reaching back.
Within the past month there has been much activity in Qatari-Indian business relations, some in the more traditional field of energy but also in finance and other non-oil related sectors. Qatar has long had close ties with the Indian economy, being the country’s largest single supplier of gas, a position that is set to expand. India, too, is home to many of the migrant workers employed in Qatar, whose remittances are a major source of cash for the Indian economy.
With the growth of India’s economy into a global powerhouse, and Qatar’s drive to spread its economic wings, the relationship is set to deepen. Bilateral trade between India and Qatar has an estimated value of just $1 billion, the majority represented by the export of $690 million worth of Qatari liquid natural gas (LNG).
In mid-October, the Qatar National Bank announced it was seeking to break into the Indian market: “Entry is difficult but we are looking at different options for entry into India,” said Ali Shareef al-Emadi, the bank’s acting chief executive in October, adding that the move was part of a wider expansion plan for the bank.

Looking for options
In early October, another door opened for Qatari investment in India, with the country’s National Thermal Power Corporation offering the Qatar Investment Authority a 40% stake in its gas-fired power project in the state of Kerala. NTPC is planning a major expansion of its plant there, lifting capacity from 350MW to 1,950MW, and it is looking for partners; Qatar, as India’s leading gas supplier, is a natural choice.
The proposal came only a week after a call for Qatar to buy a stake in Indian gas company Petronet. Following a meeting with Qatar’s finance minister, Yusuf Hussain Kamal, Petronet’s managing director said that he had proposed Qatar buy a stake of up to 12.5% in the company through a soon-to-be-floated $100 million foreign currency convertible bond issue. A delegation of officials from the Qatar Investment Agency will visit India shortly to look into the proposal.

Long-term agreement
India has also announced that it is seeking a further long-term agreement with Qatar to provide an additional 10 million tons of LNG annually, starting from 2010, yet another fillip to Qatar’s strongly performing energy export trade.
In mid-September, on the sidelines of the Non-Aligned Summit in Havana, Qatar’s Crown Prince Sheikh Tamim bin Hamad Al Thani met with Indian Prime Minister Manmohan Singh, with the focus of talks being further direct Qatari involvement in the Indian economy.
Though the full details of the discussions were not made public, a statement following the meeting said that Qatar was considering investments in India’s infrastructure and energy sectors. Likewise, India is considering opportunities in Qatar’s construction, transport, communication, oil-related service industries, IT, education and banking sectors.
However, there is a sticking point with Qatar’s desire to become more deeply involved in India’s economy, said al-Emad: India has only just begun opening up its market to overseas banks and financial institutions.
An example of this is Doha Bank’s application to operate in India, which has been held up at the Reserve Bank of India since last year. It is important for India to further liberalize policies to promote trade to the maximum, said Doha Bank Deputy Chief Executive Officer R. Seetharaman.
India must look at the bigger picture, he said. Since funds are required for infrastructure development, financial institutions and banks must be allowed to come in to speed up the process.
In many ways, Qatar and India are natural business partners. Both are looking to expand their economies, with the emirate having cash to invest and India actively seeking investment. Qatar already has a strong position in the Indian energy sector as a major supplier—a position that appears set to be consolidated as India’s demand for gas expands along with its economy. If India lowers a few more barriers in its financial sector, the distance between these two countries will narrow further.

November 3, 2006 0 comments
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Levant

Visiting Syria

by Executive Editors November 3, 2006
written by Executive Editors

Historical
investment

No doubt inspired by the growth of tourism in Lebanon, Syria has launched a concerted push to promote itself as a tourist destination by cashing in on its abundance of natural and historical sites to attract foreign visitors—and their currencies.
According to Syria’s tourism ministry, 3.4 million foreigners visited the country in 2005, a figure Damascus wants to see reach 7 million by the end of the decade. Investments in the tourism sector rose from $100 million in 2003 to $800 million by the end of last year, again a figure Damascus wants to see more than double in the coming years.
As an incentive to investors, the Syrian government has set out an attractive build-operate-transfer (BOT) scheme, with lease terms of up to 99 years. The government has waived a number of taxes formerly applied to investments in the tourism industry, including stamp duty on contracts. It has also cut the time and complexity needed for applications to make investments in the sector and identified 82 sites to be set aside for tourism development. Further incentives include tax holidays for investors for the first seven years of operation and tax cuts of up to 50% from the eighth year onwards.
The government has also given a commitment that it will boost infrastructure in areas listed as being of high tourism potential and upgrade the quality of services provided at sites of interest to visitors.

Facing challenges
However, Syria’s tourism industry does face a number of challenges. Compared to some of its neighbors, it does not have the number of high-end resorts and facilities needed to cater to the well-heeled visitors who are increasingly becoming the focus of the market. Damascus is attempting to redress this deficiency by actively seeking out foreign, and especially Arab, capital inflow to help the industry blossom.
In the past months, Syria has been wooing Arab investors, with more than a little success. Leading the charge has been Sadallah Agha al-Qala, the minister of tourism, who has been touting both the country’s tourism potential and the increasing ease and attractiveness of doing business in the country.
“The Syrian government has opened the way for scores of tourist sites that achieve economic and tourist feasibility in addition to issuing a large number of decisions and decrees which encourage the launching of new tourist projects,” the minister was quoted as saying to a delegation from Iran’s Amiran Group for Investment in late September.
Amiran’s chairman, Hasan Akhondi, said his group was looking into setting up a tourism resort complex on the Mediterranean coast near Lattakia that would include hotels, chalets and associated facilities. Though still in the negotiation stage, Akhondi said Damascus’ new measures to encourage investment in tourism were encouraging.

Regional interest
The Iranian interest in Syria, and especially around Lattakia, has been mirrored by other investors from the region, with Kuwaiti company al-Nour looking into launching a major development on the shores of the nearby November 16 Lake. In September, representatives of Qatari tourism developer al-Diyyar signed a memorandum of understanding with the Syrian government to invest $250 million in a new coastal project at Ibn Hani, which will include a five-star hotel, villas and chalets, a shopping complex and eateries, to be built on an area of 220,000 m2.
Naser al-Ansari, Al-Diyyar’s executive director, said that the Ibn Hani project would not be the last his firm would invest in, but rather the first of many.
These are only some of the new projects coming on line. According to Fareed Karima, Syria’s director of tourism projects, there has been a growing interest in the country’s tourism sector. In a press statement released in early September, Karima said 51 investors had made bids on 18 of the tourism sites identified by the government. The total value of these bids alone added up to $500 million.
The last three years have seen a constant 6% increase in foreign arrivals, with receipts growing apace. Having already taken steps to liberalize the sector and encourage investment, Syria is looking to build on its newly laid solid foundations.

November 3, 2006 0 comments
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“They hate us for our freedoms”? If only they knew

by Abigail Fielding-Smith November 1, 2006
written by Abigail Fielding-Smith

Immediately after September 11, 2001, while the ruins of the World Trade Center still smoldered, some of the more thoughtful members of the punditocracy and the population asked the obvious question of why: “Why did this happen? What had the US done that was so bad?”

For some—George W. Bush, for instance—the answer was clear. It wasn’t what the US had done, it was who we were.

“Americans are asking, why do they hate us?” he said in a joint address to Congress on Sept. 20, 2001. “They hate our freedoms—our freedom of religion, our freedom of speech, our freedom to vote and assemble and disagree with each other.”

He used “freedom” 13 times in that one speech. It would, as it turns out, become a recurring theme for the president. In his second inaugural address, Bush used “freedom” 27 times, more than twice as many times as his joint address. That’s a lot of freedom. And that’s not even counting the “freedom fries” on the menu at the Congressional cafeteria.

But under this president and the bills he’s signed into law, Americans are losing their freedoms at an alarming rate—and with them, the United States’ power to inspire people to work for real freedom from tyranny.

One shouldn’t discount the power the idea of America has for oppressed people of the world. When Syria still had its boot on Lebanon’s throat, Americans in the country were often reminded of this power by cab drivers, shopkeepers and other strangers who spoke movingly of America’s support for freedom around the world and expressed hope that it would support freedom in Lebanon, too. And then, for a brief moment during the Cedar Revolution, Bush seemed to support the country.

Back home, however, it was a different story. On October 17, Bush signed into law the Military Commission Act of 2006, which supporters say provides a framework for trying terrorism suspects while “clarifying” the Geneva Conventions. Under the law, Bush’s new powers are the very definition of tyranny. Setting aside it’s thumbs-up to interrogation techniques such as water-boarding, sleep depravation and stress positions—techniques which “normal people consider torture,” as the New York Times put it—the act allows the president of the United States or the secretary of defense to declare a US citizen, even if they had never left the States, an “unlawful enemy combatant,” throw them into a military prison and never bring charges against them. Foreign nationals or legal residents cannot appeal their imprisonment or demand a trial, a right known as habeas corpus, while Americans’ rights to a habeas hearing are strictly limited. And this can happen anywhere in the world. If the president says you’re a bad guy, it’s pretty much game over for you. Oh, and you’ll probably be tortured.

Even today, there are possibly hundreds of Lebanese detainees languishing in Stygian darkness in Damascus. Men (and some women) who were taken in the night by the Syrian forces after its October 13, 1990, invasion have been tortured, have never had a trial nor been informed of the charges against them. Just like “dirty bomber” Jose Padilla somewhere in a US military brig!

The difference between Syria and the United States is that Washington is—and I stress this—legally doing this. So what freedoms exactly is the United States fighting for? What brave fight against “Islamo-Fascism” is the US waging when its own laws sound like they were written by Josef Stalin?

That Osama bin Laden, Saddam Hussein, Abu Musab al-Zarqawi and their ilk were and are butchers, mass murders and thugs is beyond dispute. That they’re enemies of true freedom and hurtful toward the peaceful people of the world is also indisputable. But America’s judicial system isn’t about who its enemies are; it’s about who America is.

Thomas Paine wrote in 1795, “An avidity to punish is always dangerous to liberty. … He that would make his own liberty secure must guard even his enemy from oppression; for if he violates this duty he establishes a precedent that will reach to himself.”

When America looks at her enemies, she now sees herself.

November 1, 2006 0 comments
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High-speed Internet access still in the slow lane in Lebanon

by Executive Staff November 1, 2006
written by Executive Staff

For the past several months, a triumphant press release has been sitting on internet provider IDM’s homepage, gathering dust and providing, at the same time, one indication of how the government has been unable to address even small problems that seem to offer such unambiguously large rewards.

“IDM,” the release reads, “Is pleased to announce that on January 3rd, 2006, it has signed with the Ministry of Post & Telecommunications (MPT) a Memorandum of Understanding (MOU) that will allow IDM to offer broadband Internet access over DSL (Digital Subscriber Line). The service will be commercially available once the relevant decrees will be finalized and issued from the Council of Ministers.”

Of course, in retrospect, the first indication that complications might arise should have been the discrepancy between the headline of the press release—“Agreement … allows IDM to offer broadband Internet access over DSL soon in Lebanon” —and the lead paragraph above.

For when one reads on, the indispensable notion of “soon”—critical to those Lebanese who have been hearing about DSL’s imminent arrival for nearly three years now—disappears, apparently unworthy of further elaboration. In fact, any suggestion that “the relevant decrees” themselves might be finalized “soon” essentially boils down to this: DSL will be available once the Council of Ministers decides to act.

Unfortunately, 11 months on, DSL appears no closer to a daily reality than it did before the MOU was signed earlier this year.

This is due to several factors, which are conspiring together to prevent the introduction of what is seen, the world over, as a key driver of economic, intellectual and social progress.

First and foremost, since long-distance calling revenue produces hundreds of millions of dollars each year for the general budget, the government is loathe to introduce broadly available and affordable high-speed internet—the rationale being that people will start to use Voice over Internet technology (VoIP), which is illegal in Lebanon, to place their calls for virtually nothing.

Second, there is a capacity problem: Lebanon’s international fiber links out of the country and onto the commercial internet simply cannot handle a huge increase in domestic users. Long-awaited plans to increase capacity have likewise been subject to delay after delay.

As a result of these issues, internet tariffs in Lebanon remain the highest in the region, with IDM selling a two-megabyte per second upload and download speed package for a whopping $6,000 per month!

Even IDM’s current package, which approximates DSL’s bare minimum 256-kilobyte download speed (upload speeds are capped at a VoIP-killing 32 kilobytes per second), comes in at $150 per month. And that is after sharing bandwidth with other customers in the area and a $300 installation fee.

Although the promised DSL service in Lebanon is meant to provide upload and download speeds in excess of 256 kbps, the expected price of $50 a month still is almost double the average rate globally.

The situation is particularly exasperating since Lebanon’s human capital—its highly-educated and creative workforce—is routinely cited by Lebanese and non-Lebanese analysts alike as arguably the country’s greatest asset, along with its comparatively liberal economic structures.

Modern business, however, is driven by connectivity: without affordable access, Lebanon is increasingly forced to export its precious human capital abroad to better-connected, if less intrinsically liberal, economies. Indeed, even for lower-skilled workers, the lack of a true internet economy means exclusion from emerging opportunities seized on by other countries in the region—call centers, for example, in Tunisia and Morocco that are now serving a wide array of European Union businesses.

The situation reached the point of embarrassment last month when in succession, 1) former pariah state Libya announced a $250 million program with an American non-profit to provide inexpensive laptop computers and satellite internet for all of the nation’s 1.2 million schoolchildren; 2) An international report assessed that internet penetration in Israel reached 71% in 2005, putting the Jewish state in fifth place worldwide; and 3) (just to cap the month off) Iran announced it was making DSL available, but that it would cap upload and download speeds at 128 kbps in an apparent attempt to block usage of politically-oriented streaming video and audio sites.

Thus, the sad fact is that Lebanon is not only being outpaced in the internet economy by both its southern foe and a war-torn, former backwater state with little in the way of human capital, but its own provision of internet services essentially approaches the Iranian model (albeit without the intention to censor).

“Nigeria, Senegal, Libya and Iran announced the DSL entry to their country,” observes Zakiye Karam, commercial manager at IDM. “Who knows, maybe Iraq would do it before Lebanon.”

The suggestion is not entirely implausible. After all, South and Southeast Asian countries have seen a cumulative 57% growth in DSL users over the past year. In the Middle East and Africa, the number of DSL users increased by nearly 1.75 million between July 2005 and July 2006.

Iraq, despite its chaos, has a burgeoning mobile communications sector ideally suited for implementing so-called “leap-frogging” technologies—like wireless Internet—thus avoiding the need to build actual lines on the streets. (Such technologies are also on the rise in Lebanon, with Cedarcom leading the way through its launch of mobile wireless broadband service this month. These high-speed, lower-cost alternatives may even end up trumping the stalled DSL drive — see page 79.)

In any case, Lebanon is seeing little in the way of movement towards a resolution of the DSL issue.

In fact, nine months ago, Minister of Telecommunications Marwan Hamade responded to one reporter’s query on the subject by saying, “The ministry has been paralyzed for years while the main items discussed were conflicts with the mobile companies … Now that we are out of this mess, we can address the issue of broadband.”

Unfortunately, as with the US in Iraq, Hamade’s prognosis that things may finally be clearing up seems, 11 months later, to be worth about as much as promises issued from the suffocating confines of the Green Zone.

It is also perhaps an indication that it will take a lot more than resolving one old issue at the ministry before Lebanon is finally able to move ahead into the Internet economy.

November 1, 2006 0 comments
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Society

Killing Mr. Lebanon – New book on target

by Michael Karam November 1, 2006
written by Michael Karam

On that sunny February day in 2005 when they killed Rafik Hariri, Basil Fuleihan and 21 others outside the St. Georges hotel, I was due to have lunch at Le Vendôme at 1pm. However, that morning the venue was changed. Had it not, and being the punctual sort, I would have arrived in Ain Mreisseh minutes before 1pm. Quite where I would have been as Hariri’s convoy hurtled past Marina Towers seconds before its fiery denouement, I am not sure. I could have missed the blast, been caught in it or been blown flat on my back as I handed my car keys to the parking valet. As it was, I never even heard the blast. It was warm day, the a/c was on and the radio was blaring. I had taken a bad route and was stuck in traffic outside the French embassy. Lunch was cancelled. I went home, poured a large whisky before turning on the TV and watched the news unfold. My mother called from London. “Yes,” I told her. “He is dead.” Reads like a Ludlum thriller

Nearly two years on, the crime, while momentarily overshadowed by the recent summer war, is still etched on our minds. It was a defining second in Lebanese history, one of those moments that we divide into life before and life after. For those who care about such things, the events that took place in the hours before and after the explosion are thrillingly and minutely recounted in Killing Mr. Lebanon: The Assassination of Rafik Hariri and Its Impact on the Middle East by Nicholas Blanford. The opening chapter reads like a Ludlum thriller, made all the more compulsive because Blanford has skillfully knitted together the events of that Valentine’s Day morning through the eyes of no more than 15 people in whose lives that day will forever resonate.

However, there is much more to KML that makes it one of the most important and entertaining books in a long time to examine the tectonic plates that grind under Lebanon’s political surface, charting as it does the raw power struggle between Lebanon and Syria that eventually led to the presidential extension, Hariri’s resignation and the passing of the fateful UN resolution 1559. As its title hints, the book also seeks to portray Hariri—“He was a corrupter rather than corrupt”—as the prodigal son who rode into town on the back of a billion-dollar fortune and set about realizing a dream to take Lebanon and transform it into what he saw as its rightful position as the Hong Kong of the region. In the interest of disclosure, Nicholas Blanford is a friend. He is also a dogged and thorough reporter for the Times, Christian Science Monitor, Time Magazine and occasionally, the pages of Executive. He has lived in Lebanon since 1994 and has reported from Iraq, Kuwait and Saudi Arabia. He is also one of the most knowledgeable reporters in the world on Hizbullah. Tragic epilogue

KLM was written over eight months. It contains over 80 interviews conducted in three countries—Lebanon, France and Syria—lasting over 100 hours. Blanford traveled to Paris to interview Saad Hariri and Abdel Khalim Khaddam. He sat with an emotionally drained Jumblatt in Mokhtara, and quizzed Marwan Hamadeh and the late Gebran Tueni. In examining the role of Syria in Lebanon, he spoke to Fares Boueiz, who is by all accounts a great raconteur, and Qassem Qanso, whom Blanford found surprisingly likable. Even if it needs to be updated, the book will stand the test of time when others will loiter in the remainder bins. IB Tauris took a gamble by asking Blanford to write what is the defining book on the event and its impact. The investigation was, and still is, a work in progress, so at any time the book could have been overtaken by events. It is, however, bang up to date. It concludes with a powerful epilogue written on July 23, midway through this summer’s war between Israel and Hizbullah, in the form of a dispatch datelined Tyre. As Blanford notes, the war was a tragic finale to the Hariri story. “Hariri had always feared that Hizbullah’s hostility toward Israel would lead Lebanon into just this kind of slaughter and destruction. How he had bargained, negotiated and maneuvered to avoid such a catastrophe. Yet it had all come to nothing. His death and the subsequent chain of events—the polarization in Lebanon over Hizbullah’s arms, resurgent sectarianism, government weakness, Syrian meddling and international manipulation—had led to this unfolding disaster.”—MK

Killing Mr Lebanon: The Assassination of Rafik Hariri and Its Impact on the Middle East by Nicholas Blanford is published by IB Tauris, £17.99

 

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Society

Samsung’s growth in Middle East – CE giant hopes to expand its brand

by Nicholas Noe November 1, 2006
written by Nicholas Noe

This September in Berlin, in his keynote address at IFA 2006, the world’s largest consumer electronics exhibition, Samsung President and CEO Gee Sung Choi reviewed the tremendous success enjoyed by his company over the past few years and highlighted several exciting new developments on Samsung’s horizon. With 2005 parent company sales of $56.7 billion and net income of $7.5 billion, and powered by a staff of approximately 128,000 people in 57 countries, Samsung has rapidly risen to the position of global powerhouse, leaping from 34th place in Interbrand’s 2005 ranking of global brands (based on brand equity) to 20th place in 2006. (To give some more perspective, parent company sales in 2001 were valued at $24.4 billion, and net profit at $2.2 billion—values that more than doubled and tripled, respectively, by 2005.)

Leadership matters

Mr. Choi’s leadership has played a large role in these impressive strides; in his speech, Choi recalled his comments at IFA 2003, when he coined the term “digital renaissance,” predicting the growth of the consumer electronics industry and a global transition towards digital technology that have since been realized. With this in mind, his concept for the next step in the “digital renaissance,” an era of “rich digital experiences,” carries extra weight; delivering such experiences to end consumers will play a key role in Samsung’s strategy for further consolidating its market leadership.

Although the Middle East is not Samsung’s largest market, it is one of its fastest-growing, and is poised to play an increasingly significant role in the company’s global strategy. In terms of brand power, Samsung is the #3 consumer electronics company in the Middle East and Africa region, with a high level of brand awareness and overwhelmingly positive consumer feedback.

Headquartered in Dubai, Samsung Middle East and Africa (MEA) operates through ten branches and two subsidiaries in the region, with a permanent workforce of 434 employees. Although the brand’s leadership position is more recent, Samsung has a 20-year history in the Middle East.

MEA is no exception to Samsung’s global growth trend, and represents one of company’s fastest-growing markets along with South East Asia, Latin America, Europe and China. Since 2001, average annual revenue growth has been 24%, with 2005 revenues for MEA reaching $2.5 billion. According to MEA Corporate Marketing Manager Haris Munif, expected growth for 2006 is 18-20%, with expected revenues for the year as high as $2.9 billion.

“Our sales and growth rates in the MEA region are very much on track with other markets,” notes Munif. “In absolute terms, Samsung MEA contributes approximately 5% to global sales. Sales contribution is higher in some other markets as they are huge customers of Samsung B2B products like LCD screens and semiconductors.”

Samsung’s best-sellers in the MEA market reflect the diversity of the company’s offerings. According to Munif, AV (in particular, their flagship ‘Bordeaux’ LCD TV, which is a regional market leader) and home appliances have proven some of Samsung MEA’s strongest categories, along with the mobile phone sector—where Samsung, with its 20% market share, commands 3rd position in the regional market.

According to Munif, Samsung “has been the pioneer in introducing the era of digital convergence to the MEA consumer,” through its popular, innovative and intuitive products. Among its recent accomplishments, Munif cites Samsung’s key role in introducing “the dawn of smart home technology in this region, by displaying the first home networks in collaboration with Etisalat.”

Universal appeal

Although Samsung strives to achieve a universal image (at IFA 2006, a central section of Samsung’s expansive hall featured a display of “lifestyle concept” rooms, including Scandinavian, Asian and Mediterranean interior designs, to highlight the ease with which its digital products blend seamlessly in any home setting), partnerships play an increasingly significant role in the company’s corporate strategies, and Samsung has not missed the opportunity to draw on its two decades of experience in the Middle East when it comes to branding. “Samsung has a predominantly centralized approach to marketing; however, we do have an effective mix of global and local marketing campaigns,” explains Munif. “This ‘glocal’ marketing approach touches the local sentiment but does not compromise on global brand equity. A very good example is the upcoming Doha Asian Games campaign, for which Samsung has created an entirely local campaign for its global flagship ‘Bordeaux’ LCD TV.”

Samsung MEA may be part of a global brand, but according to Munif, MEA’s ultimate commitment is to its local end users:

“Our goal is make Samsung the most preferred and loved brand in the region. We aim to achieve this by focusing on our consumers’ needs, and delivering localized products and solutions to fulfill them.”

November 1, 2006 0 comments
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Editorial

Statement of intent

by Yasser Akkaoui November 1, 2006
written by Yasser Akkaoui

When it was announced that we were expanding Executive’s content to cover the MENA region “from Morocco to Iraq,” many people asked if we were “evacuating” to Dubai. It must be made clear that this was never our intention. Executive is a Lebanese magazine that will develop around journalism, not advertising – and Lebanon has always been a hub for serious journalism.

Yes, we will be building a solid network of business and economic analysts, experts and reporters throughout the region to produce what we hope will be the most authoritative and compelling business writing in the Arab world, but by rooting Executive in Lebanon, we demonstrate our commitment to our trade and to our country, in whose survival we have always believed.

Our expansion is much like that of other Lebanese industries, such as advertising, contracting, banking and finance, which outgrew Lebanon’s geographic limits and now serve broader economic centers while remaining essentially Lebanese. Our readers, in and outside Lebanon, can now access serious business journalism as we respond to the demands of the regional entrepreneur.

So it is out with the micro view of Lebanon and in with the macro take on the region. We will look at all the nations of the Arab world and chart the pace and level of change therein – be it fiscal, commercial or economic – and monitor how these nations adapt to internal and external pressures to implement key social reforms to improve quality of life and spur economic growth.

The Middle East is at the forefront of global economic and political activity, buttressed by the twin giants of the Europe and Asia. Yes, it has been marred by conflict and too often defined by religious dynamics, but it has much to contribute. This, for us, has become the story.

As we chart the successes and failures, the innovation and stagnation, the booms and the slumps, we will inspire many but no doubt aggravate a few. Some will find our style of journalism abrasive, but we wouldn’t be true to the Executive brand if we were not committed to objectivity, transparency and honesty.

This much we owe our readers.

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Lebanon

Running on Empty -Beirut‘s car market kaput

by Executive Staff November 1, 2006
written by Executive Staff

The Lebanese car market had its worse summer in decades thanks to the war and a two-month sea blockade, with the number of new registered cars dropping 81% in August compared to the same month last year. The sector is only slowly clawing its way back, with sales down 41% for September. With the economy running on half empty, tough times lie ahead.

“The car market is in complete chaos right now, millions of dollars have been lost,” said Samir Homsi, President of the Association of Car Importers in Lebanon (ACIL) and CEO of Impex Trading, the local representative for Chevrolet and Hummer.

Car dealers had high expectations for the summer, with 1.6 million tourists expected to visit the country and the economy picking up after a sluggish 2005 that was marred by a spate of bombings following the assassination of former Prime Minister Rafik Hariri in February.

“We were expecting the best summer ever in Lebanon,” said Charbel Abi Ghanem, marketing manager for Rasamny Younis Motor Co. (Rymco), the dealer for Nissan, Inifiniti and GMC. “Our hopes in the sector were high, believing that over 20,000 units would be sold this year.”

Until mid-July, sales had increased by a solid 4% with 11,624 new vehicles registered, of which 10,898 were passenger cars and 726 commercial vehicles, according to ACIL.

But with the outbreak of war, the economy at a standstill and up to one million people displaced, many dealers were forced to close or operate with a skeleton staff. Sales consequently plunged, with the number of new cars registered in August decreasing to 302 compared to 1,550 in August 2005.

Nagy Heneine, manager for BMW at Bassoul-Heneine, said July 2005 sales had been $7.6 million and until the war started, $3.5 million for July this year. “Business was stunning,” he said.

Expectations dashed

Business worsened in August however, with only $390,000 in sales compared to $5.8 million for August last year.

“We expected to sell 150 BMWs in the last two months, but September sales were close to August’s,” Heneine said.

Other dealers had a similar story. Negib Debs, sales manager at T. Gargour and Fils, the sole agent for Mercedes and DaimlerChrysler, said the company expected to have sold at least 70 cars this summer—over $5 million in sales. The company sold 90 vehicles between January and August this year.

But when Israel imposed a 56-day air and sea blockade on Lebanon, ships containing cargos of new cars had to dock elsewhere, adding extra costs to dealers.

“There were 117 BMWs coming to Beirut, and had to be returned to Genoa and then to Germany. We had to pay for all the port expenses,” said Heneine.

Due to the unpredictability of the situation, Debs said Gargour cancelled orders for 100 vehicles.

Rental woes

Rental car companies, which account for between 30 to 35% of overall car sales, were also badly affected. Tony Gebran, marketing manager at City Car, said July and August usually account for 75% of annual rentals, but instead resulted in tens of millions of dollars in losses for the sector.

Until the war, City Car had experienced 30% growth in the first quarter and 40% growth in the second quarter. “If rentals had stayed like this we would have had nearly 50% growth this year,” said Gebran. He added that the company had to cancel orders for new vehicles and is now working at 50% capacity, slashing fees to buoy rentals.

Cancelled orders by rental companies also put a strain on dealers’ marketing strategies, particularly as new models were slated for launch in the fall.

“We were expecting to launch four new models this year,” said Nadine Azar Ghostine, marketing manager at Gargour. “We will introduce nothing before the New Year as we have to sell the older models.”

A biannual Beirut motor show that had been organized for November has also been cancelled.

“Lots of people wait for the motor show to buy cars. It would have been a peak sales period for us,” said Abi Ghanem.

Scrambling to recover

Dealerships are consequently scrambling to make up for lost ground. Promotional campaigns are also underway to get rid of the 2006 stock by reducing prices, lowering interest rates, offering extras, and entering into loan agreements with banks.

The price of a GMC Envoy, for instance, has been slashed from $33,500 to $29,500. “So we practically have no margins,” said Abi Ghanem. “We will forget about the brand and go for the hard sell.”

Such a strategy appears to be working, with sales picking up slightly in September. According to ACIL, the number of registered vehicles decreased by 41% compared to September last year, from 1,187 registered vehicles to 691.

But with dealers only getting 6-8% net margin on each vehicle sold, Heneine said dealers are not able to drop prices significantly. He believes the onus now lies with the government to help jumpstart the sector.

“The government should take immediate action as they are also affected by reduced revenues from customs, taxes and registration. They should remove registration fees—currently 7% of a vehicle’s cost—as it would help hesitant buyers,” Heneine said.

Although after-sales have returned to normal, in the medium- to long-term, dealers will struggle in the face of sluggish economic growth and rental companies unable to pay back loans.

“The worst thing is that even though the war has finished, people have lost confidence in the country,” said Heneine. “People with purchasing power have left—the ones that usually buy luxury brands—and are not coming back. It’s a long-term disaster.”

Bassoul-Heneine has resultantly scaled back annual sales predictions of BMWs from 740 units to between 250 and 400.

Some optimism remains

Higher oil prices, which spiked due to the sea blockade, have also affected sales of larger vehicles. Debs said that Mercedes with V8 engines had previously accounted for 60% of sales but has dropped to 25% after the war, with higher demand for V6 engines.

Despite the gloomy outlook, however, some dealers remain optimistic.

“The situation here is unstable, and people would rather put their money elsewhere than buy a car. But with Ramadan and tourists from the Gulf coming, the economy could pick up,” said Layal Karam, PR coordinator at Rymco.

November 1, 2006 0 comments
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Society

Putting money where the mouth is – Lebanon’s boutique foods

by Executive Staff November 1, 2006
written by Executive Staff

Lebanon, with its limited, varied terrain and lack of cheap labor, will never be an ideal environment for mass-production. However, Lebanon is ideally positioned to “go boutique.” There are already boutique hotels and Lebanon is considered a boutique wine producer, so why not other boutique products? Why not, indeed. Local entrepreneurs are catching on, and are capitalizing on Lebanon’s strengths—its climate, its educated workforce, and its historic ties with Europe—and producing high-quality fine foods.

In the case of Le Ferme St. Jacques, a duck farm nestled alongside a monastery in the mountain village of Bechtoudar and the Arab world’s only producer of foie gras and gourmet duck products, the farm was developed in 2001 as a pilot project to help in the revival of the northern economy.

The entire operation at St. Jacques could be called a French import. The staff was trained in France, all of their equipment was purchased there, and every three weeks, Air France flies 2,000 1-day-old ducklings into Rafik Hariri International Airport for delivery to the farm.

“The ducks need to be kept at an altitude of 1000m,” explains Jihane Richa, sales and marketing manager at St. Jacques. “Lebanon is the only country in the Arab world with a suitable climate.” As the sole regional producer of fine duck products, demand is high from across the Arab world, with Dubai and other Gulf states making up the primary export market.

Expansion plans

The farm, limited by its small size, has not yet fully exploited its commercial potential, but there are plans to expand and open similar farms in other villages in the north. In the meantime, St. Jacques has successfully achieved impressive secondary objectives—a solid reputation for high quality, brand awareness, ever-increasing exports across the region, and demand far higher than what they can supply.

This last point will be especially true over December of this year. The war prevented St. Jacques from bringing in the extra ducks it had ordered to meet the holiday rush.

“Last year, we didn’t expect so much demand over Christmas, so this year, we were really prepared. But the ducks came late—they won’t be old enough in time,” notes Richa wistfully. “We’ll be able to deliver for Christmas, of course—but not the way we wanted to.” The offset in timing means St. Jacques will have a large production in January and February instead, but Richa is confident that demand will be high enough to absorb the surplus.

Despite the delayed arrival of new ducklings, overall, the farm’s remote location and niche market meant it suffered less than many other businesses during the war. “We only stopped production for four days when the war broke out. I left for Morocco, and all of a sudden I was getting phone calls from restaurants in Faraya wanting to place orders,” recalls Richa. “We closed again after the attacks on Jounieh, but only briefly, to be sure it wasn’t escalating. Throughout the war, we were delivering to customers.”

“We’re going ahead confidently,” Richa affirms. “At St. Jacques, we’ve already faced a major disaster this year with the avian flu scare—in the end, everything went great. Any company that knows where it’s going can get through these times.”

Locally smoked salmon a hit

The inspiration behind Salmontini, whose owners produce the only domestically-smoked salmon in Lebanon, came in a far more casual manner—co-owners Hussni Ajlani and Joe Bassili met at a dinner party, and over the course of the evening, Bassili came to tell Ajlani how he was smoking fish in the mountains using the traditional Scottish methods. Ajlani was intrigued, and asked, only half-joking, “So, when shall we start a House of Salmon together?”

From there, the idea took off. Salmontini—the House of Salmon—opened its doors downtown in November 2001 and became a multi-million-dollar business. However, after the tumultuous events of 2005, the changing character of downtown towards a younger, most tourist-heavy crowd and the dominance of Lebanese restaurants in the area, Salmontini moved to its current location in Ashrafieh. “We are a classical restaurant,” explains Ajlani. “We need a location where we are less affected by change. Downtown moves too fast. We need a place where the restaurant can stay and stay. We hope Salmontini will still be here in 40 years.”

According to Ajlani, the overwhelming majority of new customers are unaware that all of the salmon on their plates is prepared at Bassili’s smokehouse in Hayata—and they are proud when they learn this. Approximately three tons of salmon are imported fresh each week from Scotland (it is a point of pride for Salmontini that none of its seafood—and especially none of its salmon—is ever frozen), brought up to the mountains for smoking, then sent out to both the original Salmontini in Beirut and its second outlet in Dubai, which opened in the summer of 2006. In addition, products can be purchased directly from the Salmontini boutique, and several caterers and gourmet supermarkets stock their fish as well (though not under the Salmontini brand).

The Dubai opening was particularly fortuitous considering this summer’s events, providing income while the Beirut restaurant sat empty. Throughout the war and after, Salmontini was unable to import its fish to Lebanon, and forced to close its doors in the middle of what ought to have been its high season. Temporary arrangements were made to bring fish from Scotland to Dubai directly for the duration of the blockade.

“As soon as the airport opened, we started up again. But between the loss of income, salaries, and rent, the war cost us about $25,000,” says Bassili.

Future plans on track

However, Bassili insists that none of their future plans have changed. Salmontini has already hired realtors to scout for a location in London, the site of their next expansion tentatively scheduled for next year.

“We’re here to stay, and we’re ready to lose money if we have to. But things are picking up again. We already have parties booked for Christmas. Salmontini is a unique concept in the world, and people here appreciate that,” Bassili notes.

While the foods produced at St. Jacques and Salmontini are unquestionably gourmet, both outfits are keen to stress that their products are affordable, and not limited to super-wealthy consumers. The ‘elite’ status of these products is derived not so much from their price tags, as from the rigorous training and production standards maintained in their creation.

The potential success of such enterprises has already been proven in Lebanon, through its fine wines, sweets, and other high-end products exported across the globe. Although Lebanon’s varied climate makes mass-production challenging at best, conversely, it means that almost any specialized product can be cultivated in some part of the country—a unique claim in the Arab world.

When asked if he is optimistic about the future of Salmontini—and other similar ventures in Lebanon—Bassili responds with a resounding, “Yes!”

“I’m waiting for the stock of INERGA to run out—they’re too easy to fire.” Bassili laughs. “We have a very different sense of humor in this country, no? Honestly, I’m very optimistic. We have to shake off the dust. If you want to live in this country, you have to be able to deal with these situations and move forward.”

November 1, 2006 0 comments
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Society

Controversial billboards on airport road – Hizbullah’s ad campaign

by Executive Staff November 1, 2006
written by Executive Staff

In the aftermath of its 34-day war with Israel, Hizbullah decided to launch its first-ever full-scale PR campaign: the “Divine Victory” blitz. The slogan was emblazoned on hundreds of billboards, primarily in the South, the Bekaa and the southern suburbs of Beirut, in a blissful union of militancy and marketing.

The contract was won by a team from Idea Creation, headed by Mohammad Kawtharani, the 30-year-old artistic director who coined the “Divine Victory” slogan. The campaign would have cost around $400,000, but the agency and the billboard companies offered their services for free. “So many companies refused money for their billboards. They said, ‘This is for Sayyed Hassan, this is for the muqawama—have it,’” explained an exuberant Kawtharani. Today, the slogan can be seen set against images of martyrdom and Israeli humiliation on 100 15x5m unipoles and 2,000 smaller billboards—a total of 12,000 m2 of printed area.

“We realized in the beginning that on the military and political levels, we were about to achieve victory,” Kawtharani says from the agency’s new offices in Haret Hreik, just a stone’s throw from the rubble heap that remains of its former location.

“We also saw the party unifying under the leadership of Sayyed Hassan Nasrallah. So we started linking his charisma to the victory. You know, ‘Nasrallah’ in Arabic means ‘divine victory,’” he adds.

Not just for Shia anymore

They emphasized red in the billboards to “signify the huge amount of blood” spilled during the war and highlight its civilian casualties, which Kawtharani calls the “real cost of the war.” The thin line of white line running across every image is meant to link the harsh realities on the ground with the ethereal forces of the divine. The green symbolizes the victory of resistance, which succeeded in “transforming death into life.”

Although Hizbullah was marketing the resistance long before this summer—Al-Manar TV station, local print media, and three billboards in the South and Dahieh owned by Hizbullah’s Martyr’s Institution were the crux of its public relations strategy—this is the group’s first attempt to market outside of its core constituency.

“It’s not only important that we won the war, now we have to maintain the vitality of this victory … and prove that the resistance is for all Lebanese,” Kawtharani says of the main objectives behind the campaign.

To communicate the national—as opposed to exclusively Shia—character of the “Divine Victory,” Idea Creation chose the images for each billboard according to its location and the demographics of its target audience.

“We chose different photos for billboards in the North than for the ones on the airport road,” Kawtharani says, “Like for one in Jounieh, we put a Lebanese Army soldier next to a resistance fighter, meaning the resistance is not just Muslim.”

Multi-media campaign

In addition to outdoor advertising, Idea Creation employed three other marketing tools in its campaign: printed pamphlets, banners, and personal items like flags, caps and pins. These elements of the campaign were also oriented towards specific target audiences.

The English-language banners proclaiming “Made in the USA” and “Extremely Accurate Targets” jutting from the rubble in Dahieh, for example, were designed for Western consumption.

“We tried to use the language of American media ironically there,” Kawtharani says, “So Western [news consumers] absorb a double-meaning.”

While the campaign certainly succeeded in getting attention both at home and abroad, it remains to be seen whether it will prove effective in attracting new supporters to the Hizbullah camp or in shoring up the support of disillusioned Shia. Now that domestic political tensions have once again replaced an external enemy as the biggest threat to Lebanon’s stability, the more important question may be whether the campaign was designed to help unify the Lebanese people, or as an opportunistic attempt to stir the sectarian pot.

“No one is disputing the costs of the war, but we are trying to recover now and we have billboards reminding us all along airport road,” says an executive from a mid-size advertising agency in Lebanon who preferred to remain anonymous. “If we want tourism and investor confidence to recover, we cannot show these kind of images.”

Kawtharani dismisses criticism on this count as beside the point: “Our priority is not to attract tourists back to the country—we are not trying to promote commodities, but to show the reality on the ground.”

The same executive said that the marketing campaign has also failed to consolidate increasingly fragmented public opinion within the Shia community.

“A lot of moderates in Hizbullah are thinking, ‘Why do we need to rebuild our homes every four years?’ The campaign pushed them away, and for the rest of the Shia, Nasrallah could have made a TV appearance and had the same effect because they believe everything he says anyway.”

Battle in the media, not the streets

Another executive speaking on condition of anonymity, from the Lebanese branch of a multi-national advertising franchise, agrees that the campaign did not sway public opinion. Although he is optimistic about what the strategy means for the future of the Lebanese political environment, his optimism is based on a kind of tenuous logic that has proven dangerous in the past.

“Effectively, if this is fine,” he argues, “Then Hizbullah will have to accept another political party mounting a similar campaign that they might not like, and they can’t get upset about it.”

However, he also observes that a slick Hizbullah marketing campaign, though controversial, may mark a positive change in the domestic sectarian discourse:

“It is offending a lot of people, but I’d rather the debate happens this way than for it to happen on the streets with riots and demonstrations.”

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

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