The Buzz

Believe in the Lebanese Way

by Michael Karam
written by Michael Karam

Like many Lebanese at the time, my grandfather, Esper Karam, left Lebanon at the end of the 19th century and headed for Brazil to make his fortune. He established Esperadio Karam Trading and, by all accounts, he prospered – he was a senior freemason in the Sao Paulo lodge, learnt Portuguese and married a Swedish dressmaker.

This is the Lebanese way.

In 1915, he returned to Lebanon with his young family, only to be caught in the blockade of Beirut and the ensuing famine. In his village, people survived by eating radishes and grass. My grandmother took in starving children who would otherwise have died, cared for them and returned them to their families when better times came.

This is the Lebanese way.

Esper lost his company in Sao Paulo, but with the Lebanese pioneering spirit still thundering through his veins, he headed off to Mali, where, with his brother, he established another trading concern in Koulikoro. Working in Mali today would be no picnic; quite what it was like in the late 1920s is unimaginable. But the heat, the malaria and the ever-present threat of violence did not deter a man, who despite his habit of losing money at cards, was not afraid of hard work.

This is the Lebanese way.

I did not inherit my grandfather’s knack for making money, but the entrepreneurial gene remains dominant in the Lebanese DNA. They cannot travel abroad and not do anything. Dump them in a foreign country, give them minimal capital and they will start a business, any business. They have to work; for their family and their future.

This is the Lebanese way.

During the civil war, Lebanese of all religious stripes fanned out across the globe – to Africa, Australia, Canada, the US, the Gulf and Europe. They established communities and opened businesses: restaurants, supermarkets hardware stores, car dealerships, dry cleaning operations, even petrol stations. Their kids were the products of a foreign education system but were drilled by Lebanese parents for whom education was a religion. They became doctors, lawyers and engineers, while others simply got a business degree and joined the family firm. And when the fighting finished, many came back.

This is the Lebanese way.

Once back, they were hungry to share new ideas and techniques. They opened restaurants and bars and, out of nothing, created beach resorts. They grew grapes and made wines that made the world blink in surprise. They established IT companies and developed property. They worked in advertising, banking, finance and tourism. They established factories and agro-industrial plants and they opened department stores and shopping malls. All this they did with little or no government help or incentive.

This is the Lebanese way.

For Lebanon’s bankers, financiers, entrepreneurs, developers, traders and wine producers are the real Lebanese: brilliant, educated, hard working people, who, like generations before them, want to make a better life. This year, in the course of my work, I have been encouraged by the energy and determination of the Kassem family, the foresight of Lebanese Canadian Bank’s George Zard Abou Jaoude, the vision of Exotica’s Etienne Debbane and the entrepreneurial energy of Akram and Nayef Kassatly.

This is the Lebanese way.

From the wine industry, I have been privileged to be allowed into the inner sanctum of Chateau Ksara to see how Lebanon’s oldest winery operates. I have been moved by the bravery of Massaya’s Ramzi Ghosn, who stayed with his winery as the bombs rained around him. Selim Wardy, owner of Domaine Wardy, told me over the phone of how he was helping coordinate relief efforts in his beloved Zahleh, while Serge Hochar, who in 1982, harvested his grapes under the Israeli, Syrian and Palestinian guns, defiantly announced that that it was “business as usual.” They are all fatalistic, but they still have faith.

This is the Lebanese way.

And the bombs continue to fall on Lebanon. The heroes of the private sector, their achievements, their shattered vision and their material loss, are also victims of a futile, vainglorious adventure and the obscenely disproportionate response it has provoked. But they will be back.

This is the Lebanese way.

Now it is time for all Lebanese to show their commitment to the Lebanese way once and for all by putting national consensus before sectarian allegiances and be inspired by the Lebanese work ethic. The government must now draft a concrete economic plan, not only for the immediate reconstruction needs, but for sustainable future economic development in all areas of the country, including the Akkar, the Bekaa and especially South Lebanon. It must no longer avoid privatization and it must identify and develop areas of undisputed potential, such as tourism and wine as well as harness vital natural resources such as water. Lebanon, more than ever, must be developed as a brand, a country that is investment-friendly and an oasis of progressive, liberal values in a traditionally conservative region.

This is the Lebanese way.

0 comments
0 FacebookTwitterPinterestEmail
Comment

World War three will not start here

by Yasser Akkaoui
written by Yasser Akkaoui

This black cloud has been a long time gathering: since 1996, in fact, when the sponsors of war unveiled their agendas. Until the end of 2005 – after the presidential extension, UN Resolution 1559, the assassination of Rafik Hariri, and finally the Martyrs’ Square demonstrations calling for a sovereign nation – the twin forces of conflict and prosperity had been sparring and trading jabs.

We were not free. When we woke up from our Independence-Revolution-induced-drunken-stupor, the forces of conflict had merely regrouped, and were still working to stymie progress at every turn and impose the state of war that feeds their very existence.

We have learned the hard way that Shebaa farms were of more use to Israel, who saw a land dispute as the perfect tool with which to keep its war options open.

And so the drums of war are getting louder. After tasting a sample of what this war is like, it is obvious that little Lebanon can neither take much more nor suffer the consequences. Now is the time to acknowledge that the only viable resistance is the one forged in the fires of economic supremacy. It is the time for every political party to subscribe to a new mission that will remove us from the well-worn regional agenda predicated on conflict and start to build a prosperous country, free from any affiliation or interests other than its own.

Refusing to allow others to wage their wars on Lebanese soil does not mean that we do not exist on the regional map. We are as much an Middle Eastern state as Switzerland was European during the Second World War, when its German, French and Italian cantons remained neutral and became a refuge for all that remained precious. Getting to this point will not be easy, but united we can make it.

And still there remains the hand of the assassin. Do not think that because Lebanon has entered a new, arguably more violent chapter in its history that those who shaped the dark days of 2005 have slipped into obscurity. National weakness is the perfect opportunity to sow the seeds of death and confusion. While death still looms, those who are still committed to freedom of speech and thought are not out of danger. Let’s pray that assassins will not reembark upon their deadly art.

Bridges and roads can be rebuilt, but lives are gone forever.

0 comments
0 FacebookTwitterPinterestEmail
The Buzz

It’s War

by Executive Staff
written by Executive Staff

It took Israel’s military thinkers about two weeks to declare the systematic destruction of Lebanon’s infrastructure – along with Hizbullah’s launching of hundreds of rockets into Israel – a war. The nearly one million Lebanese civilians fleeing the South and Beirut’s southern suburbs, turned into refugees in their own country, could have told them as much on day one.

So, too, could the casualties of that war: at time of writing, some 950 killed and about 3,225 wounded.

For the first time since Israel withdrew from south Lebanon six years ago following its 18-year occupation, the Jewish state is getting involved once again in Lebanon. And once again, it finds itself caught in the Lebanese quagmire with its plans for a quick campaign going askew.

Lopsided conflict

Indeed, it may well be a war as the Israeli military has declared, but it is a very lopsided conflict, with Israel inflicting collective punishment on the entire Lebanese population for the actions of Hizbullah, a party over which the Lebanese government has absolutely no control.

Initially, Israel believed it could limit its involvement on the Lebanese front to an air campaign, while using heavy artillery on its side of the border to pound Hizbullah positions. Israel also thought it would be a quick offensive, and that the Party of God would capitulate within days. But as an Israeli general later admitted, “Not all wars are won in six days.”

The question the Israeli high command must be asking itself now, almost a month into the war, is whether it can be won at all?

Seeking to limit its military casualties, Israel believed it could conduct its campaign mostly from the air. Prime Minister Ehud Olmert wanted to avoid committing boots on the ground, aware of the political and military consequences of being drawn inside Lebanon anew.

Israel is not about to forget the protracted and costly war in Lebanon that grew out of it’s invasion in 1982. In fact, today’s war is partially a continuation of a conflict that started more than two decades ago. It was that very invasion 24 years ago, dubbed Operation Peace for Galilee, that gave birth to Hizbullah. The Shia organization came to fill the void left by the precipitated departure of the PLO from the South and the Lebanese government’s failure to reclaim the region.

The Israeli invasion of Lebanon in 1982 also divided Israeli public opinion as rarely before, tearing at the very fabric of Israeli society. Many questioned the wisdom of the operation, and even within the military establishment there were diverging opinions.

Nonetheless, if the 1982 invasion of Lebanon gave birth to Hizbullah, that same war also produced the Peace Now movement in Israel, adding to the division of opinion.

However, this new war is very different. For the moment, it still has the backing of the majority of Israelis. Prime Minister Olmert has enjoyed their largely unwavering support on his decision to take military action in Lebanon following the kidnapping of two soldiers by Hizbullah . But as casualties begin to mount, that is likely to change.

Obvious risks

Olmert knows only too well the history of the last war in Lebanon, a war that nearly ended the illustrious – albeit tumultuous– career of his former boss, Ariel Sharon. At the time serving as defense minister, Sharon found himself accused of dragging Israel into a costly war when he took the fight all the way to Beirut. The prolonged siege of the Lebanese capital and the massacre of Palestinians in the Sabra and Shatila refugee camps only exacerbated negative domestic and international public opinion.

Indeed, Israel knows the risks of getting dragged into Lebanon. While this may still change, for the moment, the chances of another full-fledged invasion seem unlikely, despite Israel’s shattered hope of a quick victory over Hizbullah. With civilian casualties mounting every day, so too is pressure from the international community for the war to stop.

Israel maintains it wants the Lebanese government to assume control of its destiny, and for the national army to take hold of the Hizbullah-dominated South. However, Israel’s relentless bombing of Lebanon’s infrastructure will only weaken the Lebanese state.

So where is the logic behind the brutal bombardment of Beirut, its suburbs and other cities, ports, airports, roads, bridges, and so forth?

Israeli objectives

Israel’s plan, it would seem, was to pound Hizbullah into submission – or nearly enough. The intense bombing campaign was meant to weaken it to the point where it would be incapable of resisting the implementation of UN Resolution 1559, which calls for the disarmament of all militias in Lebanon, and allow itself to be disarmed by the Lebanese Army – the only boots that should be on the ground in Lebanon in the first place.

While the continued pounding of Hizbullah positions must have taken its toll on the group, the effect Israel hoped to achieve has largely failed. Unable to achieve the desired effect through its air campaign, Israel found it had to commit infantry troops and armor to the battle. The resistance put up by Hizbullah in fierce fighting in the South – and the casualties it inflicted on the Israeli army – has strengthened the movement, rather than weakening it. Instead, the continued destruction of Lebanon’s infrastructure is weakening the government.

The South has plagued Israel for several decades, as its control passed from the PLO to Hizbullah. Two invasions by Israel – the first in 1978, that brought about the deployment of the United Nations Interim Force in Lebanon, and the second in 1982 – failed to pacify Israel’s northern frontier.

Just as Israel set about to distance the PLO from its northern border in 1982, it is now seeking to do the same with the Lebanese Hizbullah, which has replaced the PLO in southern Lebanon.

In destroying Hizbullah, Israel sought to reverse the group’s victory in May 2000 that forced Israel out of southern Lebanon. That triumph paid much dividend to Hizbullah, both in Lebanon and in the rest of the Arab world where Hizbullah’s fighters were hailed as heroes. Hamas in particular hoped to emulate Hizbullah through it.

Israel’s new war on Hizbullah was undoubtedly partially intended as payback for the 2000 defeat and to discourage hopes within Hamas that they could gain same stature as Hizbullah – something for which the Palestinians in Gaza received a brief apercu following the capture of Corporal Gilad Shalit when Israeli troops re-entered the territory.

What next?

The war in southern Lebanon did not turn out as expected for Israel. Resistance put up by Hizbullah appears to have caught the Israelis by surprise. As a result, Israel intensified its bombardment and lowered the bar on its expectations. An initial demand that Hizbullah be completely destroyed is now changed to a request that Hizbullah keep its weapons out of the south. Although Israel originally rejected the deployment of international peacekeepers along the border, it has now made its withdrawal contingent on the presence of such a force.

Meanwhile, various parties are trying to patch together this multinational deterrence force — to facilitate and support a Lebanese army deployment in the South – in a way that satisfies the demands of all parties. However, there is widespread disagreement over its nature and composition. Lebanon will accept a 2,000-strong international peacekeeping force led by UNIFIL; the Israelis, on the other hand, deem the inclusion of “incompetent” UNIFIL as unacceptable, demanding a force of combat units rather than inspectors.

In addition to any international peacekeepers, it appears that the Lebanese army will also be deployed to the South once Israel withdraws. The government has announced plans to send 15,000 troops to the southern border, and has asked its reservists to report for duty by mid-August.

In the aftermath of the hell currently raining down on South Lebanon, the people of the South would certainly welcome the national army. But as in all troop deployment, the honeymoon period between the newly-arrived military in a region and the local inhabitants may be short-lived.

When the Lebanese Army deploys to the South, it had better come prepared to replace Hizbullah in all capacities : that includes setting up free clinics, schools and social centers. Of course, the Lebanese armed forces are not geared to the administration of school and medical dispensaries. This will require the immediate and close cooperation of the Lebanese government to ensure that competent ministries, along with NGOs, pick up the slack where Hizbullah left off. They will only have one chance at getting it done right, because honeymoon periods often expire rather quickly, and people in need tend to have very short memories. A few mistakes by the Lebanese military or government, and the villagers may be clamoring for Hizbullah’s return.

0 comments
0 FacebookTwitterPinterestEmail
Society

The Voices of Growth

by Executive Staff
written by Executive Staff

Pierre Achkar

The Lebanese Hotel Owners Association

Of course the situation is extremely bad for tourism. Tourism and warfare just do not go hand in hand. We were en route to a record year in terms of foreign arrivals, but now everyone has left. Hotels in the Greater Beirut area, all along the coast, as well as the Chouf, are performing badly, are almost empty. Only hotels, furnished apartments and restaurants are performing well in the region from Beit Merri to Bcharre. Here, most hotels have an occupancy rates of 90% to 100%. Most rooms are occupied by internally displaced from the South or from areas close to the areas most affected by the war. Generally, the poor have to stay in schools, but the middle class and wealthier prefer to rent a house or take a hotel room. However, as soon as a ceasefire is signed they will all go back to their area. What we need now is a comprehensive ceasefire, a final political solution, so Lebanon once and for all can come back as a tourist destination. It’s at this moment too early to talk about the damages and loss of income, but it will be significant.

Michael Dunn

Michael Dunn & Co.

My personal view on these events is quite straightforward. Israel had it all worked out and pre-planned. But now that the PR is turning against them, it will be interesting to see if they have the stomach. Regarding my work, a lot of us in real estate have made a big effort to get this far. None more so than Solidere and their investors. I have spent 10 years living in Lebanon and a lot of this time, it has been very hard slogging through the recession. 2005 and 2006 have been very promising. The Souks in downtown was well underway. Multi-national companies were expanding their businesses and taking more space. Right across the board, there was growth. For the first time in 10 years, we have seen real growth in the office market with a jump from $250 to $300/ m2. To me, it does seem as if there is a sadistic and jealous aspect to this attack on Lebanon. The economy was moving quickly forward and with that, there would come political progress too. I think Israel would resent the idea of Lebanon becoming more powerful. Ultimately, what we have lost is the confidence that had come back to the country. It takes years and years to create and develop that. And Lebanon needs it.

Rizk Khoury

Cumberland Insurance

The situation is catastrophic, as everyone else told you I’m sure. Because of the security situation, the economy has come to a standstill. In the insurance sector, we try to keep offering services to our clients, but it is very difficult with this situation. Some employees cannot come to work. On a financial level, it is very difficult to currently collect premiums. Basically, we are trying to keep our operation running, but live on a day-to-day base. We try to maintain our contacts with hospitals and brokers, but it is very difficult, as we operate on a 60% capacity. The effect of the crisis will be worsened every day this continues. Let’s hope it will not last long, so we can pick up the pieces, and continue our lives and work where we were before.

Marwan Iskander

Economist

The effect of this situation on the economy is obvious. First of all, Lebanon’s Gross Domestic Product was growing at a rate of 6% before the war started. Now there’s zero growth. The loss of income and opportunities because of the lack of 6% growth is the equivalent of $1.4 billion on an annual base. Secondly, there is the immense damage to Lebanon’s infrastructure, which is currently estimated at some $1 billion, but which is set to increase in case of further bombardments. Thirdly, the damage to the summer season, which normally runs from June to October, yet this year ended at July 10, while we had already recorded an influx of 40% more tourists over the first 6 months, compared to last year. A loss of an estimated $1.5 billion, although part of this amount is already included in the overall decrease in the country’s national income. In addition, the damage to plants and factories is currently some $100 million, without taking into account loss of production and profit. On top of that, there is the issue of housing and supplying the some 500,000 internally displaced, which I’d say costs an estimated $200 million. Finally, there’s the loss of government income, which amounts to $600 million over three months. Now, of course these are all estimates, but it may be clear that these are staggering figures and don’t paint a pretty picture.

Tareck Farah

Financial Funds Advisors

People need not be afraid of a currency devaluation. In the first stage of the conflict there was some lack of banknotes, but that was quickly solved. Lebanese banks have some $70 billion in deposits, 70% of which is in dollars. What’s more, the Central Bank has some $13 billion in reserves, which is huge, and that’s without the $1 billion Saudi Arabia has donated. So, there is no considerable pressure on the pound. Now, if we look at reconstruction and estimate damages at some $1 billion, I think, that’s achievable for the government, certainly with the foreign aid coming in. But this, if the conflict lasts for weeks, not months. Finally, a word on shares and the stock exchange. Most Lebanese shares are still being traded at the London stock exchange. Solidere lost some ground, as it went from a price per share of $21 to $15. But Solidere also has a lot of money in the bank thanks to the sale of land and as soon as the situation improves, the price per share will increase. So, there are some nice opportunities, and in fact we already see some investor demand.

Selim Wardy

Domaine Wardy

I lived through the 1982 invasion and this is much worse when you consider the size of the bombs they are throwing at us. I am working with a relief committee in Zahleh to ensure the people can get the basic necessities such as mattresses, food and drugs. People have medical conditions such as diabetes and we need to provide for them. They have nothing. We even have to provide coffins. The harvest this year? Who knows? We don’t even have any pickers. The place is empty. Come and see what is happing here; it is incredible. The place is empty. One of my vineyards has been damaged. I have 45 hectares in Zahleh, but most of my vineyards are in the north Bekaa and we are unable to reach them because the roads are so badly damaged. We don’t even have our raw materials for the fermentation. What would be really devastating to the morale of the wine sector would be the undoing of all the good work [Lebanon’s wine producers] have done in the past decade in terms of building awareness, improving what is an excellent product and trying to penetrate new markets. If we have no harvest, all that work will have been for nothing.

Nayef Kassatly

Kassatly Chtaura

The situation is crazy, really bad, I mean, there are no words. Because of the war situation we cannot open the factory and risk the life of some 100 employees. Suppose the factory gets bombed. What’s more, we transport our goods. Trucks are regarded as a legitimate target. But even if trucks were able to move, where would we go? The port is closed, the airport is closed, and even Masnaa is closed. Like most factories in Lebanon, we export 70% of our goods to Syria, Saudi Arabia and the Gulf. Till August, I think we will be able to pay salaries, but after that, we will see. Finally, the Bekaa is running out of petrol, which we need to keep fruits and products refrigerated. If we run out, we lose all our stocks. Of course, we are lucky compared to Dalaal and Maliban Glass, but we, like the rest of the Bekaa, are in total darkness. All I ask for is one road. Give us one road to Syria or Beirut. We are only 10 kilometers away from Syria. And the future? I don’t know. We cannot afford another crisis, so we have been thinking of a plan B. Maybe we should move the factory abroad.

Toufic Dalaal

Dalaal

Following the bombardment on Maliban, we decided to close the factory, so not to put our some 400 employees in danger. Consequently, no one got killed when the raid took place. They were two planes that fired several rockets. When they realized one building was still standing, they returned and bombed that as well. And so, everything is destroyed. We have to start from scratch. That’s why I’m currently in the States. I’m an American citizen and I came here to buy new machinery, as I want to reopen as soon as possible. We are obliged to do so, as we have a good reputation in the region. What’s more we have lots of work. We have several factories under one roof, one of which produces prefab homes for the US army in Iraq and Afghanistan. So far, our clients have been very understanding and allow us to deliver with some delay. In any case, contractually the fact we are late is not our fault. Why we’ve been hit? I have no idea. I’m still half under shock. But we are too far from the border to fire Katyushas. We live in a Sunni, not a Hizbullah area. So the only thing I can think of is economic warfare. Israel wants to break Lebanon.

Michel Waked

Liban Lait

On July 17, one Israeli plane flew over and hit the factory with a missile, and on its return fired another one. The whole factory is completely destroyed. What we will do now, I don’t know yet. There are many shareholders and first we have see what the situation will bring, peace, a ceasefire, under what conditions. So, before that is clear we cannot make a decision. I can’t say exactly what the damages are. We’ve asked a team of expert to make a detailed report, and I don’t want to make claims before that has been done, but sure, it will be millions of dollars. They hit us, because we employ a lot of people from the area. The Israelis warned before the war started that they would teach Lebanon a lesson it would never forget: messing with Israel will come at a cost, because we will put you 20 years back in time. And that’s what they did. What happened in the Bekaa is no such thing as collateral damage, no, they deliberately targeted the big factories. But let’s not forget that it is not just the Bekaa. In the Dahyeh and the South, lots and lots of small and medium-sized companies have been destroyed. I know one man who worked 20 years in Africa and set up small company in south Beirut. He lost everything.

Salah Baraki

Maliban

The factory is 42 years old, of which I worked here 41 years, yet in two minutes everything was gone. There were Israeli jets that raided the factory and fired four or five missiles, I’m not sure. They were huge bombs. The craters are enormous and a some 20-meter steel beam landed on top of the office building. It seems they specifically targeted the production area. The damage, I don’t know, maybe $20 to $25 million. We have to see if the owner, an Indian businessman in London, will decide to rebuild. Meanwhile, what will we do? There are some 400 employees and their families who are dependent on this factory. What am I going to do? I’m 60, I have five children, two of whom are still in university. This should be my time to retire and enjoy, but now, everything is uncertain. Do I blame Hizbullah? No, I blame myself. I should have left the country ages ago.

0 comments
0 FacebookTwitterPinterestEmail
Analysis

Bush’s lucky break

by Executive Editors
written by Executive Editors

After three long years of somber and often depressing news from Iraq – where by mid-June, according to Pentagon sources, the American military death count had reached the landmark total of 2,500 – the situation took a dramatic turn with the death of the most wanted man in Iraq, Abu Musab al-Zarqawi.
Zarqawi was believed to be responsible for many attacks against American, coalition and Iraqi forces, as well as for the killing of Iraqi military, security and police recruits. International intelligence agencies suspect Zarqawi was also responsible for the gruesome beheading of several hostages. He was a meticulously savage man intent on igniting a civil war between Iraq’s Sunni and Shiite communities.
The US made it a priority to find Zarqawi and offered a $25 million reward for information leading to his capture. Jordan also had its reasons to want Zarqawi’s head, after he was blamed for bomb attacks in three hotels in Amman last November. While President Bush quickly claimed credit for the death of the Jordanian-born terrorist, Jordanian special forces operating under cover inside Iraq made a key contribution.

Jordanian special forces’ key role
Executive has learned from official Jordanian sources – and confirmed with several US intelligence sources – that a man close to Zarqawi was apprehended by Jordanian special forces and turned over to US authorities.
One American security and terrorism expert who is well-acquainted with the region told Executive that Jordan’s special forces were possibly the best-trained in the Middle East.
It was this arrest by the Jordanians that led the US special forces in Iraq to Zarqawi’s religious advisor. The Americans were able to monitor a cellular phone used by the imam, which in turn led the American and Iraqi forces to the house used by Zarqawi in the town of Baqouba. The rest, as they say, is history.
This time, Bush truly had something to celebrate. The elimination of Zarqawi may have finally absolved President Bush of his premature victory lap three years earlier, when, clad in a fighter pilot’s outfit, the president landed onboard the USS Abraham Lincoln and triumphantly declared the end of all “major combat operations,” standing before a huge banner that read “Mission Accomplished.”
As we were soon to find out, the battle had only just begun. In the three years since, American and coalition forces were to face two different types of insurgents; the first, making up the Sunni resistance, are in fact mostly Iraqis – cashiered soldiers and officers who served in Saddam’s army, along with members of the Baath Party.
American officials and the previous and sitting Iraqi governments have in the past tried to kick-start peace talks with these rebels. The talks, usually held in utmost secret, have mostly sputtered and stopped. But experts believe that at the end of the day, the Iraqis as well as the Americans will have to bring the main branch of Sunnis into the equation and include them in the rebuilding of Iraq.
Zarqawi and his followers are a whole different kettle of fish. They are for the most part foreigners who will have no part in any peaceful future Iraq. These are the people who will fight to the finish.
Immaculate timing
For Bush, the timing of Zarqawi’s death could not have been better. It came as his approval ratings were at an all-time low. The war was not going well, with casualties mounting on a daily basis.
Riding the momentum of this success, President Bush paid a surprise visit to Baghdad. The American president met with Iraqi Prime Minister Nuri al-Maliki, spent a few minutes with some US troops and left before word got out that he was there. In all, the American president spent no more than five hours in Iraq. But for him, every minute spent in Iraq was worth its weight in gold.
As a reminder that Baghdad is still a very dangerous place, Bush’s visit to the Iraqi capital was a far cry from his landing aboard the USS Abraham Lincoln.
Three years after that event, a select few – the Iraqi prime minister and his cabinet, along with some American soldiers – saw a far more somber and down-to-earth Bush. This time there was no fanfare as Bush arrived aboard Air Force One. To avoid anti-aircraft fire the presidential aircraft had to engage in a spiraling maneuver over Baghdad International Airport. Bush was taken in a Black Hawk helicopter to the heavily defended Green Zone compound where the Iraqi government, the US Embassy, and many foreign legations are located.
Zarqawi’s death has helped Bush’s approval ratings, pushing him up to 38%, two full points higher than he was a month ago. And as the November elections approaches, the president needs all the help he can get to keep the Republicans in the majority on Capitol Hill. But breaks like the capture of Zarqawi are rare in an Iraq that continues to be plagued by almost daily terror attacks.

0 comments
0 FacebookTwitterPinterestEmail
For your information

Ports in a storm

by Executive Editors
written by Executive Editors

Ports in a storm
A combination of relaxed trade regulations, high transit demand and soaring local consumption has helped Syria’s two ports achieve record levels of cargo traffic and position themselves as potential transshipment hubs for the eastern Mediterranean.
Lattakia and Tartous provide an increasingly vital outlet for the Syrian economy. The former has doubled its productivity and more than tripled its income over the last five years, while Tartous has grown by 115% since 2003, thanks mainly to dry bulk goods being shipped onwards through Syria to Iraq.
“Syria provides the cheapest and quickest route to the Iraqi market,” says Michel Sawaya, assistant manager at Eagle Shipping and Logistics, the Syrian agent for the French CMA-CGM container giant.
“If you go via a Turkish port, then you have to deal with mountains. If you ship through Jordan, then you have to pay Suez Canal costs and also deal with Aqaba, which is very congested. Shipping direct to the Gulf takes at least another 20 days, and even then the port of Umm Qasr in Iraq is also extremely congested.”
Lattakia mainly sees container traffic, destined for a local market with booming demand, while Tartous, some 100 km closer to the Damascene and Iraqi markets, depends on bulk goods such as cement, foodstuffs, animal feed, spare parts and iron. The majority of this is shipped on to Iraq or Jordan.
Major developments are now planned at both ports, aiming to increase capacity, upgrade existing equipment, and deepen berths to allow larger mother vessels to dock.
“We are currently working with the UNDP on a study to enlarge and upgrade the port,” says Suleiman Balouch, general manager of the Lattakia Port General Company (LPGC). “It should be complete by 2007, and then we expect construction to take another 2-3 years.”
In Tartous, a decision is soon expected on a BOT tender for a new container terminal. Of the four companies that bid for the 10-year contract, CMA-CGM and a Filipino firm, International Container Terminal Services (ICTS), have been shortlisted.
The Port of Beirut has also grown thanks to onward shipments, although to a lesser extent than its Syrian counterparts. Transit goods landing in Lebanon must pass through Syria anyway – meaning two sets of paperwork, lengthy security checks at the border and a mountainous drive.
The Syrian port companies also say that their fees are 25% less than in Beirut, a factor which they argue will drive more and more traffic through Lattakia and Tartous in the coming years.

All change at Cave Kouroum

All change at Cave Kouroum
Cave Koroum, a Kefraya winery that has so far failed to make a significant impact on the local market, has signed a distribution deal with K&M (Khoury & Moallem) which will see its wines join the ranks of other Lebanese producers on the supermarkets shelves. “We are in Spinneys, Bou Khalil, and Aoun, and will soon be in Geant,” said Cave Koroum’s sales manager Ibrahim Serhal.
Sadly, those visiting and departing Lebanon this summer will not find Cave Kouroum on the shelves of the Beirut Duty Free, as the winery has joined a handful of other producers who find the rates charged by PAC, the company that runs Beirut Duty Free, prohibitive. “To be at the airport, we must pay $25,000 a year for wine and $16,000 for arak. We would have had to spend even more on tastings, which can cost as much as $1,500 per week. I decided to allocate the funds elsewhere,” said Serhal.
There were rumors in the Lebanese community that Kouroum’s colorful wine maker Yves Morard had ended his long relationship with the town of Kefraya (he had previously worked at Chateau Kefraya since the early 1980s), but Serhal was at pains to point out that, while he spends most of his time in France, he is still under contract and was working closely with the wine-making team on the ground.


The company is the only Lebanese producer to sell its wines in boxes – the so-called bag in a box concept – but Serhal admitted that in Lebanon, at least, the concept had few takers. “You know the Lebanese consumers. They see it as low quality.” That said, Koroum aims to position its wines in the top drawer. The wines have won a slew of medals in the last six months and Serhal says the winery has great hopes for its new premium reds – Syrah/Cabernet Sauvignon and Syrah/Carignan. Koroum is also looking to increase exports. The wines are already available in Norway, Germany, Switzerland, Belgium and Mexico. According to Serhal, at least half of the winery’s 450,000 bottles are destined for the export market.

Business excellence

Business excellence
The American University of Beirut’s Olayan School of Business, in cooperation with the Reuters Foundation, a nonprofit associated with the Reuters news agency, has announced the launch of an Academy of Business Information. According to George Najjar, Dean of the business school, “the proposed academy is to be part and parcel of the Olayan School. As such, its activities go beyond business journalism to focus on the process of generating, analyzing and using business information.”
Activities of the academy for the next year include a pair of two-day workshops in November and December and a proposed international conference in January on business information in the Middle East. But the main event will be a formal, one-semester program conferring a certificate in Business Information. The first classes toward the certificate will be held in February, 2007.
Coursework for the certificate will consist of five one-week modules, each of which can be taken independently, and which will be taught every other month. Although the syllabus is still in development, each course is likely to consist of a short, intensive session of four 8-hour days, with classes capped at 12-15 people. According to Najjar, “a participant may opt to register for only one module, but then they would obviously not get a certificate.”
The coursework will be based on a syllabus being developed by the Reuters Foundation in cooperation with AUB faculty. According to Jo Weir of the Reuters Foundation, the academy will mark the first time the foundation has participated in a formal program granting a certificate in business reporting. On the other hand, the foundation has been training journalists and businessmen around the globe in business information for years, and has cooperated with AUB since donating a news room to the school in 2001. The news room, along with a dealer’s room (donated later), will form an important base for the practical elements of the new academy.


Although the coursework will be in English, Weir expects that many beneficiaries of the program will work mainly in non-English media, based on the Reuters Foundation’s experience both in the region and around the globe. “The basic principles of journalism remain the same and can be transferred to work in other languages,” she says, “And this is especially true of business reporting.”
Najjar emphasizes that the program will not be intended only for journalists, but will be “intended to serve as a major platform for all three constituencies, namely producers, analysts and users of business information including business journalism. The program is intended to significantly upgrade the quality of business information services available locally and regionally.”

Web alliances

Web alliances
Last month, Franco-Lebanese web marketing firm Ebizproduction finalized a partnership with Weborama, a French industry leader in e-commerce services. Through the agreement, Ebizproduction can now offer its clients access to Weboscope, Weborama’s premier website analysis tool. The partnership is Weborama’s first foray into the Middle Eastern market, and coincides with the company’s euro 20 million worldwide expansion plan.
According to Communications and PR Manager Yann Rotil, Ebizproduction sought out the agreement: “We were looking for the solutions that they were providing,” he explained to Executive. “There was another group we could have partnered with in the United States, but as a French-Lebanese company ourselves, it was easier to use Weborama.”
Weboscope, the service at the center of the agreement, provides detailed website traffic analyses and Return on Investment (ROI) data for online advertising campaigns. By providing precise turnover figures for each investment (such as a banner ad or Google “sponsored link”), Weboscope enables clients to monitor – and potentially increase ­– the effectiveness of e-marketing strategies. Although Ebizproduction and its competitors have been offering more basic site analyses for years, Weboscope provides a far wider range of data than any other service on the domestic market and is the only tool to analyze ROI and effectiveness statistics. Rotil reports that several of Ebizproduction’s high-profile Lebanese and regional clients have wasted no time signing up.
As for the Lebanese e-commerce sector itself, Rotil anticipates it will heat up in the next few years as web marketing companies provide their clients with better solutions (and returns). For Rotil, this means keeping up to speed with European technologies: in addition to the Weborama deal, Ebizproduction is currently in partnership talks with another top French firm.
Rotil sees tremendous potential for online business in the region – as long as red tape doesn’t get in the way. “In North America and Europe,” he explains, “E-commerce has been booming for the past five years. In Lebanon, the industry hasn’t taken off yet, primarily because of the quality of internet connections in the country. Once that problem is addressed, e-commerce will boom here, too.”

IDAL hits the road

IDAL hits the road
The Investment Development Authority of Lebanon (IDAL) was created to provide financial incentives and fiscal exemptions to lure investors to Lebanon. According to Nabil Itani, IDAL chairman and general manager, $800 million has been invested and 3,000 jobs created thanks in part to the Authority, which was formed by Investment Law 360 in 2003. He told this to reporters gathered for lunch at an almost empty Habtoorland following a June press tour of some of the projects that have profited from the new law.
But while the owners of projects visited by journalists during the IDAL press tour were unanimous in praising the fiscal incentives offered, they were less flattering in their assessment of the administrative procedures they have had to negotiate. (In addition to providing financial incentives, IDAL is supposed to be streamlining Lebanon’s laborious investment bureaucracy.)
Pierre Abou Jaber is CEO of VEN Invest Holding, a development group that comprises a number of foreign shareholders and has invested $350 million in Lebanon, $90 million of which is in the Le Gray Hotel project in downtown Beirut. According to him, “We would have expected a little bit more on the administrative and legal side … It took us a couple of years to get the necessary permits. The administrative side needs to be completely restructured. What we lack is transparency. The procedure is not accurate. You have to deal with the municipality. And it depends on the political mood. They’re stuck a little in the past, Ottoman procedures.”
Issam Tannir, part owner of the Grand Hyatt hotel being built in the Solidere area, said, “We have had many administrative problems. It is within IDAL’s remit to help with these problems, but they have not been fully involved in the matter.”
Dr. Nizar Younes, part-owner of the $70 million Hilton hotel under construction in Downtown Beirut, was fuming when the IDAL press group showed up. He had been ordered to stop work the preceding day because, according to an IDAL staffer, changes had been made to the building plan without the permission of the municipality. “There is no state,” Younes complained. “It takes too long to deal with administrative problems. Our administration can’t oversee development of the country.” IDAL staffers wrapped up the interview quickly.
“Maybe work will stop for two months now,” an IDAL employee said. But by lunchtime, the problem had been resolved. IDAL Director Nabil Itani told Executive he had “made some calls,” but with a broad smile declined to reveal exactly who he had called.
One IDAL official said the organization’s inability to streamline administrative procedures was a consequence of the political disputes that have paralyzed Lebanon in recent months. Itani acknowledged the need for administrative “improvements,” but when asked if politics was hindering IDAL’s work responded only, “The issue is not about supporting IDAL, it’s about supporting investors. All politicians support investment.”
Lebanon’s tourism sector has been a principal beneficiary of Investment Law 360. Itani said that 50% of the projects – worth 96% of total IDAL-supported investment expenditure – enjoying financial incentives under the new law were hospitality- and tourism-related.

Football financials

Football financials
As football fever grips the nation, some enterprising financial services firms have cashed in on the flurry of spending generated by the World Cup.
Al-Mawarid Bank (AMB) erected its own stadium tent downtown – with access reserved for customers who were generous with the bank’s MasterCard during the build-up to the tournament.
AMB devised three levels of spending under a special promotion which ran between April 20 and May 20. Customers forking out $100-250 on retail transactions during this period won a seat to watch all first and second round matches on the stadium’s projectors and plasma screens.
Spending $250-500 allowed two people to watch all games except the semi-final and final; access to the semi-final and final is restricted to those who made at least $500 of retail purchases.
“We definitely noticed higher spending on our credit cards during the promotion,” says Rana Karaki, Sales Manager at AMB. “Overall, we’ve given out 2,000 passes to the stadium, which holds about 150-200 people. The first few games were relatively quiet, but since then there’ve been about 150 people every night. We expect the final to be full.”
Société Nationale des Assurances (SNA) has also capitalized on the tournament, launching an online football game featured on their website.


“You log on, register and play as many times as you want,” says Rita Bakhos, from SNA’s corporate communications department. “Your score is recorded on the system and on July 9, at the end of the World Cup, we will award prizes to the top scorers.”
Booty includes a Chevrolet Aero, Acer laptops, digital cameras and mobile phones, although the bad news for more grizzled World Cup veterans is that only 15 to 30-year-olds are allowed to enter.
“The idea of this campaign was to tell young people in particular about SNA, promote our new website, and raise awareness that SNA is a part of the Allianz group – which is associated with the football stadium in Frankfurt,” says Bakhos.

Rustic charm

Rustic charm
As boutique hotels move into the mainstream, a trend has emerged at the cutting edge of the Lebanese hospitality industry: ultra-exclusive, niche venues offering five-star quality – at five-star prices – in an intimate setting. The movement is led by restaurants like Ashrafieh’s Metropolitan Club, and in the hotel sector, Bikfaya’s Locana Corsini.
According to Cinzia Corsini Abi Farah, her family’s “guest villa” represents a new concept in Lebanon. It was inspired by the locande of her father’s native Italy – small, family-run country inns where guests could enjoy comfort, warmth and personal attention.
With only eight suites, Locanda Corsini is the smallest luxury outfit in Lebanon. Its appeal relies on attention to the unique tastes of each guest. From deciding which magazines to place in a suite to planning individual excursions, niche hotels can make even boutiques look impersonal. Locanda Corsini even boasts home-cooking: all the food at their rustic Italian restaurant is hand-prepared by Abi Farah’s mother.


Aside from a few initial press releases, the Corsinis have relied exclusively on word-of-mouth marketing, a strategy which has left them almost fully-booked all summer. Abi Farah estimates 60% of their guests are Lebanese, 30% European and North American, and 10% Arab. They are already seeing an increase in the number of people coming from abroad.
Hospitality insiders believe that niche operations offer a promising new direction for the Lebanese tourism sector. With an abundance of picturesque countryside and villages, Lebanon is uniquely equipped to develop these kinds of projects in the region.
Abi Farah isn’t worried about competition, although she knows its coming. Locanda Corsini will retain an edge, she says, because of the extra intimacy that comes from being entirely family-run.

Cut Cristal

Cut Cristal
In late May, MENA Cristal announced that the second edition of its advertising awards would be staged at the Faraya-Mzaar mountain resort from February 28 to March 2, 2007. The MENA Cristal awards, an offshoot of Europe’s prestigious Méribel Festival de la Publicité, were introduced in 2005 to recognize talent and creativity in the Middle East and North Africa’s advertising industry.
MENA Cristal is still in its infancy, but the festival’s association with prestigious Méribel leaves it poised to bypass many of the usual growing pains. Méribel’s sole offspring, the MENA event even gives out the same award – the internationally-recognized Cristal.
The 2007 festival will differ somewhat from its debut in Casablanca on February 24 of this year. The range and number of awards presented will be greater: in Casablanca, besides the “MENA Grand Cristal,” awards were given in two categories; in 2007, there will be six areas of competition.
The single-day event has also been transformed into a four-day festival, equal in length to Méribel. In addition to the awards themselves, the festival will include advertising and marketing forums integrating debates, conferences, workshops and roundtables. The final day is set aside for leisure and tourist activities in Faraya-Mzaar.
Organizers are keen to foster an atmosphere similar to their parent award festival, which is held each winter at the ski resort of Méribel in the French alps. “One of the main reasons we chose Lebanon for 2007 is that we wanted to create the same ambiance as Méribel,” explained Emilie Rohmer, the International Development officer for MENA Cristal. Although Rohmer declined to speculate as to whether the awards might settle permanently in Lebanon, she confirmed that the festival is likely to remain in Mzaar for 2008 if next winter’s experience is positive.

Groupe Méditerranée
merger

Groupe Méditerranée
merger
This summer, a second step is being taken in the reorganization program at Group Méditerranée. The program began by rebranding Banque de la Méditerranée as the snappier BankMed. Now, the Group is consolidating all three of its commercial banks: retail-focused Allied Bank was merged with BankMed in May; Saudi Lebanese Bank is set to follow suit within the month. Mr. Mohammad Hariri, chairman and general manager of Groupe Méditerranée, explained the merger as an effort to streamline the Group’s activities and expand its catalogue of products and services. It will also provide customers with access to a far larger, more convenient network of branches and ATMs. However, the primary aim of the banks’ unification is probably to diversify and increase BankMed’s deposit base, chiefly from Gulf investors.
There are also plans to diversify funding by tapping the international investor community. A Euro Deposit Program of $1 billion and the issuance of 12 series of deposit certificates reflect the Group’s desire to broaden investment and boost its image in the international finance community and capital markets. Furthermore, there are plans to dispose of part of the Group’s real-estate portfolio, bringing in around $100 million and further diversifying and optimizing funding.

0 comments
0 FacebookTwitterPinterestEmail
Capitalist Culture

Bear with us

by Michael Young
written by Michael Young

In mid-July, the Group of Eight industrialized countries, and Russia, will be meeting in St. Petersburg, in what Russian President Vladimir Putin will regard as recognition of his nation’s resurgent importance. Not surprisingly, a main agent of that importance is oil and gas, and Putin has proposed that “energy security” be an item on the agenda.
Oil is one very good reason why Russia has been accorded a seat with G8 members, though its economy is smaller than Holland’s. Meanwhile, the country with the second largest economy in the world, China, has been kept at arm’s length. That’s partly because the G8 likes to see itself as a grouping of wealthy democracies, and China, with its blending of capitalism and autocracy, has provoked discomfort in the industrialized club. Oddly, though, that same distaste has little affected their attitude toward Russia, where Putin has gradually suffocated independent voices in the media, in the business sector, and even in non-governmental organizations.

Oil, gas, and a little payback
In the Middle East, however, Russia has shown an admirable propensity to absorb capitalist culture, though paired with a hard-nosed policy little patient with advancing open societies. Not surprisingly, oil and gas form a cornerstone of Russian behavior, as does pleasure in striking back at the Americans and reviving old Soviet-era alliances.
As analyst Ilya Bourtman has written, “Learning from US policymakers who for many years developed relations with both Arab states and Israel and were thus at an advantage when it came to resolving disputes and capitalizing on economic opportunities, Russian officials now similarly avoid any ideological principle that would force their policy to be zero-sum.”
Take Russia’s relationship with Iran. Putin is in a win-win situation as the West seeks to head off the Iranian nuclear program. Months ago, before the United States agreed to participate directly in talks with its European partners, Putin was the go-to man to offer Tehran facilities to enrich uranium outside Iran – seen as preferable to allowing this inside the country. The Ahmadinejad administration said no, but that hardly diminished Russia’s importance as the United States, the United Kingdom and France continued depending on Russia and China to preserve Security Council unanimity. At the same time, Moscow and Beijing retained Iranian goodwill by rejecting sanctions.

Profit before politics
If war were to break out in the coming year, Russia would not complain. Not only is a conflict likely to push Iran closer to Russia, it might generate so much regional blowback that the Bush administration would face years of headaches because of Iranian retaliation. But most significantly, war would push the price of oil up to unheard-of levels, providing a windfall for Russian oil companies.
Oil has also been at the forefront of Russia policy toward Arab states such as Saudi Arabia, Iraq, Syria, and Jordan. It’s the promise of profits that has motivated Moscow, not at all the idea of using economics to democratize the Middle East. For example, the Russians voted in favor of Security Council Resolution 1559 demanding a Syrian withdrawal from Lebanon, but have since opposed sanctions against Damascus for failing to cooperate in the investigation of Rafik Hariri’s assassination. National interest has trumped the pursuit of justice as Moscow sees no reason to alienate Syria today, when Russian companies are involved in developing its gas sector.

It is hard to fault the russians for wanting to make money and throw deeper ideas to the wind


Oil has also played a role in Russia’s robust economic ties with Israel, another sign of how Russia has left ideology by the wayside. Direct bilateral trade stands at close to $1.5 billion, while the two countries have over $1 billion in energy deals. Bourtman writes that Russia provides 88% of Israeli crude oil, and in November 2005, “it was reported that the Blue Stream Natural Gas Pipeline – a $3.4 billion project between Russia and Turkey – would be expanded to Israel through the Eilat-Ashkelon pipeline to allow Russian and Azerbaijani oil and gas to be exported by tanker through the Red Sea to China and through the Suez Canal to Southern Europe.”
It is difficult to fault the Russians for wanting to make money while throwing deeper ideas to the wind. After all, isn’t that what the Americans spent the Cold War hoping they would do? But one still gets a sense that this attitude will only ensure that Middle Eastern despots continue to get a free ride.

0 comments
0 FacebookTwitterPinterestEmail
Cover story

Beirut’s architects

by Executive Editors
written by Executive Editors

The big news in the BCD this spring was the announcement of two mega-building projects.
In April, the privately owned Abu Dhabi Investment House (ADIH) revealed that it had snapped up seven parcels of land just south of the vacant space that is Martyrs’ Square for Beirut Gate, a $600-million mixed-use residential and commercial project.


The project’s footprint covers 21,447 m2 and, when finished, will consist of 178,500 m2 of built-up area. Preliminary plans include seven different deluxe buildings. When ADIH announced the launch of the project, its first in Lebanon, Beirut Gate was the largest development project on record in the Beirut Central District (BCD). But only for a month.
In May, Kuwait-based Levant Holding announced it would begin financing Phoenician Village, a high-density, four-tower complex – including “intelligent” office space, apartments, retail outlets, hotels and entertainment facilities – as soon as it raised the $410.8 million in start-up capital. Levant Holding – which was set up by the Al-Sayyer Group and Aldhow Investment, a subsidiary of Al-Sayyer – reportedly paid $1,750 per m2 for the 20,000 m2 plot of land nine months earlier. According to Salah al-Mayyal, the company’s managing director, the value of the land has already risen 30% since then.
Redrafting the skyline
The Phoenician Village will have a built-up area of 205,753 m2. The four towers northeast of Martyrs’ Square will reach a maximum height of 160 meters. At the moment, Phoenician Village is the largest project in Solidere’s ongoing urban renewal of the BCD.
These are just two of the latest and most audacious instances of Gulf money flooding into Beirut’s real-estate sector. If Beirut Gate and Phoenician Village mean anything beyond the complete (though still entirely hypothetical) redrafting of the Beirut skyline and city center, they are further evidence that the Lebanese capital is in the midst of a real-estate boom.


Since its inception twelve years ago, Solidere has placed a premium on architectural quality for its own developments and insisted on a high level of design for other developments within its territorial borders. Controversially, Solidere has drafted lists of architects that developers must choose from for projects on specific, high-profile plots of land.
Jean Nouvel is working on the luxury Landmark project to be built on Riad al-Solh Square; Stephen Holl on the Beirut Marina, Michael Graves on the Dib and Town Towers, Rafael Moneo on the souks project, and Arata Isozaki on Beirut Gardens (next to the Virgin Megastore). Elsewhere, Zaha Hadid is reportedly designing the headquarters of the Al-Mawarid Bank, Christian de Portzamparc is on board as the chief architect on Beirut Gate, and Norman Foster is said to be at the top of the wish list for Phoenician Village. All three have won the Pritzker Prize, the architectural equivalent of a Nobel.
The idea that architecture (or an architect) can bring added value to real-estate projects is catching on for developers working outside the BCD, particularly in such neighborhoods as Gemaizeh, Clemenceau, Sursock and Abdel Wahab al-Inglizi, where land prices are soaring and numerous high-ticket residential buildings are going up based on plans by well-known local and international architects. This can only be good news for architects in Lebanon, especially those who remember the days when the real-estate market tanked in the late 1990s, after a promising start in 1993 courtesy of the Hariri boom years.
According to Sany Jamal, who heads up the architecture section of the Order of Engineers and Architects, there are now 5,000 architects in Lebanon among the order’s 25,000 to 30,000 members. By all accounts, they are busier than ever.

Enfant terrible at work
“I’m not looking for work. We are over-flooded with work,” says Bernard Khoury, who at 37 is widely considered the boldest, most daring and rambunctious of Beirut’s architectural elite – and with a mouth to match his designs, its resident enfant terrible as well.
He earned his spurs with such projects as the BO18 nightclub in Karatina and the restaurants Centrale and Yabbani in Ashrafieh – all conceptually-driven rehabilitation projects done on tight budgets.
That said, when Khoury first returned to Lebanon after studying at the Rhode Island School of Design and Harvard University’s Graduate School of Design, he had sixteen contracts between 1993 and 1996 that never resulted in a single finished building. By his own colorful description, he has eight “cadavers” in Solidere alone, projects that never managed to get beyond the initial design phase, either because Solidere dropped them or because investors pulled out. On a few occasions, Khoury himself walked away.


About a year ago, however, Khoury restructured his office, creating Bernard Khoury Architects/DW5, a union that allows him to draw on the expertise of a loose, ever-evolving collective in a studio workshop-like set-up. Khoury has completed 10 buildings since 2000. His web site lists 24 projects in progress, nine of which started in 2006.
“We never build one hundred percent. A good percentage of what we design never makes it to construction. But outside the parameters of Solidere we’ve had a pretty good rate lately. It’s on the way up,” says Khoury. “There is a whole sector that did not knock on my door until recently.”


Working on relatively small-scale, high-end residential buildings with such developers as Karim Bassil (of Convivium I through VII fame) and newcomer Marc Doumit, Khoury now finds himself in a new market niche – apartments that diverge sharply from the well-thumbed recipe of the typical Beiruti family residence.

“A few projectw we were not expecting”
Naji Assi, one of a core team of nine architects in the associated firm of Elie-Pierre Sabbag Architects, says that he too feels the heat of the current real-estate market. “We feel it. We have a few projects now that we were not expecting.” This year the firm has three new projects to design in downtown Beirut, including two residential buildings at 4,500 m2 and 10,000 m2, respectively.


There is evidence that the real-estate market is recovering quickly. One of the firm’s clients, for example, put a major project on hold after the assassination of former Prime Minister Rafik Hariri in 2005 and the country’s ensuing political instability. At the start of this year, however, “he finalized the contracts, bought the land, and now we are in the design phase,” explains Assi, 37.
Nabil Gholam of NG Architecture & Planning describes the current real-estate boom as a seller’s market for architects. “We’ve been here for 12 years,” he says. “[Early on] we worked a lot and developed several hundred concept designs and projects, but with all the upheaval in Lebanon, very few got built. Right now, seven or ten or nine are all coming up at the same time. So all of the sudden, they will be out there in the next couple of years.”
Those projects include three in Saifi Village (one being developed by Solidere itself, one by a private client, and one, well into construction, by the Dubai Islamic Bank); a residential building, Foch 94, that sold out just as excavation began; a small office building, Foch 126; a residential develpment with high-ceiling lofts conceived of as “urban villas” and known as Garden View; and the most high-ticket of Beirut’s high-ticket projects, Platinum Tower, for which Gholam collaborated with Spanish architect Ricardo Bofil. According to Solidere, Gholam, 43, is one of three architects who have been retained along with Christian de Portzamparc to tackle different portions of the Beirut Gate project.

Is that a yardstick in your portfolio?
The 1,000 m2 apartments in Platinum, says Gholam, “start at about $7.5 million. And this remains the very beacon of excellence. Platinum remains the yardstick, which is quite interesting for us, because when you have the yardstick in your portfolio, it attracts a lot of developers.”
Gholam is now being commissioned for projects approaching Platinum’s caliber outside of Solidere entirely – in Ashrafieh, near Sassine, and in Clemenceau, near the Ecole Superieure des Affairs, both with the Middle East Capital Group (MECG). Gholam says he’s seen prices in Ashrafieh rise from $2,000-$2,500 per m2 to $3,000-$3,500 per m2 in just the past year.
“There is more work,” he adds, “and paradoxically there is less competition because the developers are fighting over who they perceive to be the good people. Demand increases but the supply doesn’t. I know from my colleagues and friends that the good guys are busy.”


Still, Gholam suggests that a hot market is also by definition a tough market. “Besides Dar al-Handasah and Khatib & Alami and Erga and the big offices [all corporate firms specializing in engineering and consulting as opposed to boutique architecture offices like Gholam’s], the smaller ones are having a hard time structuring themselves, hiring more people and actually working. At the time the boom came, we were already 30 to 35 people and used to working in an organized structure.” NG Architecture & Planning now employs between 40 and 45 staff and has opened a second office in Barcelona, with a third in Istanbul on the way. “I would have hated for the boom to come eight years ago when we were five,” he explains, “because we would have turned out messy work.”


Working without a system
Raed Abillama of Raed Abillama Architects is particularly wary of the too much too soon phenomenon. His firm of 13 is deliberately less than prolific. “One of the risks of building in Lebanon is the lack of a system. Architects don’t have a lot of protection. You can lose control of a project and damage your name. It’s a profession that takes a very long time. And if you spend two years on a project you have reservations about, that’s a lot of wasted time, even if you get paid. If you don’t have a set-up you can trust, then you can end up with only half-projects. You need to have the control to do better architecture and push the projects further.”
Like Bernard Khoury, Abillama has found a niche in the non-conventional residential market, working on villas outside of Beirut and designing smaller-scale apartments within the city that break up the monotony of the typical four-bedroom luxury flat.
“It’s important that the client is there to trust you, to take the risk,” he says. “Partnerships need to be done with time, more experience, and a longer relationship. This is the struggle of a young architect,” laughs Abillama, 36. “The more money there is but the less system there is, the less creative you can be because it’s too much of a risk.”
So is the current real-estate boom, in the end, actually good for the quality of design and the professional and ethical standards of architecture as a profession, or is it only good for potential returns to developers on ever more speculative investments?
Says Khoury, “We’re beginning to see developers who understand that the architecture can be an added value. There were very few who operated like that before. Now you have a few developers in town who understand that if there is something in their project that is attractive, it will sell above the market value. It will sell quicker and better. I’ve experienced this,” he adds. “Clients are eager for something that is going to bring them pleasure.”
Adds Gholam, “A fresher awareness is emerging now. You get a sense that things are moving forward. Not least, people are looking again at modernity as an alternative to the good old, fake old, traditional, conservative – whatever you want to call it – pastiche. We are seeing … more than three times the appreciation for our modern projects … than there used to be before, when you almost had to beg to convince a client that things didn’t need to have capitals and arches and so on.”
When there is movement in the market, he adds, “Things are bound to evolve because they get shaken about. There are more projects, there are more clients, and some of the clients have several projects. If anything, a fast market is a definite way to improve standards if only by practicing your trade, whereas in a slow market we’re all sitting there trying to fire people and unable to do so and spending a lot of time and money on one job.”
And, of course, there is the issue of money. Because architects, in theory at least, are paid based on a percentage – loosely understood to be 7% – of the total cost of a given project (not including the cost of land), bigger budgets should mean larger fees. As a rule, architects are loathe to disclose how they calculate their fees, much less put actual numbers to what they earn annually, but they generally insist that they are not necessarily making a lot more money now than they were a few years ago. What they have gained, if not hard cash, is a greater semblance of security that comes through steadier work.

Headaches and growing pains
The Order of Engineers and Architects has a standard contract that all architects and developers must sign before they obtain a building permit for a given project. The problem is that high-profile commissions from international investors often require a second contract that essentially cancels out the first. “This is not always to the benefit of the architect,” says Khoury, who adds that a 7% fee is at this point highly unlikely on a multi-million dollar project. The fee is usually less. (On projects costing less than $1 million, however, the fee is usually more).
Sany Jamal of the order’s architecture section says they can protect architects only in so far as they act within the bounds of Lebanese law. Thanks to a hot real-estate market and conflicting or variously-interpreted contracts, the order often has to step in and arbitrate, trying to resolve disputes before they escalate into full-scale conflicts that have to be settled in court. International architects, though much in demand in the BCD, can end up bewildered, bouncing off of Lebanon’s archaic and often protectionist building and urban planning legislation.
Other headaches of the current boom include the rising prices of concrete and steel and higher fees demanded by contractors and consultants, who each take their share of the architects’ fee. Then there is the higher overhead cost of running an office and paying staff, and the scarcity of young architects looking for work. “It’s very hard to find architects in town now,” says Abillama. “A lot get sucked into the Gulf.”
And then there is, well, dumb developer syndrome. A senior figure in Solidere recently said of the investors who are now flooding their money into the BCD: “They’ll tell you they’re developers and city-makers but they’re not. They’re moneymakers. They’re like sheep. They know their mates want apartments and they know retail is sharp. But they are not at all adventurous.”

“People are looking again at modernity as an alternative to the good old, traditional pastiche”


“In boom times, there are more discriminate clients and less discriminate clients,” says Gholam. “There are better-equipped consultants and worse-equipped consultants. The risk you face is clients working with people who will not deliver what they promise, or us meeting clients who technically are not very practiced. We meet several clients who have never built a building before but they’ve heard that that’s what’s happening. They have a lot of cash so they think, build a building.”
For developers unfamiliar with Lebanon, anything outside the BCD “looks like the wild west,” says Gholam, leaving much of the rest of the city to veteran developers like Jamil Ibrahim and Rabah Jaber, along with the likes of the plucky yet undeniably innovative Karim Bassil.

“the day i’d say the boom is sustainable is the day we get a call to do something outside of beirut”

Uneven development
All this makes for uneven development. Beirut’s current real-estate boom is being fueled almost exclusively by high-end residential projects. This prices out all but the very rich. In terms of middle and lower-class dwellings, the market remains stagnant. “It’s not a fluid market,” says Abillama. “[Already existing] apartments take a long time to sell on the market, to change hands. There is a lack of liquidity. There are not a lot of people who can actually afford to buy new apartments. Salaries are not high enough.”
But that still leaves the market centered in a tiny area of an already small country. “Other regions in Lebanon need development,” says Naji Assi. “Not just from the aid of UN development groups but on a competitive basis. The classic example is Tripoli, which is enduring a lack of projects on the scale of the city, and a lack of interest on the part of investors and developers. The day I’d say the boom is [sustainable] is the day we get a call to do something outside of Beirut, in the Bekaa, in the South,” or maybe even in Tripoli.

0 comments
0 FacebookTwitterPinterestEmail
Business

Coming in from the freez

by Michael Karam
written by Michael Karam

This month will see the launch of Château Ka, the latest recruit to the steadily growing roster of local wineries. Ka is the brainchild of Akram Kassatly, chairman of Kassatly Chtaura, the company that at various stages in its life has brought concentrated syrups, preserves and fruit juices to generations of Lebanese. His first wines will include 15,000 bottles of Blanc de Blancs, 15,000 rosés and 60,000 reds – called Source de Rouge. There are also plans for a “Château” level wine.

Six years of innovation

The wine initiative is the culmination of six dizzying years of successful innovation for Kassatly. In 2000, the company spotted the commercial potential in alcoholic ready-to-drink-beverages (RTDs) and within a year launched the multi-flavored Buzz, Lebanon’s own vodka-based RTD to rival Smirnoff Ice. Buzz was followed up a year later by Freez, a non-alcoholic RTD, which has become so successful in the GCC that it makes up nearly 70% of the company’s $15 million revenues. With Château Ka, Kassatly now has three high-profile brands.

The company spends around $500,000 a year, mainly on billboards, advertising Buzz and Freez. The aim is to gently push the Kassatly name into the background. “This way we can build our brands and make them more attractive to potential buyers,” explains Nayef Kassatly, Akram’s son and Kassatly’s Vice President.

So is the foray into wine merely another well-spotted opportunity, given the wine sector’s elevated profile in recent years? Nayef disagrees and explains that the move is rooted in a solid commitment. “Wine runs deep in my father’s veins. He always wanted to make wine. He studied enology in Dijon in the 60s.”

In fact, the building that houses the factory in Makse, just outside Chtaura, was originally a winery (the original concrete vats are still in place) but the war put those plans on hold. “We had made our first wine but a militia raided us, removed the caps from the vats and the wine leaked out. We were a family making alcohol in the Bekaa. It was a difficult period for us, so we went back to producing concentrated syrups.”

Bottling jallab

In 1982 the company began the first of its marketing brainwaves by putting jallab, until then a drink that could only be bought from street vendors, into bottles. This was followed up in 1983 by the production of a crème liqueur similar to Bailey’s Irish Cream. “We were taking the basis of an established international drink and giving a local name and a local brand,” says Nayef, who joined the company in 1994 and helped start the juice line as well as consolidate jams and pickles.

And that was how things chugged along until 1999, when Akram awakened his dormant dream of producing wine. “My father got his hands on a bottling machine from a bankrupt winery in Switzerland,” recalls Nayef. “I was sent with some technicians to dismantle it and ship it back to Lebanon.”

It was then that the wine dream was again sidetracked. “While in Switzerland, I learned that Smirnoff was launching Smirnoff Ice. I thought, ‘we should be doing this,’ and realized that we could use the bottling plant to make carbonated drinks, as it was originally used to produce sparkling wines.”

Marketing Buzz

In June 2001, Kassatly bottled its first run of 25,000 cases of Buzz. With Smirnoff launching in Lebanon at the same time, Buzz was able to hitch a ride on the coattails of a global brand while offering a competitive alternative with a wider range of flavors. “It gave us it a good image,” explains Nayef. “We were able to undercut the local market by 20%. We could not go any lower, as that would have given a negative perception to the brand. You know what the Lebanese are like. If it’s too cheap, they aren’t interested.”

Buzz buzzed, and in 2002, the company upped production to 50,000 cases. But Kassatly still wasn’t getting the most out of its plant. Then came the masterstroke. “I was sitting with my Saudi associate,” says Nayef. “I asked if he would take a non-alcoholic Buzz, and he said, ‘Sure, why not?’ He wanted to call it Buzz non-alcoholic, but I wanted it to be a different product and I came up with Freez. We made two flavors, lemon and grenadine and I gave him I gave him 2,000 cases (48,000 bottles) as a trial batch. I put them on the lorry and they vanished.”

Today the company sells 40 million bottles. At least 75% or $11 million worth of both Freez and Buzz are exported. Freez has found a huge following, not only in Saudi Arabia, but also in the UAE, Kuwait, Qatar, Bahrain, Jordan and Syria, while Buzz has a loyal customer base in Syria, Jordan and Iraq.

The key to Freez’s success is that it lets the youth and young adults of the conservative Gulf States enjoy the image of being seen drinking an RDT while remaining true to their Islamic principles. “We are currently launching a limited edition Freez,” says Nayef, plonking a matte silver bottle on his desk. “We added volume and put it in a funky bottle. It has a sporty look, almost like a scuba tank. Red Bull was doing it and charging a premium. I felt we could too.”

Kassatly has not ignored Buzz. It recently launched Buzz Strong, which now accounts for 50% of Buzz sales, and this summer will launch the beefy Buzz Extra Strong (10% alcohol). According to Nayef Kassatly, Buzz is the king of the off-trade but cannot get a look-in at the bars, nightclubs and beaches. “We just don’t have the budgets the big distributors have to pay establishments a pouring fee. A supplier will pay a club to put its brand of whisky into a whisky and coke, for example, as well as telling them to take their RTDs and give them exclusivity. What we’ve learned is that people drink Buzz at home before going out and then buy one or two drinks at the bar.”

Building the winery

So we come full circle and back once again to wine. “The money was coming and it was time to reinvest,” says Nayef. The winery, set in the grounds of the Kassatly factory in Makse, took only six months to build at a cost of $1.5 million. Running costs will stretch to a further $500,000 annually.

Grapes were particularly expensive in the first year. Akram found that as a new producer he just couldn’t waltz in and place an order for 300 tons of premium grapes. “We were forced to pay top dollar, as much as $0.80 per kilo.” Within three years, Chateau Ka will harvest its own grapes. The company has planted 60 hectares just outside Baalbek.

At our next meeting, Nayef has begun introducing his wines to a few of Beirut’s most popular restaurants. He is confident that Kassatly’s established distribution network will be a considerable asset in introducing the wines into the local market. “But you know what is good about showing someone your wines? No one wants to talk about price in the same way they do with other products. It’s different.”

0 comments
0 FacebookTwitterPinterestEmail
Economics & Policy

Crude Reality

by Faysal Badran
written by Faysal Badran

As tensions between Iran and the US have subsided somewhat, it may be time to revisit the crude oil market that monopolized so many headlines in recent weeks. While we rejected outright the claim that $100-a-barrel oil was around the corner, the geopolitical risk pushed oil briefly up to the mid-70s per barrel. Things have cooled down and in our view may cool down further.

Even at the height of the Iran news, oil was showing technical signs of fatigue in its advance. This was confirmed by a retrenchment, not only in the price of oil, but of other commodities closely linked to oil such as copper and silver, which have dropped by nearly 25%.

This exhaustion of the oil and commodity trend demonstrates first, that oil speculators had gotten ahead of themselves, and second, that the global economy is slowing down.

Passing the oil debate peak

At the peak of the oil debate, speculators had rushed into the crude oil market. Most of the hedge funds involved were unequivocally positive on the black gold, a reliable sign of an imminent pullback.

There have also been signs of slowing in the two main engines of world growth: the US housing market and China and other emerging markets. The big drop in emerging markets clearly showed that their breakneck momentum had waned, and the correspondingly high levels of demand for oil were soon to fade. As the world economy slows down, oil will continue to correct downward.

It is also estimated that about $5 to $7 of the current oil price comes from a geopolitical risk premium. Since a full-blown conflict involving Iran no longer appears likely, thanks to that country’s new readiness to talk, this premium will probably be wiped out in fairly short order.

Checking the charts

As a technical analyst, I view charts as my guide. Let’s look at the chart of oil to get a feel for where things have been and where they may be heading.

Since 2003, oil has been in an upwardly sloping channel that contained prices in an almost textbook manner. Intensified demand pressures and political issues led to two attempts to break the upper boundary of the channel as the mainstream media speculated about $100-a-barrel oil. These two attemps failed, resulting in what is termed “false breaks,” and oil has resumed its orderly upward course.

The latest attempt on the chart to run away to the upside featured excessive positive sentiment (nearly 94% of market players saw nothing but upside), demonstrating just how crowded the oil trade was. Again, the market returned to the channel, and the technical view is that oil should be poised for more losses, down toward the $55-a-barrel area.

This is still a much higher price than the oil market saw throughout the last decade, so energy issues will remain on the forefront of the global debate. But a cooling-off in oil prices is welcome news, especially for struggling economies such as ours! This is not the time to bet against oil, since the overall trend is still up. But it does seem that predictions of oil-based Armageddon were at the very least premature.

0 comments
0 FacebookTwitterPinterestEmail