CommentEducationSpecial Report

The view from Lebanon’s education ministry

by Fadi Yarak
written by Fadi Yarak

The Lebanese economy is changing. Our education system must follow suit. The Ministry of Education and Higher Education (MoEHE) is committed to achieving the United Nations Sustainable Development Goal (SDG) 4 Education, thereby committing to providing access to quality education for all children. Our work contributes to 12 other SDGs for 2030, including Goal 8 on decent work and economic growth and Goal 9 on industry, innovation, and infrastructure. Thinking ambitiously in these areas means Lebanon needs well-thought out strategies for the economy, for education and skills, and for future industries and innovation.

It is also clear that predicting the economic future requires more than a 10-year horizon. The education system must respond from a broad vision right down to what is happening in classrooms and lecture halls every day.

Changing markets

Diversity is a key characteristic of Lebanon, and our openness to and appreciation for other cultures dates back centuries. This gives the Lebanese a competitive edge, for as the world becomes increasingly interconnected and interdependent, “cultural competence” is more important than ever. Indeed, a globalized market will require not only technical competencies, but also socio-cultural knowledge and understanding. Global citizenship education is key to ensuring our students are equipped with the skills and attitudes that would enable them to thrive in multinational, multilingual, and multicultural environments.

Another pivotal aspect of future markets is the role of technology. It is evident that the future will hold greater technological and digital dependence. A three-year-old child who enters the education system today will enter the workforce after 2030. It is our responsibility to prepare these children for the future job market. How can we identify the markets and corresponding skills needed 20 years from now, with disruptive technologies altering life as we know it? Social media, smart phones, and ride-sharing applications have had a major impact on how we interact, work, and commute today, and these were all created less than two decades ago. The networking skills prepared through curricula designed 20 years ago would not have prepared today’s young job-seeker for the social networking market that exists now.  

The networking skills prepared through curricula designed 20 years ago would not have prepared today’s young job-seeker for the social networking market that exists now. 

We must think about more innovative and effective ways to incorporate education technology in our education system. Lebanese students have already won multiple awards in robotics. The MoEHE organized a coding week in 2018 that attracted thousands of students, and we are looking into using artificial intelligence to track students’ learning outcomes and cater to their learning needs accordingly. We aim to continue in that direction, ensuring we are making the most of what technology can offer to enrich the education of our students and prepare them for the future.

A digital future

Given the challenges of predicting markets, we must consider solutions that prepare youth for employment that we cannot yet envisage. One solution that research increasingly points to is a dual education system that simultaneously focuses on broad educational knowledge and the development of positive citizen behavior, whilst being much more explicitly linked to the world of work. This means regular exposure to the “career world” in schools. This could include job-shadowing activities, guest speakers from various professional fields, and workshops/training sessions on the digital technologies and processes used in the workplace. These activities would require intersectoral collaboration involving government agencies, civil society, and the private sector, to capitalize on what each sector has to offer.

Secondly, we cannot continue to view education as the attainment of knowledge alone. Lebanon, like many middle- and high-income countries, has a mismatch of learners to the economy. Solutions start with mapping our economy in detail and transposing the skills needed. We must start with a good foundation of general education, then build on broader competencies, such as creativity, adaptability to risk, and entrepreneurship. Many countries are also considering incentivizing life-long learning through, for example, individual “skills accounts,” so that even adults can afford to upskill themselves as technologies and their own careers change.  

Finally, we need to consider our education policies in conjunction with our job creation, and industrial and economic policies. We cannot invest in skills for a digital future if we do not simultaneously invest in upgrading and expanding our digital infrastructure.

Our goal must be to move forward consistently across education and industry, to ensure the future youth of Lebanon are able to adapt, navigate, and excel in this unmapped territory.

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Last wordOpinion

Are Arab countries on track for UN education goals?

by Hamed al-Hamami
written by Hamed al-Hamami

A region of renowned civilizations and contribution to humanity, the Arab region has become one of paradoxes in recent times: Young, highly educated, dynamic nations, on the one hand, and multiple protracted armed conflicts, high levels of youth unemployment, volatile and vulnerable states of existence, and extreme inequalities and disparities, on the other.  

 While the region indeed has made tremendous achievements toward development goals, many countries have unfortunately seen their developmental gains significantly reversed, primarily due to the protracted nature of multiple conflicts, while others struggle to improve the quality of education and achieve nationally set goals.

Available evidence shows that national education systems face significant challenges. Children, youth, and adults in the region are facing unprecedented challenges in terms of learning, employment, and social cohesion. More than 20 million Arab children are out of school or at risk of dropping out. This is coupled with a growing number of youths in the region who are not in education, employment, or training (NEET). In some countries, NEET accounts for up to 45 percent youth. 

In addition, the quality of education needs major improvement. For example, results in the 2015 TIMSS (Trends in International Mathematics and Science Study) for grade-8 mathematics indicate that while some countries have shown improvement, as compared to 2011 results, six out of the bottom eight countries surveyed are in the Arab region. When it comes to literacy, the number of adults possessing low literacy skills is relatively high in the region (more than 50 million adults) and appears to be on the rise, particularly in crisis-affected countries. In most Arab countries, the expansion of educational opportunities has yet to translate into economic growth. The average rate of youth unemployment in the Arab region is the highest in the world, reaching 30 percent, which is more than double the world average.

Steps taken on a long road

Cognizant of the above, all governments in the Arab region embraced Sustainable Development Goal (SDG) 4 – Education 2030 as a prime opportunity to transform national education systems into those of resilience, and to contribute to the realization of national development goals and the Agenda 2030 for Sustainable Development as a whole. In this regard, evidence points to three broad-based issues and priorities of common concern: First, migration, displacement, and education—ensuring access to safe and conducive learning environments at all levels, providing opportunities to gain life-saving and enhancing knowledge and skills, supporting teachers and educators, and building resilient education systems; second, quality and relevance of education—ensuring coherent, holistic, systematic, and sector-wide approaches to addressing the dimensions of quality and relevance in education; and third, financing of education—increasing, optimizing use of, and accounting for, investment in education.

Almost five years after adopting Agenda 2030 for Sustainable Development, countries have demonstrated a number of key achievements. Arab states have led and remained engaged in policy and technical dialogue at national, regional, and international levels as well as corresponding actions through elaboration of, commitment to, and implementation of, successive roadmaps and commitments.

 With the Agenda 2030 being country-led, all countries in the Arab region have taken their own initiatives toward achieving SDG 4, and contextualizing, mainstreaming, and integrating countries’ commitments into national processes. An ‘Arab Regional Support Group for SDG 4 – Education 2030 Agenda’ consisting of  23 member states and organizations have been working together since early 2014 and have met five times to take stock of the implementation of the regional roadmap, and to jointly plan for and finance the continuation of initiatives in 2019.

 The region is confronted with multiple crises that heavily affect the state of education and has been implementing humanitarian response plans for over a decade.  While acute educational needs must be met for millions of out of school children, long-suffering teachers, and a dysfunctional education system, countries in crisis and those affected by it equally recognize the need to combine both humanitarian and development interventions. Therefore, SDG 4 provides an excellent opportunity to position itself as the long-term goal toward which countries plan to rebuild national education systems. 

 In spite of numerous challenges confronting many countries in the region, all are determined to realize education as a fundamental human right, and as the main vehicle for individual, societal, and national development. It is, therefore, the role and responsibility of UNESCO to accompany each and every country in the region toward the 2030 target and beyond.

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CommentEducationSpecial Report

Education and the 21st century

by Farid Chehab
written by Farid Chehab

The 21st century will cause a rupture in the way we think, feel, behave, create, produce, and live. Fire took eons to start changing humanity—tools, a little less. The first agricultural revolution changed people’s lives over the course of 8,000 years. The first and second industrial revolutions took place within less than 150 years. The digital age will change our civilization in less than a century. Economic theorist Jeremy Rifkin talks of a third industrial revolution, one where humanity moves from owning to sharing under the thrust of the internets of energy, mobility, and communication. These tectonic shifts are happening at a speed never before experienced. Leading the charge are the new digital industries that will render those of the 20th century obsolete before 2050.

The industries of the 21st century, old and new, must submit and react to market pressures—staying in comfort zones means assured death. Unfortunately, worldwide, education has been slow to react. Educational institutions may understand the threat, but the pace of change has not matched needs. Parents and educators raised on the ideas of the 20th century may still insist that students today can learn and adapt, “like we did,” but this is simply no longer the case. Jack Ma, the Chinese business magnate and co-founder of the Alibaba Group, predicts that robots could replace 800 million jobs by 2030. The next generation, who will then be in their 20s, will face a major challenge if we do not prepare them now.

As of today we must forget all we know, because everything that will govern our lives will change. This rupture commands us to enter a period of ongoing creativity and invention. Knowledge of the past becomes obsolete when the future is totally new; this includes education. New education must strive in the following directions: resilience, creativity, collaboration, curiosity, communication, and mathematics.

Resilience

We are an epoch of the mind, one that requires resilience, not memorization. Resilience to fail, to try again, to never lose hope, and to succeed in time frames that are counted not in professional lifetimes, but in decades.

In this new world, education must prepare the mind to see failing as a learning experience, to understand that successes do not endure and that a career path can be shorter than a decade. In the 21st century, newer ideas will overwhelm new ideas. Newer systems will beat already state-of-the-art systems. Just look at the speed in which the likes of Netflix, Airbnb, and Uber entered our lives and disrupted the previous order. 

How many schools and universities today entertain such a spirit of resilience? Are we not still in the era where school marks and academic end-year success remain the norm? Take physical education as an example. Sport is considered a by-product of education, not an essential ingredient to nurture the brain—and increase its resilience. Are schools ready to make sport an intrinsic part of the learning process? 

Resilience, however, is only one aspect of a whole new approach in education; the most important aspect is creativity.

Creativity 

Our current mode of education is learning through rote where educational programs are filled with unnecessary content to memorize. Take this away, and our students can utilize their brain power where it is truly needed—creativity. Today’s schools teach children how to acquire knowledge, not how to create. What we need instead is education through creativity. This is understood by state-of-the-art schools in Finland where students are educated via play. Students acquire knowledge through games with their peers that grow in complexity according to their level. This new paradigm yields results; the Finnish education system is considered one of the best in the world by most metrics. At tech universities, like Massachusetts Institute of Technology (MIT), learning is through continual inventiveness and creativity. 

It has been established that playing and games put the brain in creative mode. Observe a toddler. They are at their creative best playing with blocks and putty, but this is stifled when entering school systems that value study time over play time. Is this not still the case in Lebanese schools and universities? If your child enters an education system from age three that is not fit for purpose, then how will they cope when forced at a later stage to compete with the all-categories creative minds that will rule the world?

Collaboration

Another given in new education is teamwork: Our capitalistic culture, especially in our country, is to favor the “I.” We produce egos and entrepreneurs, but not brains capable of working in groups. One of the best ways to be inventive, creative, and beat the competition is through teamwork. We are still in the mode of “Be the first, be the best.” We need a new education to change this mentality.

Creativity and collaboration are the essentials of new education, but there is more to add: curiosity and communication.

Curiosity

Our ancestors survived because they were curious. Today, our hedonistic civilization has eroded our curiosity in favor of enjoyment. Mindless screen time has replaced our curious instincts. But if schools and universities grasp the urgency of enhancing creativity, they cannot drop the need for knowledge as well. Education must awaken a child’s curiosity. In an age where continuous learning becomes the new standard, its fuel is enduring curiosity. It is a step-change in education. How then do we nurture curiosity? Games and playing is one way, but also by creating a new culture that brings students into contact with nature and triggers their curiosity for the world around them. If parents cannot feed their childrens’ curiosity then they must demand it from their educational systems. 

Communication

Internet communication will be one of our new century’s pillars. In our culture, communicating means speaking our mind without listening to the other. In the 21st century, students’ ability to communicate must not be acquired by social media, but it should be embedded in their program starting with their youngest age. Communication skills are fundamental. Our educators must also spread a spirit of tolerance in a world growing more intolerant by the hour. Are we educating Lebanese youth to open to the world, share, and become tolerant in spirit, ideas, culture, and behavior? Who is championing communication through tolerance in our national education?

Mathematics

The 21st century remains the era of mathematics. Our century will not forgive us if we do not give mathematics the importance it deserves. Digital becomes the new language. Whether they excel in science, culture, or art, our youth must realize that everything they will do in the future will be digitally-based. Previously, we used to start by learning the alphabet. From now on, numbers will equal letters. Survival in the course of the 21st century is at this price—one we have yet to pay.

Resilience, creativity, curiosity, collaboration, and communication must become the mantra of our new educators. Parents must be aware and acquire a new sense of urgency to ask for it. Time is running short because the curve of techno-progress is steeper and faster than our ability to adapt. Children born in the first quarter of the 21st century must not become collateral damage of the new world because of our irresponsibility.

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Hospitality & TourismQ&A

Le Gray’s general manager’s four years in Beirut

by Nabila Rahhal
written by Nabila Rahhal

Lebanese born and raised, George Ojeil was the hotel manager at the Intercontinental Hotel in Amman, Jordan, when he was offered the position of general manager (GM) of Le Gray Beirut, which he describes as a “very sexy product which any hotelier would love to run.” What further facilitated the decision to accept Le Gray’s offer was that Ojeil’s wife was pregnant with their first child back then, and the couple thought it would be good to be close to family during that period.

So, on October 15, 2015, Ojeil became the GM of Le Gray Beirut at a time when the country was facing a waste management crisis and a dismal tourism and hospitality season. The four years that followed saw Ojeil leading the hotel through what was still a challenging period for tourism (despite a pick up in tourism numbers), and through an extension project that saw an addition of guest rooms, conference rooms, and a ballroom.

As Ojeil prepares to leave Le Gray (effective end of July 2019) to become GM of Ritz Carlton, Abu Dhabi, he reflects on his time with Le Gray and shares his insights on the hospitality sector.

E   I imagine it wasn’t an easy decision to take, joining Le Grey, considering the situation of the country at the time?

I resigned from my previous position in Amman and signed the contract with Le Gray 20 days prior to the waste management crisis and the demonstrations that accompanied it right at the doorstep of the hotel (on October 7 the façade of Le Gray was vandalized). So I had to call Le Gray and see if they were still interested in having me and the reply was yes, things are under control.

When I arrived in Lebanon a few days later, the hotel’s façade was broken and some of the doors had no glass, business was very low, and there was a curfew in the area around the hotel. To be honest, I did have fears at that time and wondered if I had made a big mistake coming back to Beirut. But I remained positive and tried to make the best out of it, and I believe we managed well with the team.  

E   What were your priorities upon assuming your post at Le Gray?

There were a lot of things to be tackled on my list, but the most important thing was looking into my colleagues’ mindset and managing it.

My colleagues were really impacted by the events [of that year], and I felt great demotivation among the team, so I had to work on reengaging them and making them believe that the property will shine once again, despite what we have been through, because you know we are in the people industry where having a positive attitude is very important.

E   How did you manage this period of crisis that the hospitality industry passed through financially? Were you able to retain your team?

We never looked into reducing our payroll or manpower just to save a few dollars—I don’t believe in that at all.

We decided to retain our team because they are our best asset. In hospitality in Lebanon, there will always be good and bad days, but as an employer of choice, we need to prove to them that we are there for them during tough days and that we will support them so that they will support us during the good days.

Still, we managed to put many strategies together at that time to reduce our payroll by, for example, managing a natural attrition: When there were people leaving, due to personal choices, we did not replace them, and we had to make do with what we had. In parallel, because we were working on boosting the motivation and morale of the remaining team, this enhanced their productivity while reducing headcounts. When someone is engaged and motivated, he or she can replace two or three headcounts. When I took over, we were 231 employees with only 87 rooms and occupancy was very low; today, business is at a peak, we have additional conferences and events facilities, more rooms, and the additional lobby—and we are at 165 employees.

E   What were some other measures you took to reduce costs?

Aside from looking at payroll, we looked into energy. We transferred our lighting to LED technology, we looked at operating our generators at peak hours to reduce our electricity cost. So we have taken a lot of cost-saving initiatives when it comes to energy, and when you save on energy it’s automatically pure profit. These two measures supported us in reducing our expenditure and optimizing our profit without impacting the quality of the product.

E   The extension project was completed in July 2017. How has it impacted business at the hotel since?

The extension project allowed Le Gray to provide full service, so we managed to attract residential seminars, MICE business, and so on—and this is of capital importance. Prior to the extension, we only attracted frequent international travelers staying at the property, but now it’s a different ballgame.

During tough times, hotels focus on the local dynamics where you can at least generate revenues to cover your costs. If you don’t have these conference and events facilities, it’s a handicap. 

E   Let’s talk about 2019, and how the year has been so far for hospitality and tourism in general and Le Gray specifically.

2018 was a record year for the hotel, and so far in 2019 (July) we are witnessing a year-to-year increase of 3 percent on a record year. The first half of the year was fantastic and, in ratio, we have already generated 65 percent of 2018’s profit.

E   Is that related to the lift of the travel restrictions from Saudi Arabia to Lebanon?

This is supporting it, definitely. The lift of the travel ban accentuated the demand, and once we had more demand on the market, this supported driving average rates upward. Once the demand is bigger than the offer in the market, you feel the rates gradually increasing. We witnessed an increase year-over-year in our average rates by 12 to 13 percent of the average rate.

E   But what happens if the demand suddenly decreases due to security incidents such as the one witnessed in Aley/the southern highway on July 6?

If, God forbid, there is a drop in demand, you start seeing a sort of price war between hotels. Hotels will have to drop their rates to get more business, and if the competition drops their rate, we may have to follow at a certain stage. Le Gray has a competitive advantage in that we have a diversified business mix, so demand from different continents would support driving occupancy continuously.

E   From your experience, how have you seen the government supporting hospitality in Lebanon, and what more could be done?

I personally believe that Mr. Guidanian [the tourism minister] is doing a fantastic job in diversifying the demand and bringing more demand from different areas. What he has done through participating in different fairs on different continents was very smart and allowed hotels to be present under the umbrella of the Ministry of Tourism, thereby saving costs and encouraging wider participation.  

Regrettably, in the 2019 budget, it looks like there will be a cut in the ministry’s budget, which means it won’t be able to participate in the majority of these fairs anymore.

In a wider sense, the government can support the hospitality sector in numerous ways. With energy, the government can subsidize or support hotels with a lower energy fee.

On another note, we need to support our youth and grow talent. We are not developing our youth or nurturing the hotelier of tomorrow.

E   Can you elaborate on this? And whose responsibility do you think this should be?

I think [the government] needs to focus more on developing the youth toward service departments, to have highly skilled and developed waiters, cooks, and captains, for example, which is something we don’t see often. These are respectable, well-paying jobs where the starting salaries for entry jobs in the kitchen and restaurants are around $800 for example. These jobs also offer the opportunity to learn the basics of the hotel business and grow from within; there is no elevator to success, you need to climb the ladder.

The Ministry of Education and Higher Education needs to once again support technical education. There will always be people who go to universities to get their degrees [in hotel management], but there will be other people where, instead of having zero education, they go to these technical schools and learn something that would support them in their journey in hospitality.

If we have a situation where everybody wants to go into hospitality management programs, at a certain stage, there will be an overflow of managers and not enough entry level employees, and at the end [of the day], when you go to a hotel, you are not served by the general manager. It ends up that people who are doing these entry-level jobs have never been in any kind of hospitality schools, and so you have to spend real money on training them and doing orientation.

E   Why have you taken the decision to move on in your career?

From a professional perspective, we hoteliers have to broaden our scope every four to five years, otherwise we fall into our comfort zone, which is not healthy.

Also, I have aspirations and dreams that, regrettably, I feel won’t be fulfilled if I stay in Lebanon. If we look at how many five star hotels are in Lebanon, they are only a handful: The industry is not growing and demand on the destination is not growing, and so if we need a career at the international level in hospitality, we need to leave. 

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CommentEconomics & Policy

The deterioration of human capital in Lebanon

by Talal F. Salman
written by Talal F. Salman

Economic and social prosperity in a country is measured by assessing the standard of living of its people. Those born in a country with high levels of poverty and corruption have a higher risk of living in a state of deprivation and suboptimal prosperity. Those born to wealthier nations with a more equitable distribution of that wealth will, in contrast, have a more prosperous life—developing the skills, knowledge, and experience (i.e. human capital) that will allow for more economic and social productivity.

Economic theories might differ on the best approach, but all schools of economic thought agree on the importance of investing in infrastructure, education, and healthcare as prerequisites for development and advancement. These three pillars allow citizens to live a full life. Yet development efforts over the past few decades have been geared toward the infrastructure rather than the human being. 

The human link

The end result of forgetting to place human beings at the heart of development goals, according to the World Bank, is that 56 percent of all global newborns today will, at best, be 50 percent as productive as they could have been as adults, had they received the necessary education and healthcare. To counter this, the World Bank launched the Human Capital Project, creating a human capital index (HCI) for countries, and offering support in designing strategies to tackle deficiencies in education and healthcare. The project’s underlying principle is that investing in human capital—in particular in healthcare and education from a young age—is  essential for eventual adulthood success and prosperity. 

The HCI—which ranges from 0 to 1—measures the amount of human capital that a human born today is expected to accumulate given available education and healthcare. Based on 2017 metrics, the new index placed Lebanon 86th out of 157 countries with a score of 0.54, meaning Lebanese productivity is just 54 percent of what it could be. This is below the MENA average of 0.57, and it is low compared to other upper-middle income countries such as Turkey (0.63), Bulgaria (0.68), and Serbia (0.78). By this metric, Lebanon has failed to design and implement developmental policies for its own population. 

Education, education, education

On the healthcare front, the results of Lebanon were in an acceptable range, as the index by nature targets the poorest countries, which are mostly in the African continent. On the education front, however, the average Lebanese student completes just 10.5 years out of the required 14, compared to a MENA average of 11.5, and a world average of 11.2. For standardized tests—scored between 300 and 600—Lebanon’s score was 405, under the regional average of 408, and lagging behind the world average of 431.

Due to low-quality public education and limited years in school, the HCI estimates the effective school years for Lebanese students is just 6.8 years, compared to the regional average of 7.6, and world average of 7.9. In developed countries this average rises to 11 years, meaning that Lebanon suffers from an alarming learning gap of 3.7-years.

The global preliminary findings of the HCI found that the lack of quality public education and healthcare were due to two things: First, politicians think short-term by investing in infrastructure over people; second, bureaucracy tends to get in the way of transforming efficient policies to actionable implementation programs.

A future vision

Chile focused on early investment in human capital by mixing education, healthcare, and social protection programs for children; Pakistan focused on using technology to reach children in need of vaccines. This is to say that ideas are as diverse as every society is, and as diverse as every country’s capabilities are. What matters is to diagnose the problems, and then design policies with a long-term vision that increases living standards by improving the capabilities of humans, so they can become healthy and productive adults.

It is not acceptable for Lebanon to continue to boast about its past, its diaspora, and its private education, while the level of education overall has lowered and continues to worsen. What is needed is an emergency plan to diagnose the real challenges, develop our curricula, improve teaching quality, and link education to health and to an overall economic plan, because society is not a sum of the parts—it is a whole to which success is as good as that of its weakest member.

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CommentEconomics & Policy

US sanctions Hezbollah lawmakers

by Jeremy Arbid
written by Jeremy Arbid

Last month, the United States designated two elected Lebanese legislators and members of Hezbollah as terrorists. This was an escalation of the US measures targeting the party, alleging that Hezbollah smuggles drugs and launders the proceeds to finance its militia and alleged terrorism activities. Little more than two years since Lebanon’s Prime Minister Saad Hariri visited the White House, we have the Trump administration’s answer to the “menace” of Hezbollah: more of the same in America’s war on terror spanning nearly two decades over multiple American presidencies.

In July, the Office of Foreign Assets Control (OFAC) under the US treasury department, sanctioned two Hezbollah parliamentarians: Mohammad Raad, head of the party’s parliamentary bloc, and Amin Sherri. A third individual, Hezbollah’s liaison and coordination unit official, Wafiq Safa, was also listed. The three were designated for their alleged roles as “terrorists and those providing support to terrorists or acts of terrorism” through an executive order that dates back to the Bush administration.

The latest action comes as the US has ramped up pressure on Iran and looks to squeeze its economy to the point of collapsing the Iranian regime. This represents a change of direction when compared to the former US President Barack Obama’s second term. The main difference between the Obama administration and the Trump administration is that the former was pursuing Hezbollah while easing off its patron, Iran, while the latter is going full throttle after both. Under Obama, the US pursued a diplomatic solution to the prospect of an Iranian nuclear weapon, whereas now, the US is seemingly on a path toward military confrontation with Iran and its allies—if Iran does not change course in its regional influence campaign.

Ramping up the pressure

In May 2018, the Trump administration reneged on the Iran Deal, formally known as the Joint Comprehensive Plan of Action (JCPOA). The Iran Deal was an agreement between Iran and five nations (the US, the UK, France, Russia, China, and Germany), as well as the European Union to limit and delay Iranian uranium enrichment capabilities needed to manufacture nuclear warheads in exchange for the lifting of sanctions. The US unilaterally withdrew from the deal despite evidence that Iran was in compliance. Justifying the withdrawal, US President Donald Trump cited Iranian aggression across the region, its military campaign in Syria, and the implied notion that Iran was using its economic recovery from the JCPOA sanctions relief to fund Hezbollah in Lebanon and other non-state actors and militias elsewhere in the region.

The US is pursuing Hezbollah aggressively and on all fronts. It has attempted to pressure Hezbollah financially by targeting its patron, Iran (which, according to a 2016 speech by Hezbollah Secretary General Hassan Nasrallah, funds the group exclusively). A year ago, it appeared the US might be building a case that could lead to legal actions against Hezbollah officials or their affiliates. Lebanon still remembers the forced closure of the Lebanese Canadian Bank in 2011, which was the end result of a US Drug Enforcement Administration law enforcement campaign that began in 2008, code-named Project Cassandra, to disrupt Hezbollah’s alleged global drug trafficking and money laundering network. 

Earlier this year, OFAC sanctioned two individuals and three entities it alleged were “evasion conduits for major Hizballah financiers,” and, in a separate action, designated Kassem Chams and his money service business, Chams Exchange. OFAC alleged that the money changer “launders drug proceeds throughout the world on behalf of narcotics trafficking organizations and facilitates money movements for Hizballah.” On five separate occasions in 2018, OFAC sanctioned 19 individuals and 16 entities, including Nasrallah and Hezbollah’s Deputy Secretary General Naim Qassem.

Last October, the US Department of Justice named Hezbollah one of the “transnational organized crime threats” to the US, alongside four Central American cartels, and is now looking to “reengage with our partners in the hemisphere” according to recent remarks by US Secretary of State Mike Pompeo at the July 19 Western Hemisphere Counterterrorism Ministerial Plenary. The same day OFAC sanctioned a senior member of Hezbollah’s external support organization, Salman Raouf Salman. “We are targeting Salman Raouf Salman, who coordinated a devastating attack in Buenos Aires, Argentina against the largest Jewish center in South America 25 years ago and has directed terrorist operations in the Western Hemisphere for Hizballah ever since,” according to a readout of the statement. The day before, Argentina announced it had designated Hezbollah as a terrorist organization and froze assets. Iran and Hezbollah have long denied involvement in the bombing. 

The Trump administration also brags it has set the record for “the most sanctions imposed on Hizballah in a single year,” according to a March statement declaring support for Israel (though the announcement did not count how many designations were made, or whether those actions referred only to OFAC listings or included measures by other agencies). Over the course of 2018, by Executive’s count, OFAC had designated nearly 40 entities and individuals. 

So what is to be made of the recent sanctions targeting the elected officials, and what does the Trump administration have in mind for Lebanon by targeting members of Parliament? Reading the sanctions as the targeting of the Lebanese state by the US may be an exaggeration, says Albin Szakola, an illicit finance analyst. “US policymakers have long pursued the objective of bolstering the Lebanese state and its institutions,” he says. According to data from the United States Agency for International Development, the US supported Lebanon to the tune of nearly $600 million last year, counting humanitarian, economic, and military aid, and from 2011 – 2017 provided Lebanon with aid worth nearly $2.7 billion. Szakola adds that, “The US treasury designation statement, in its language, does not fault the Lebanese state, instead painting it as a victim of the Hezbollah officials’ conduct.”

Part of OFAC’s explanation for the action reaffirmed American insistence of no distinction between Hezbollah’s political and military wings, using a quote by Hezbollah’s Raad: “Hizballah itself makes no distinction between its military and political wings, as Hizballah’s own leaders have acknowledged publicly, including Muhammad Hasan Ra’d, who said in 2001, ‘Hizballah is a military resistance party … There is no separation between politics and resistance.’” However, in Szakola’s analysis, the US was only targeting the legislators and not the institution to which they were elected. “The statement was very specific and explained that the US sanctioned these individuals for taking advantage of their political positions to facilitate Hezbollah’s non-political activities, including smuggling of contraband, acquiring passports for foreign operations, and trying to maintain access to Lebanon’s financial system.”

Dangerous game

Is it possible that the US may be attempting to provoke the party into political conflict with Lebanese counterparts? Szakola does not think the OFAC sanction demonstrates a shift in US policy. “I’m very hesitant to interpret this US treasury designation statement as signifying any new policy on the part of Washington to drive a wedge between Hezbollah and the Free Patriotic Movement (FPM), or its other political allies.”

Joe Macaron, a resident fellow at the Arab Center Washington DC, however, reasons that just may be what the Trump administration is attempting. In his reading of the sanctions, the US may be trying to “weigh in on Lebanese politics” by forcing a wedge between members of its national unity government in which all major political parties in Lebanon are represented. He writes that Safa, the security official sanctioned in the most recent OFAC action, is Hezbollah’s conduit to Gebran Bassil, Lebanon’s Minister of Foreign Affairs, who also heads the FPM and is the son-in-law of the country’s president, Michel Aoun. Bassil was a key figure in negotiating the political alliance between the FPM and Hezbollah in 2006, and it was thanks to Hezbollah that Aoun reached the presidency in 2016.

If framing the sanctions as a US effort to provoke political conflict between Lebanese counterparts is accurate, what could happen to Lebanon? Macaron suggests the possible outcome of a dysfunctional or collapsed government. Such a scenario, he says, could derail American efforts to broker border negotiations between Lebanon and Israel. It might also ruin Lebanon’s efforts to unlock desperately needed infrastructure loans pledged last year at the CEDRE developmet conference, and could jeopardize other projects in Lebanon, such as reforming the electricity sector, or finding a sustainable solution for garbage management. 

It could be more damaging for Lebanon than just project failures. The country is in a very delicate position: The economy is in recession and has been for almost a decade, it is under significant financial stress due to high levels of debt and poor public finance, and it faces social upheaval from the burden of hosting Syrian refugees. Any sort of political disruption in Lebanon could—in a worst-case scenario—create a domino effect leading to a security crisis. 

It remains to be seen how the American’s heavy-handed, top-down approach to dealing with Hezbollah will play out in Lebanon politically and on the ground. But at least now we have an answer to what the Trump administration plans to do regarding Hezbollah, even if we still do not understand the White House strategy for containing any possible fallout.

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CommentEconomics & Policy

Gas sector a catalyst for further cooperation between Lebanon and Egypt

by Mona Sukkarieh
written by Mona Sukkarieh

The first six months of 2019 saw an unusual series of meetings between Lebanese and Egyptian officials, with energy cooperation at the core of these discussions. If memory serves well, the frequency is unprecedented.

The option of resuming gas imports from Egypt was discussed extensively, especially during the first meetings of 2019. Lebanon previously imported natural gas from Egypt in 2010 via the Arab Gas Pipeline (AGP) to generate electricity. But supplies were interrupted after a few months with various reasons touted (such as Egypt’s inability to pursue exports because production was barely enough to meet local demand, instability in Egypt, and attacks against the pipeline). With the formation of a new government on January 31, Lebanese officials explored the possibility of quickly resuming imports as they scrambled to find solutions to the problems plaguing the electricity sector. The dire state of Lebanon’s power sector and the burden it places on the economy propelled it to the forefront of the government’s reform agenda. Government officials examined the option of importing gas by pipeline from Egypt to generate electricity—in addition to the possibility of buying electricity from Jordan in exchange for water—as among the possible solutions that they thought could be implemented quickly.

Reasons to pause

But, importing gas from Egypt by pipeline is not without challenges:

(i) Importing gas from Egypt via the AGP would entail passing through Syria. The issue of normalizing relations with Syria is highly divisive in Lebanon and is opposed by various political actors, including Prime Minister Saad Hariri’s Future Movement. However, according to the gas supply contract previously signed between Lebanon and Egypt, negotiations with transit countries and transit fees should be handled by the supplier (i.e. Egypt). As one would expect, this is an issue with a strong political dimension and the Syrian regime, in search of legitimacy, will not hesitate to use it to get something in return.

(ii) Israel is expected to export its gas to Egypt by the end of this year. Once past the endpoint of the East Mediterranean Gas (EMG) pipeline, which connects Ashkelon in Israel to Arish in Egypt, Israeli gas is supposed to use the same stretch of the pipeline in the Sinai that Egypt uses to export its gas via the AGP northward to Jordan, and beyond, to Lebanon via Syria.

(iii) Although Jordan is currently importing gas from Egypt via the AGP, many in the industry seem to think this is only a temporary measure. In January, Egypt and Jordan amended an existing gas purchase and sale agreement, and agreed to increase supplies. According to the Egyptian petroleum ministry, gas exports toward the end of February reached about 350 million cubic feet per day (mcf/d), compared to 100 mcf/d in January. The contract with Jordan provides for exporting varying volumes of gas, depending on Jordan’s need and available quantities in Egypt. But Jordan is expected to start importing gas from Israel’s Leviathan field by early 2020, once the gas field comes on stream and the pipeline currently being built to carry the gas to Jordan is completed. This pipeline will connect to the AGP in the northern Mafraq province of Jordan, and gas will be distributed from there to the country’s power plants, which incidentally adds one more technical obstacle to Lebanon’s plans to import Egyptian gas via the AGP.

These challenges mean that it is unlikely that Lebanon is going to import Egyptian gas via the AGP on the short-term as it was initially hoped.

But some Lebanese officials seem to have other ideas in mind. Keserwan MP Neemat Frem met Minister of Energy and Water Nada Boustani on February 20. After the meeting, Frem told the press that he could contribute to resolving the electricity crisis in Lebanon in just six months, starting with the Zouk power plant in Keserwan and moving on to the Jiyeh power plant south of Beirut. The solution Frem proposed to the minister involves importing gas from Egypt in a compressed form (CNG), aboard special ships using a new technology. In 2013, when it became clear that monetizing offshore gas in the Eastern Mediterranean was harder than previously thought, this technology began to be promoted in neighboring countries by lobbyists as a potential lower-cost solution to otherwise stranded or difficult-to-exploit gas. The feasibility of this option is not clear; to date, there is only one project using this technology in Indonesia.

So then, what could justify these repeated meetings between Lebanese and Egyptian officials, much of which focuses on energy cooperation? No doubt, there is genuine interest from both sides to strengthen bilateral ties, including cooperation regarding energy. From an Egyptian perspective, strengthening cooperation makes sense on more than one level.

The Egyptian side

First, Egypt is interested in exporting natural gas to Lebanon, according to Egyptian Minister of Petroleum and Mineral Resources Tarek el-Molla, who confirmed in July that discussions to supply Lebanon with Egyptian gas, “whether through LNG shipments or others,” are ongoing.

Second, Egyptian companies are interested in investing in the various areas of Lebanon’s energy sector, as often noted by Molla, despite recent setbacks. (Egyptian companies did not make it through the technical evaluation phase in the tender to procure floating storage and regasification units, and failed to pre-qualify for Lebanon’s first offshore oil and gas licensing round.) As pointed out by the petroleum minister in remarks to the press following his June meeting with his Lebanese counterpart, and previously by Egyptian Prime Minister Madbouly at the May 2019 meeting of the Lebanese-Egyptian Joint Higher Committee, Egyptian companies are “ready to take part in tenders” and “implement projects” in Lebanon.

Third, Egypt sees itself as the main player for gas in the region and hopes to become the region’s gas export hub, thanks to its infrastructure and liquefaction facilities. This is the role it is actively pursuing by strengthening diplomatic relations and energy and economic cooperation with neighboring countries. From an Egyptian perspective, it is only natural for Cairo to pursue the same policy toward Lebanon, a fellow Arab country that is preparing to launch exploratory operations and may have significant offshore resources.

According to Madbouly, these efforts or overtures toward Lebanon are strongly supported by Egyptian President el-Sisi, who, according to comments made by the Egyptian delegation in Lebanon in May, would not hesitate to intervene personally to overcome any obstacles facing bilateral cooperation in order to advance and strengthen relations between Egypt and Lebanon.

The Lebanese side

For its part, Lebanon is open for Egyptian investments and looks forward to benefiting from Egypt’s experience in developing its oil and gas industry, including by training Lebanese workforce in Egypt’s training centers. Beirut is also increasingly aware that regional cooperation is required to make the most out of offshore resources. When the Eastern Mediterranean Gas Forum (EMGF) was first announced in Cairo in 2019, Lebanon scrambled to deal with a new regional configuration that left the country out. Caretaker Minister of Energy and Water Cesar Abi Khalil was dispatched to Cairo two weeks later to discuss the newly announced forum, in addition to the possible resumption of gas imports.

In a previous piece analyzing the EMGF from a Lebanese perspective published in the February 2019 issue of Executive, it was argued that Lebanon should not respond to this new regional configuration by isolating itself. On the contrary, if the presence of Israel prevents Lebanon from joining the EMGF, then Beirut should strive to make up for this by strengthening bilateral cooperation with the rest of its neighbors, starting with Egypt, or risk finding itself on the margin of developments. The article pointed out that Egypt is best placed to reassure Lebanon, stating that:

“More than any other member state, Egypt has the possibility to reach out to Lebanon. Egypt is the key player in this new configuration, and, as an Arab country that maintains close and brotherly ties with Lebanon, it can play an important role in reassuring the Lebanese about the project while also seeking to strengthen prospects for energy cooperation between the two countries.”

This is the message Molla wished to convey during his last visit to Beirut in June, where he mentioned that cooperation with Lebanon is regarded as a priority for Egypt. In an interview aired on LBCI, he insisted that Lebanon and Egypt should seek to strengthen relations “at the bilateral level, even if it is not within the forum at this stage … We can share our experience with the Lebanese on one hand, and we can, as a country or via our public or private companies—as Lebanon wishes— contribute to supplying Lebanon with gas to meet its needs in the electricity sector.”

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Budget 2019Economics & Policy

Lebanon ratifies 2019 budget

by Jeremy Arbid
written by Jeremy Arbid

More than seven months into the fiscal year, Lebanon ratified its 2019 state budget. The law’s passage comes after months of delay and deliberation over expenditure-saving and revenue-boosting measures in what is being dubbed the austerity budget, though more accurately is a reformist one. The 2019 budget is the third in three years, after more than a decade of going without, and is a necessary exercise to correct the state’s woeful finances and to unlock infrastructure loans from last year’s CEDRE infrastructure conference. At the same time, it represents the beginning of a shift in the politics over what Lebanon will spend and collect. 

Fiscal fever

In mid-July, Parliament convened to vote on the 2019 state budget. Over four days of deliberation, lawmakers voiced criticism that the projections in the budget were not based on reality and that not enough was done to enlarge the revenue base. Lawmakers also complained that expenditure cuts did not go far enough to rein in public spending, and cuts that were made were labeled as too draconian.

Since promising reforms at CEDRE 15 months ago, Lebanon overshot the spending allocation in last year’s budget by nearly $600 million. According to the fiscal performance sheets published by the Ministry of Finance (MoF), Lebanon spent almost LL24.7 trillion ($16.4 billion) in 2018 but was only authorized to spend LL23.9 trillion ($15.8 billion). The higher spending was due to an increase in the cost of servicing the debt, a higher cost of subsidizing the failing Electricité du Liban, and a higher wage bill for public sector workers after the 2017 pay raise and the wasta hiring buffet where more than 5,000 state jobs were doled out as favors during the 2018 parliamentary elections despite a hiring freeze.

Overall, Lebanon spent 17 percent more in 2018 than it did in 2017, and recorded the first primary deficit (expenditures not including debt servicing) since 2013. The total deficit for 2018 reached 11 percent of GDP, or approximately $6.5 billion. The year prior, 2017, Lebanon spent LL21.2 trillion ($14 billion) for a deficit-to-GDP ratio of 6.1 percent, according to the finance ministry’s fiscal performance sheets. Through April 2019, Lebanon had already spent LL7 trillion ($4.6 billion) and collected LL5 trillion ($3.3 billion), according to the ministry’s fiscal performance sheets. This represents a 12 percent decline in spending in the year-on-year comparison with 2018 and a 5 percent decline in revenue collection for the same period last year. The deficit reduction for the first four months of 2019 is rooted in the non-payment of government obligations to local suppliers as alleged in separate tweets by Dan Azzi, former Chairman and CEO of Standard Chartered Bank, which was sold to Cedrus Bank in 2015, and Alia Moubayad, an emerging markets economist. According to the July issue of EcoNews, a monthly economic newsletter published by local bank Societe Generale de Banque au Liban (SGBL), Lebanon “is delaying long-overdue payments to contractors, hospitals, and non-governmental organizations to reduce its borrowing needs in the first few months of the year.”

Lebanon’s pledge at CEDRE was a reduction of the debt-to-GDP ratio by 1 percentage point each year over five years. The 2018 budget was legislated in the weeks leading up to CEDRE, and there was never a deficit specified as a starting point. Instead, Lebanon made its pledge on the implied deficit-to-GDP ratio of 8-9 percent, and that promise was made long before the 2018 spending spree was realized.

What does the budget do?

The 2019 budget is now the midway point in an effort to get the country’s finances in order, according to officials. After the 2017 and 2018 budgets established that, yes, Lebanon could actually legislate a budget after a 12-year period in which it did not, the 2019 budget is meant as a first step in altering how, and on what, Lebanon spends money. Hazar Caracalla, an economic adviser to the prime minister, tweeted after the budget was ratified that the “the ratification by Parliament of the 2019 budget is a good and imperative first step in the long path of financial reform. It must be built upon in the budgets 2020, 2021, and 2022 through additional measures aimed at completing deficit reduction and reversing the dynamics of public debt and re-regularizing the public finances by approving the 2020 budget according to the constitution.” 

We are still unsure of what this long path of reform entails, and that may be because the government has not articulated the waypoints. For now, we have the high-level budgetary figures, assumptions, and the measures that have been publicized, but we will have to wait for publication of the budget law to take a full reading. 

Revenue in the 2019 budget is estimated at nearly LL19 trillion ($12.6 billion) according to reporting from L’Orient-Le Jour. The paper noted that the MoF had not given a revised spending figure after the budget had been ratified; Parliament’s finance committee had estimated spending at nearly LL23 trillion ($15.3 billion). These figures, if they hold true through the end of the year, would represent a 17 percent increase in collected revenues, and a 7 percent decrease in spending when compared to 2018 figures from MoF fiscal performance sheets. The budget projects the deficit to be 7.6 percent of GDP for 2019. 

To reduce spending, there were cuts to the budgets of institutions including the Council for Development and Reconstruction, Ogero, and the Higher Relief Council. The budget also reduced the number of yearly monthly salaries certain employees receive from 16 to 12 (see box left), reduced some benefits for different groups of retirees and state contributions to pension systems, capped public salaries at 20 times the national minimum wage, and froze hiring until 2022. On the revenue front, a number of taxes were increased or introduced, including: a 3 percent increase to 10 percent tax on the earned interest on deposits for the next three years, a new tax bracket for persons and enterprises at the rate of 25 percent for annual incomes above LL225 million ($149,254), the introduction of a 3 percent duty on imports that are subject to the VAT, excluding fuel, raw materials, and industrial equipment, and a new annual fee of between LL100,000 ($66) and LL1 million ($663) per license plate for cars with special license plate numbers (see box left).

A budget based in reality?

The 2019 budget made some lofty assumptions. The version approved by cabinet in June assumed Lebanon’s economy would grow by 1.2 percent in 2019, according to a study by Kulluna Irada (KI), a civic organization for political reform. It pointed out that government projections of economic growth in the previous two budgets missed actual year-end figures. In 2017, for example, KI says the forecasted growth rate was 2.2 percent, but the final result was only 0.6 percent, and for 2018, the budget forecast 3.43 percent economic growth but ended up at only 0.2 percent. KI concludes that “overstating growth affects the budget on two levels: it overstates the level of projected tax collection due to an overestimation of its tax base [and] it brings down the deficit to GDP ratio since it inflates the metric’s denominator.” In other words, Lebanon may be overstating the amount of money it expects to collect and inflating the size of the formal economy to make the deficit-to-GDP ratio look better.

According to KI, the 2019 budget was pinned on “elements of confidence” that Lebanon can overcome its fiscal and economic challenges. These confidence elements include hoped-for revenues from yet undiscovered oil and gas resources, yet uncommitted pledges in the form of $11 billion in loans from CEDRE, as well as the nearly $139 billion in deposits as of April 2019 held at Banque du Liban (BDL), Lebanon’s central bank. 

Betting on such so-called confidence elements is, as the document puts it, “a starting point.” According to officials, the 2019 budget is the first on the path of long-term financial reform that must be continued in the budgets for 2020 – 2022. Will these bets pay off in this period? 

Lebanon is scheduled to drill its first offshore oil well later this year. Assuming luck is on Lebanon’s side and the results of the first well is positive, it could take several more drilling efforts to confirm commercial viability of the well. Then, infrastructure would be needed to extract the resource and a market secured to sell it. This whole process can take several years or longer and depends on internal and external factors, such as political stability, global market prices, and a calm regional security. 

As for CEDRE funding, earlier this year donors were not hiding their frustration with Lebanon’s slow progress toward approving the 2019 budget and introducing fiscal reforms. They were openly stating that the 1 percentage point reduction was no longer enough after the 2018 spending spree. Cabinet was yet to approve the budget and pass it to Parliament when the World Bank’s vice president for the region, Ferid Belhaj, visited Lebanon in March. Belhaj was less than impressed with the progress the government had made to that point: “These reforms, despite having started, do not rise to the expected level and this is what we have said with all frankness to the Lebanese government.” Belhaj also warned that, “If Lebanon wants to see any money from CEDRE soon, it needs get [sic] serious about implementing reforms … If it fails to do so, the amount will be zero—let me be very clear about that. Zero.”

In a speech at Parliament, before voting of the budget commenced, MP Salim Saadeh said of the fiscal reductions in the budget and of the reforms pledged at CEDRE, “They know we are lying to them, and we know that they know we are lying to them, this is the truth so there is no problem.”

Cherish the game of lies

Despite acknowledgement of lying to their face, the diplomatic community sent its usual congratulatory reassurances: The International Support Group, a coalition to support a stable Lebanon led by the UN with the governments of China, France, Germany, Italy, Russia, the UK, and the US, as well as the EU and the Arab League, concluded that the budget “is an urgently needed first step by Lebanon in fiscal management and towards reducing its deficit.” Likewise, the World Bank’s regional director for the Middle East, Saroj Kumar Jha, tweeted: “This is a good first step and the broad discussion, which is unique in the region, is welcomed.” Oh, to be an eternally positive emissary.

As for deposits, inflows came to a near standstill in 2018 and was the lowest rate of deposit growth since 2005, according to the International Monetary Fund (IMF)’s Article IV statement. The IMF also pointed out that reserves at BDL declined by a whopping $6 billion in 2018, that bank lending to the private sector is down, and that there has been an increase in non-performing loans. 

To protect its balance sheet the IMF recommends the central bank “should step back from government bond purchases and let the market determine yields on government debt. Buying the proposed low-interest government debt would worsen the BDL’s balance sheet and undermine its credibility. There should also not be any pressure on private banks to purchase the low-interest debt instead.” Projections in the 2019 budget had assumed BDL would purchase LL11 trillion ($7.3 billion) in Lebanese treasury bills (T-bill) at 1 percent to help the state reduce the cost of interest payments on the public debt (which stood at LL128.69 trillion, or $85.4 billion in May 2019). According to remarks published by The Daily Star, BDL governor, Riad Salameh, squashed that idea ahead of Parliament’s ratification of the budget—however, this has not been confirmed in any official statement from BDL.

It is nice that officials regard the next decade with such optimism but perhaps they are just biding time until more drastic reform measures can be introduced. At the time of writing there are indications that the US Federal Reserve will cut interest rates so it may be possible, at least by consensus of economy watchers, that the interest rate environment in the short- to medium-term will develop to Lebanon’s advantage. Lebanon now can only focus on controlling what it can, such as budgetary discipline, minimizing the public wage bill by avoiding the corrupt practice of political hiring, and responding to developments that go against budgetary projections. However, the external circumstances of war, trade wars, currency wars, or any other such force majeure may derail any forward motion set by this budget.

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EntrepreneurshipProfiles

Lebanese edtech startups carve a place alongside traditional teaching

by Lauren Holtmeier & Thomas Schellen
written by Lauren Holtmeier & Thomas Schellen

Lebanese startups focusing on education technology (edtech) have tapped into the idea that as education changes, they have a role to play in preparing the next generation for the 21st century workplace. Educators seeking to prepare children for the jobs of the future, those that rely more on coding, robotics, AI, and programming—and depend less on traditional knowledge than an ability to think critically to solve new problems—can tap into these technologies and integrate them into their classroom teaching. 

Investments in edtech are growing globally, and beyond the overarching education goal, Lebanon’s entrepreneurs see a potential market for these businesses here and in the region. In 2018, 1,087 edtech companies received funding globally, an increase from 813 in 2017, according to research from Metaari, an advanced learning technology research company. Of the six Lebanese edtech companies that Executive has profiled below, most expressed interest in expanding to other MENA markets, primarily those in Saudi Arabia, citing difficult economic times at home and better opportunities to grow their businesses abroad. Beyond better expansion opportunities in the Gulf states, Lebanon’s schools sometimes lack the technical infrastructure or cannot afford these solutions, making finding markets elsewhere not only lucrative for these startups, but in some cases necessary. 

From personalized children’s books and programs that teach kids and teens coding and robotics to an adaptive learning platform, these edtechs have one thing in common, an understanding that for children to learn best, they must be engaged with the content. “Gamified learning” and “project-based learning” seemed to be recurring buzzwords during these interviews, as the people behind these platforms see these styles to be the most engaging because children are actively involved in, and invested in, solving a problem from start to finish. These companies seek to partner with schools to give teachers another tool to use in the classroom, though they have primarily sought to tap into private schools in Lebanon, as public schools rarely have the budgets or infrastructure for these products.

Synkers

Incorporating a proprietary mobile app as a platform for interaction, Synkers is an online marketplace for tutoring services that is mostly active in Lebanon, where about 70 percent of its tutors are based. Synkers has a secondary presence in the UAE and aspirations to roll out its services in Saudi Arabia in the near term. With roots in the founders’ personal experiences as actors on the supply and demand sides of tutoring while studying in Canada about 10 years ago, Synkers was accelerated from business idea to startup venture at Beirut accelerator Speed@BDD, from which it graduated in April 2016. Seed funding came from Lebanese venture capital firm Phoenician Funds in 2017 and growth of the startup ensued on basis of strong knowledge of the Lebanese education environment. The edtech startup also is working in education markets that provide higher profit margins than tutoring by organizing classes on specific topics, such as the SATs, and also plans to provide corporate training. Its business model for intermediation between sellers and seekers of tutoring and handling of related payments is built around the charging of commissions to the buyers of tutoring (at a gross rate of 20 percent as part of which overheads, tech developments, and taxes due from tutors are covered). The startup’s concept also has accents of the sharing economy and social enterprise aspirations for contributing to the improvement of the education opportunities. Social accents include a professed vision of broadening the reach of education by making it more affordable for students from poor backgrounds to obtain peer tutoring that will give them an improved chance to complete their education and avoid dropping out of school. However, Synkers is also already contemplating exit strategies via acquisition by one of the larger edtech players in Asia or the United States who might seek to enter the Middle Eastern tutoring market (estimated by Synkers on basis of market research to worth $3.1 billion). 

Augmental

Some students are visual learners, some are auditory, and others are verbal or kinesthetic learners. With learning types this varied, the founders of Augmental, a digital learning platform, are trying to cater to an individual’s learning style. Students using the platform take an assessment that measures their skill level and learning style and an algorithm accordingly assigns material after the teacher has presented the lesson and introduced the concepts. For the teachers, there is a dashboard to monitor students. In Lebanon, Augmental is used by five schools, and Paul Barakat Diab, one of the founders, says that the team has interest from public schools in the UAE and Kuwait and is trying to penetrate Saudi markets. In Lebanon, there is currently content for STEM subjects for grades 5-9 as well as French and English. Content on the platform is made by content providers previously certified by the Ministry of Education and Higher Education or by teachers who can load their own content onto the platform. Each school subsequently has a coordinator to review the content and ensure it aligns with core competencies. For Augmental to function as intended, there are minimum infrastructure requirements a school must meet to qualify, such as a lab with enough tablets so that each student in a given class can use one. In Lebanon, because many schools—especially public schools—lack the appropriate resources, Barakat Diab says that Augmental’s future markets will mostly be outside the country. While teachers in Lebanon are aware of adaptive learning and are themselves searching for solutions, he admits the timing for such a product launch in Lebanon is not ideal because of the strained economic situation. To break even, a lot of factors must be considered he says. If they receive the requested funding, which will be used to pay increased marketing and sales efforts and the development of a marketplace for adaptive learning content, they will reach that mark in two years. 

Spica Tech Academy

Spica Tech Academy teaches children and teens how to create their own video games through project-based learning, but perhaps more importantly for founder Reine Abbas, the program is teaching kids how to be creative, a skill she stresses is imperative. Even if children do not go on to be game developers, the skills they are learning—creativity, project management, critical thinking, coding, storytelling, and writing—will be important in nearly any future career, Abbas says. Spica Tech Academy started as a B2C platform where parents could enroll their children in week-long 20- or 30-hour coding camps, but has since evolved to include a B2B model where Spica Tech Academy instructors will teach a week-long course in schools. So far, they operate in four private schools in Lebanon and, depending on demand, Abbas says she would likely expand to 12 schools in Lebanon and is currently finalizing contracts with three schools in Dubai. The focus on project-based learning, an approach in which students work to complete a project over an extended period of time, stems from a need to have children work through a task from start to end, figuring out solutions along the way. With game creation, challenges have to be created and solutions must be invented, says Abbas, making it a good—and importantly fun—way to get children thinking critically. Teaching complex concepts like coding to children could be challenging, but scaling activities appropriately makes this possible. For younger children, visual programming languages are a way to grasp these concepts, but teenagers can create their own game from scratch using the C# language. At the advanced level, students use Unreal Engine. “We’re using the real software developers are using,” Abbas says. “So after the first course they can create their own game at home, and it’s open source software.” Beyond expanding to other regional and global markets, Abbas says the next step, currently underway, is a template that instructors can use to gamify their curriculum to follow Spica Tech Academy’s model.

Lululittle

The Arab culture is one of rich history and important discoveries, yet this is often bypassed as people delve into the West’s history, ignoring their own, says Joanna Khoury founder of lululittle, a personalized children’s book company. Khoury wanted to make Arab history accessible to youngsters in a way that puts the child at the heart of the story. “From the dawn of time, stories have been a tool to deliver a message,” Khoury says. Lululittle uses a print on demand technology based in the UK that ranges from £6 – £8 ($7.46 – $9.94 at time of writing) and book buyers can choose their avatar and insert the child’s name to be made into a soft or hardcover book printed in either French or English. Because the books are printed on demand, overhead printing costs are minimal. Lululittle has done a preliminary launch of an Arabic version, and the full launch will follow when it is fully automated, which Khoury hopes will be in the next few months. Where Khoury sees a gap in the number of quality Arabic childrens’s books, she says that getting the Arabic version automated will allow for children in the region to learn about their culture in their native tongue and will be a way for expats to bridge the gap to home. Lululittle’s primary market is the MENA region and GCC states in order to teach kids about their own culture; of the 700 books sold so far, most have been within the region. This has been achieved with very little marketing, Khoury says, and next steps include ramping up their marketing efforts within regional target market. Khoury says for Western audiences the books are a way to learn about Arab culture and they have sold a few books in these markets. 

Nooreed

At age 16, deciding what to do for the rest of one’s life can feel overwhelming. Nour Jabra, founder of Nooreed, felt this herself and wanted to help teens identify careers to which they are well-suited. What started as a series of videos with professionals from various fields has evolved to include an assessment based on the Holland Code, which refers to American psychologist John Holland’s six personality types: realistic, investigative, artistic, social, enterprising, and conventional. Nooreed’s assessment is a simplified version, which Jabra says is an attempt to make it more accessible to teens and also to help eliminate any language barriers non-native English speakers may have. When a student registers, they take the assessment and are given a breakdown by percent of which careers best match their personality; they can then watch the related videos. In the six months since the assessment has launched, around 15,000 students have signed up. In Lebanon, the business model works as a sponsorship system where universities can sponsor Nooreed in return for advertising space on Nooreed’s website; students can access Nooreed regardless of whether their university has made a sponsorship agreement. Jabra says they are currently trying to break into the Saudi market by early 2020, and in that case the business model would shift to a subscription service that would be specific to Saudi Arabia, where a different economic situation means more schools will likely be able to pay. A dismal economy and shrinking school budgets have left little room for this type of service to work as a subscription service in Lebanon. “Lebanon isn’t a very healthy place to grow a business,” Jabra says. Other plans for expansion include partnering with study abroad agencies whereby Nooreed would refer students to a specific agency and receive a fee in return. While they are in talks with one such agency, no deals have been finalized at the time of writing. 

Cherpa

A Lego factory in Hungary with no human workers on the factory floor—that is what Ibrahim Ezzeddine saw on a class trip while studying at the Lebanese American University (LAU). Ezzeddine and Basel Jalaleddine, former roommates at LAU, started thinking about how to prepare children for future job markets where robots could replace traditional human labor. Cherpa, the duo’s startup, teaches kids coding and robotics through a gamified system. Cherpa has worked with experts from NASA and Google to design educational content and also works with an educational specialist to create content tailored to student levels. Currently, there are five courses; the latest, on cyber security, launched in July. Ezzeddine said the decision to follow a B2B model was because the teacher’s presence ensures students can follow the content rather than get frustrated and walk away. Because it is a paid service where administrations buy a course for a specific number of students (e.g. one course for $399 for up to 20 students), it is easier for Cherpa to target  uppper-end private Lebanese schools. A partnership with the education ministry will have Cherpa in five public schools on a one-year pilot program this year. Cherpa is currently in 18 schools in Lebanon and 1,600 students have completed at least one course, but Ezzeddine says the plan to expand beyond Lebanon, in which schools often lack the funds, necessary infrastructure, or internet connectivity. Cherpa has successfully entered one school in Saudi Arabia and has sold courses to one after-school educational center in Spain and one in Portugal. Future targets include penetrating the Gulf markets, primarily Saudi Arabia, where they are working with a business developer to test the market.

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CodingEducationSpecial Report

Providers search for lucrative coding bootcamp models

by Lauren Holtmeier
written by Lauren Holtmeier

If anything about the future can be claimed as certain, it is this: The jobs of the future will be different from those of today, and jobs across various sectors will more heavily rely on skills such as coding and programming. This shift has already begun, and Lebanese entrepreneurs, such as the founders of SE Factory, Codi, and Torch Academy, began looking to break into the coding bootcamp market about five years ago and educate fresh job market entrants. 

Information on the size or value of the global coding bootcamp market is not readily available, but a quick scan of available camps shows, at least anecdotally, a fairly large number of these bootcamps emerging globally. One estimate from Technavio, a company that conducts market research, predicts that the global full-time coding bootcamp market will reach $331.96 million by 2021, an 11 percent growth over the five-year forecast period. The Investment and Development Authority for Lebanon (IDAL) reported in 2018 that the Lebanese ICT sector was a fast-growing sector, whose impact, whether direct or indirect, on GDP was expected to be $7 billion by 2025. Such expectations reinforce the notion that Lebanon’s knowledge economy and tech startup ecosystem are an apt destination for the funds provided under Circular 331 from Banque du Liban (BDL), Lebanon’s central bank. Even before this data was published, entrepreneurs had identified a need and began looking to fill that gap and hopefully turn a profit. 

Learning how to code is not just for tech whizzes designing the latest hit app. Working Lebanese must be prepared and equipped to move into these jobs of the future, as more traditional sources of income are lost to technology. In 2018, PwC, a global consulting company, conducted a survey of 29 countries—of which only Turkey and Israel were surveyed in the Middle East—which estimated that 3 percent of jobs were at risk of automation by the early 2020s, increasing to 30 percent by the mid-2030s and putting 44 percent of low-educated workers at risk from losing their jobs to automation. A June 2019 Oxford Economics report found that up to 20 million manufacturing jobs—or about 8.5 percent of the global manufacturing workforce—could be replaced by robots by 2030. Since 2010, the report states that the number of robots in industry has more than doubled worldwide. 

Finding the right skills

Lebanon is not immune to these pressures. Of the local labor force, 21 percent work in the industrial sector, according to IDAL, and the country hosts over 4,700 industrial firms—meaning the rise of automation and robots could impact the makeup of the Lebanese labor force. But with disruption comes opportunity, IDAL identifies gaming, e-health, adtech, software as a service, media streaming, and financial and e-payment solutions as key investment opportunities in Lebanon. Bottom line, with millions of jobs likely to be automated in the future, the living labor force must adapt to define and subsequently fill new roles. 

In Lebanon, a 2017 skills forecasting study conducted by the national employment office in conjunction with UNESCO, the EU, and NET-MED Youth—a five-year project implemented by UNESCO and funded by the EU—identified close to a combined 13,000 jobs across the ICT sector, including systems analysts and various developers and programmers; while a 2016 UNDP labor needs assessment for the ICT sector estimated 2,000 new jobs would be created annually for new graduates. With around 800 ICT enterprises in Lebanon and approximately 2,000 university ICT graduates looking to join the workforce each year, these estimates would indicate that the sector is capable of absorbing these new graduates. However, this projected 15 percent job creation rate should be questioned with the country headed toward austere times and real GDP growth at just 0.2 percent in 2018. Even if these projections prove correct, there is still a gap in that degrees do not necessarily set students up for the workplace. 

Fadi Bizri, founder of SE Factory, a coding bootcamp for recent graduates, says there is a skills mismatch, in that universities focus on theoretical knowledge and fail to instill in students the practical knowledge needed to succeed in the field. “If there’s a supply, and there’s a demand,” Bizri asked himself. “Why isn’t it working?” The UNDP report cited a lack of “blue sky thinking” in the current collective skillset, meaning the current labor force lacks the ability to think critically and creatively.

Bizri and his co-founder Zeina Saab recognized this knowledge gap, especially for graduates coming from what he describes as second-tier universities where receiving a high-quality education is hit or miss. SE Factory, which focuses on full-stack web development, is one of multiple endeavors, alongside Torch Academy and Codi, across Lebanon that aims to provide students with this practical technical knowledge while simultaneously boosting critical thinking, but it also teaches soft skills and has career services that include CV writing and mock interviews. All three of these programs target young adults and recent university graduates, and all claim a 90 percent job placement rate of their graduates. 

Such endeavors have popped up over the last five years, and a few seem to be operating relatively healthily in their early stages. One that failed to do so though was the popular France-based Le Wagon program. Le Wagon has bootcamps in 35 cities globally, and a branch opened its doors in Lebanon in 2015, but closed after just two cycles. Malik el-Khoury, Lebanon’s Le Wagon founder, says this was for multiple reasons that included the price, the coding language taught, and the fact the teachers hired from the US and Europe were more expensive than local instructors.

The price tag for an intensive nine-week program was $4,500, and 80 percent of Le Wagon’s students came from abroad. Finding people who were willing to pay that high a price in Lebanon was difficult, and the number of Lebanese employers who use the language taught, Ruby on Rails, can be counted on one hand, Khoury says. Ruby on Rails is great for people who know little about coding, but is not exceedingly useful in a country that primarily uses PHP and Java, he says. When asked what model may be more sustainable in Lebanon, Khoury says he thinks something where students can go to school in the evenings and still be working during the day could prove more lucrative.

Finding the right model

Torch, which began in 2015 as well, is now beginning to shift to this “short course” model in which students attend classes three evenings a week and choose to learn IOS, Android, or web development, with a focus on building practical skills. Traditionally, students enrolled in a 14-week full-time program for $1,200, and while they have trained more than 350 students and have three or four courses a year, Inaam Hassoun, program coordinator at Torch, says that they are struggling to attract interest in this intensive program in which they would need 10 to 15 students to run a cycle. Hassoun believes this is because most recent graduates do not have the necessary funds and are focused on getting a job to use their recently obtained degree.

SE Factory, on the other hand, have stuck with the 14-week, full-time model since incorporation in 2016, operating three cycles annually with around 20 students in each cohort, but where they are targeting recent graduates with some background in computer science from the middle and lower socioeconomic classes, they charge just $100 for the course. In the beginning, this was achievable through grants and heavy fundraising, and now SE Factory charges a success fee for students and companies. For students, once they land a job, one month’s salary is owed that can be paid over three to 18 months. For companies, if they hire a graduate and are satisfied, SE Factory receives 1.5 times a month’s salary once the employee makes it past the probation period. Bizri, one of SE Factory’s co-founders, says that currently they have about 60 companies in their network, including employers outside Lebanon. Regarding growing SE Factory, he says that while they are on a path to sustainability, they still rely on some grants, and they have recently raised money to open two new bootcamps, one in the north and one in the south, but the exact locations are yet to be determined. 

Where SE Factory charges an, albeit very affordable, fee for their services, Codi, a similar program that targets marginalized youth, including low-income Lebanese as well as Syrian and Palestinian refugees, who must be at least 17 years old to enroll in the program, offers six-month classes for free, relying heavily on fundraising from corporate or individual donors. In operation since 2017, they tend to target members of the Lebanese diaspora for funds through cooperation with the Lebanese International Finance Executives (LIFE), a group that works to link Lebanese finance executives abroad back to their roots. 

still in demand

Joseph Atallah, director and head of operations at Codi says that they receive their physical operating space for free and only pay for utilities, helping lower operating costs. Beyond having tuition-free courses for the near 30 students each cycle, Codi partners with Al-Majmoua, a nonprofit microfinance organization, to provide microloans of $2,000 spread over the six months to students who need financial assistance. Graduates must begin paying back the loan within four to six months of graduation, assuming they find employment; if not, Codi covers the costs. 

With these four programs all emerging within a two-year window of the others, and three left standing—and where at least one, Torch, has expressed trouble attracting new students for their full-time coding bootcamp—the question arises: Has the market reached saturation? Torch’s Hassoun says she thinks it is a possibility, but SE Factory’s Bizri disagrees. With only a handful in Lebanon, and with those in operation targeting different markets (marginalized youth, lower income youth, and middle to upper class), he argues it is doubtful that the market has reached saturation. Regardless of these programs’ presence, the jobs they seek to prepare their students for will continue to emerge rather rapidly over the coming decades, and demand for skilled workers will not dwindle. In turn, the demand for coding bootcamps—unless Lebanese universities drastically alter their curriculum to ply their students with more hands-on experience—is not likely to decline. 

However, prospective students’ demand for full-time coding bootcamps, for the time being, seems to be contingent on pricing. Of course, many other factors that may affect demand could be at play, such as preference for programming language, skills taught, or offerings on teaching soft skills, but where these offerings seem to be similar across the board, price varies dramatically. Le Wagon’s failure was in part due to the Ruby on Rails programming language offered, despite it being a full-stack program, but the other three offer full-stack training on commonly used coding languages. If students have a preference for learning a certain language, this could affect the landscape as well. The experiences of Le Wagon and Torch in struggling to attract people for their relatively pricey full-time courses compared with SE Factory and Codi’s relative ease in identifying students indicates that there is at least a partial link with affordability in a country that is undergoing an economic crisis. How coding bootcamps adapt and continue to fare in stormy economic times will require identifying a model that is affordable for recent graduates that teaches the right content, or, like Torch, adapts by shifting to a model where those in the labor force already can earn a living during the day and learn in the evenings. 

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