Special Section

Safe And Sound

by Thomas Schellen
written by Thomas Schellen

For an industry that is battling a higher cost of doing business and, during the past quarter witnessed its first contraction of deposits after something like 50 quarters of perpetual increases, the mood at leading banking institutions is exuberant. And for more than one reason.

The first is confidence, both economic and general. Many bankers saw their confidence get not one but single but a multiple shot in the arm in the past quarter. The nation’s ability to navigate the sudden storm-swept political waters and avoid being torn apart by internal strife and violence, clearly imprinted itself into the minds of many bankers as a general confidence booster.

Secondly, banks saw good rise out of their own ranks. The fast action and effective leadership of the central bank in averting the danger of capital flight and handling the pressure on the currency has been suitably acknowledged. But banks also played an effective part in calming depositors, managing a sudden surge in dollarization of accounts and steering customer funds back towards the Lebanese pound.

This resilience in the nation’s economic stance made the president of the Association of Banks in Lebanon, Joseph Torbey, exclaim assertively in a meeting with Executive, “We are not a third-world country! We are a country with a real economy and a real growth and the real power of the country is its people.“ [for the full interview, go to page xxx]

Assured by Lebanon’s and their own successes in defeating the dangers of political and economic turmoil, and now betting confidently on a graceful transition to a new political governance paradigm, bankers today publicly profess optimism. When asked by Executive about their evaluation of the situation in the middle of the second quarter, sector leaders voiced positive expectations for the economy at large, with some projecting growth for 2005 just slightly below last year’s level or even referring to a GDP potential of breaking the $30 billion if Lebanon only fulfilled its promise. For all lines of banking activities they predicted new upswings either in the medium or, especially for retail banking, in the short term.

Expressions of such optimism were also aided by sector numbers, which had been good for 2004 and at the end of the day also came out much better for the first quarter of 2005 than it had been widely feared in February and March. The 12 out of 14 Alpha Group banks with deposits over $1 billion for which figures were communicated, achieved growth in assets, deposits and loans of 16.27%, 14.95%, and 12.68 %, respectively, in the Alpha group’s consolidated balance sheet. Profit cushions were comfortable for many large banks as the group’s consolidated net profits rose by 11.75%. BLOM Bank was again the leader in profits even as the gap with some in the leading group narrowed. Three banks recorded moderate profit contractions, while one, SGBL, saw a large one. BLC, previously resident in negative profit territory, led the sector in profit improvements with 181% growth.

As banks tallied their first quarter results and finalized their audited annual reports over the past weeks, they confirmed that the first quarter contraction in customer deposits in wake of the Hariri assassination, was slight at about 2%. For some, even from January 1 till March 31, deposit growth was achievable as demonstrated by mid-sized Bank Al-Mawarid, which achieved 3.78 % growth in deposits and 3.71% growth in loans for the period.  

In signaling readiness to respond immediately to an improvement in the economic climate, Lebanese Canadian Bank went ahead with opening five new branches it had bought from Bank Al Madina, while Lebanese Canadian and BEMO and are in the process of erecting new headquarters downtown. BEMO, only last month, concluded an agreement over the purchase of a plot near Starco where the group plans to establish 6,500 square meters of built-up headquarters space. 

Another, and newer, message from Lebanese banking is that of regional successes. Where local banks began two years ago to justify their need for expansion into other Middle Eastern and North African countries with the over-ampleness of their own size in relation to the domestic economy, they speak this year in glowing terms of their initial experiences in operating those new subsidiaries and present a plenty of further projects.

Byblos Bank, which was at the forefront of going regional by establishing Byblos Bank Africa in Sudan in 2003, is full of praise over its progress there and its new expansion accomplishment in Algeria, where it recently acquired a bank with six branches. With teams already having been dispatched from Lebanon to Algeria, Byblos’ second regional venture is already operational and only awaiting final administrative approval in both countries to complete the acquired bank’s transition into Byblos Bank Algeria.

The third regional joint venture banking project of Byblos, the establishment of an operation in Syria, is also well underway with a head office already having been bought and launch of the institution planned for this year, hopefully before September. According to Byblos’ general manager, Semaan Bassil, Algeria (which is also being eyed-up by Lebanese Canadian) is attractive due to its proximity to Europe, strategic importance in oil and gas, large projects and numerous development needs in the banking sector, while in Syria, the bank is looking not only at corporate clientele but also at building a network and consumer franchise there.

At the Audi Saradar Group, where there is a history of strong European subsidiaries, the rollout of the first regional operation in Jordan has been a tremendous story, claims strategist Freddy Baz. Based on a license for a 10-branch network, the Lebanese group had six out of ten branches up and running at the end of 2004, three months after assuming operations. “We reached a level of assets of JD 120 million at yearend, which corresponds approximately to $160 million,” Baz told Executive. “This is a very good performance when you compare it with existing banks having several branches and six, seven years of operations. We are at 60% of their performance after 14 weeks. This is related to vision, strategy, well-defined business plans, and more importantly, your people.” The group foresees completion of the branch network in Jordan within a matter of weeks as well as launching operations in Syria before the end of the summer. The start of the joint venture was delayed because of a decision to double the new bank’s capital from $30 million to $60 million, in order to meet the requirements of what Baz described as “a very aggressive business plan for Syria”.

As Audi Saradar’s ambitions extend even further than these two new ventures and the group regards the Levant, North Africa and the Gulf area all as within its reach for regional activities, the public should not be surprised to see another Audi Saradar startup coming along, perhaps in form of a new niche operator in corporate finance in the Gulf or through acquisition or founding of an institution in Egypt where the group’s market interest is documented.

Also gearing up towards their opening in Syria is Bank of Beirut, which is collaborating with Emirates Bank and Qatar National Bank in their joint venture for the Syrian market. BoB is also preparing to co-list its shares on the Dubai Stock Exchange within the coming three months.

No single banker talking to Executive last month about plans for the Syrian market left any doubt that money talks equally sweet from both sides of the border and Syrian customers had no squabbles or reservations in letting Lebanese banks serve them.

Already in Damascus is BEMO Bank, where a high reputation with the Syrian business community runs in the blood. The bank’s aspirations are for the Syrian operation to eventually outpace the asset size of the parent bank in Lebanon. “In Syria we achieved $400 million after one year, for most of which we had only one branch,” said BEMO general manager Samih Saadeh.

Among the two private sector banks already open in the neighboring country, the joint venture Bank BEMO Saudi Faransi (BSF) is currently leader by number of assets, deposits, and loans, according to Saadeh, and growing to four branches this summer. Interestingly, the focus at BSF is on retail banking growth while BEMO’s home strategy is to develop its niche as boutique private and corporate player. Covering both angles, the group aims for a substantial role as banking conglomerate between Lebanon and Syria.

The Syrian market’s need for advanced and indeed basic financial services should provide Lebanese banks participating in joint ventures there with no shortage of opportunities to break growth records over a good number of years, as long as the flows of economic freedom and overall reform in the allied country do improve and not subside. Their market expertise and managerial leadership as drivers of joint banking ventures in the Syrian economy may even allow stronger Lebanese banks in the longer run to get around the restrictions on their roles created by the legal framework that dictates Syrian majority in the capital of private sector banks.

While the regionalization of their business is buttressing the market positions and risk diversification of Lebanese banks, it does not provide them with answers to all their challenges. Many still have to work on ameliorating their asset quality and interest rate risk, loan portfolios and policies, management and service structures. Although appearing perhaps somewhat less attractive today under the inescapable size limitations of the market, domestic mergers and acquisitions in further consolidation of the sector can be expected to become again more important with progressive implementation of Basel II requirements over the next five years.

Furthermore, within the limitations of the economic environment and the prospects for gradual improvements over a not short period before full recovery of fiscal and macroeconomic health, innovative contributions of banks to the financing of growth and productivity in Lebanon have a lot of calling. In an example for a new project, Byblos Bank is currently working on establishing a joint venture financial firm with the European Investment Bank (EIB) and probably another foreign partner. An EIB expert had been hosted at Byblos Bank for the past six month in a mission to analyze the feasibility of an equity fund for investing in companies in Lebanon and the region, and the project is ready for start-up within 2005.

To be capitalized initially at $30 million, with 50% participation by Byblos Bank, the investment fund firm aims to enter the equity of promising companies that also export. Managed out of Beirut with a Lebanese team and also based as offshore entity in Cyprus for reasons of giving the Europeans and foreign partners a blocking vote, the fund will be designed to cover not only Lebanon but also be active in other countries of the Eastern Mediterranean, such as Syria, Egypt, Algeria and Palestine.

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Feature

Money , Lies And Deception

by Executive Staff
written by Executive Staff

When in October 2004 unemployed Lebanese architect Samir read an advertisement in Lebanon’s al-Diyar newspaper touting positions in Dubai for architects, engineers and foremen, he called the Beirut number in the box for more information. He wasn’t hopeful. He’d been unemployed for over a year and had responded unsuccessfully to dozens of ads. But this time, the recruitment office he was directed to gave him a glimmer of hope. Consulting & Investment was located on the 7th floor of Block B in the smart Sodeco Square building. It was lavishly furnished and manned by brisk, energetic and well-dressed staff. The company oozed professionalism. Samir knew he was qualified and believed that his luck might be changing.

It got better. The owner of the agency, Hadi M, a tall, suave, man in his late 30s wearing a designer suit and whose long, black hair was drawn back in an elegant ponytail, told Samir that he was the representative of Dubai’s al-Maktoum family and their extensive business interests. He looked at Samir’s CV and then declared in excellent English that Samir’s qualifications were bound to get him a job in the wealthy emirate. “Leave it with me,” he said, getting up from behind the desk to shake Samir’s hand.

Surely enough, 48 hours later Samir received a phone call from Hadi M. saying the job was his. It was an attractive package. “He told me I’d be earning $3,200 a month, living in a nice apartment and getting my laundry done twice a week,” recalls Samir, who was so excited he rushed round to Sodeco Square to sign the agreement. There was just one thing: Samir would have to pay $450 for his airfare to Dubai.

“It’s just a precaution,” he explained casually, “If I pay for the ticket and you decide to disappear once you get to Dubai, I’ll have lost $450.” Hadi M. reassured Samir that his employers would refund him. “Call me in a week. Your visa will be ready then,” he said Hadi M and an upbeat, albeit out-of-pocket, Samir went home.

A week later, Samir called Consulting & Investment, only to be told that there was a delay in getting the visa. Samir was disappointed but still confident that he would soon be off to Dubai. But disappointment soon gave way to doubt and then suspicion, when two weeks later, Hadi M. told him there was a problem. Would he come down to the office to talk about it? When he arrived, the secretary told him Hadi M. was in Syria “sorting out papers,” and that in any case he did not have an appointment. “I knew then that something was wrong,” says Samir.

A few days later Samir called Hadi M. “Your papers are ready,” Hadi M. said. “Come on Friday at eleven.” When Samir arrived at the office that Friday he found four other people waiting in front of Consulting & Investment’s offices. The door was locked. Repeated banging elicited no response. Everyone there had paid Hadi M. for plane tickets to Dubai where they had been offered jobs. They too had experienced delays in their paper work and they too had been told to come down to the office on that day to pick up their documentation. But Hadi M and his brisk staff were nowhere to be seen.

Some were furious. All felt foolish. It was clear then that the whole thing had been a scam. But there was little they could do. The concierge was summoned. They were told that Hadi M. had left together with all his furniture.

Samir and the four people he found waiting in front of Hadi M.’s Sodeco Square door are just a handful of what are dozens, if not hundreds of people who, over the last two years or so, have responded to newspaper ads and then paid Hadi M. hundreds of dollars in advance payments, blinded by the veneer of three separate bogus recruitment consultancies he set up in three different Beirut locations. (He even took $650 from a Lebanese brigadier-general in relation to the arrangement of a job in Dubai for his Philippine maid.) No one ever appears to have secured a job and no one has been refunded in full. Hadi M is apparently still at large.

At least 20 lawsuits have been filed against Hadi M. They show that he has been active since August or September 2003, when he placed ads in al-Diyar, al-Balad and al-Waseet. In the earliest suit, filed on 15 September 2003, a plaintiff states that he went to an office on the ninth floor of the Aresco Building in Hamra, where he paid Hadi M. $700. Another plaintiff was allegedly offered a business position in Dubai at $1,500 a month with insurance and housing. Yet another says he was told he would be a restaurant manager in Dubai at a restaurant owned by the al-Maktoums. Hadi M. then allegedly stalled, closed down his office. Before his Sodeco incarnation, he briefly plied his trade in the BCD, where in May of last year he met Walid, an unemployed personnel manager, who wanted to work in Dubai to be close to his son. Walid had seen an ad and went to the second floor of the Hibat al-Maarad building on Maarad Street. “The office was fantastic,” recalled Walid. “I had never seen such luxurious furniture.”

When, a few days later, Hadi M. told him that he’d landed the job, he agreed to pay $600 for the airfare. But Walid’s delight turned to disillusionment when it became clear that Hadi M. was now avoiding him and that there appeared to be no job waiting for him in Dubai. Then, like at Sodeco, the final insult. “He gave me an appointment but when I got there I saw around 20 people standing in front of a locked door.” Hadi M had disappeared again.

Lawyers and recruitment industry professionals are frustrated by the ease at which people’s hopes and dreams were shattered by this small-time fraudster.

“Hadi M. was dealing with naïve and desperate people from whom he was charging a very small amount of money,” explained Sabbah al-Hajj, head of Management Pro, one of Lebanon’s leading recruitment consultancies, and who claims to have reported Hadi M. to the Ministry of Economy. “If they were to recruit a lawyer, it would cost more than the money they want to recoup. It would also take years. People become defeated. He is counting on people thinking like this.”

The desperation to escape Lebanon’s stiflingly job market is another reason recruitment industry insiders say many people agreed to hand over cash so willingly. Another factor is ignorance. People in the Arab world are used to paying for recruitment services, despite the fact that it is illegal for any company to take money from the applicants.

“Lebanese labor law prohibits the taking of any money from applicants, at any stage, even if he is just filling out an application,” noted Johnny Chamichian, head of JCConseil Recruitment Consultants.

Reputable local agencies style themselves as management consultants to avoid being tarred by the same brush. JCConseil, for example, only charges the company on whose behalf it is recruiting.

Management Pro, however, takes $10 from candidates who wish to fill in an application. Company manager, al-Hajj said the $10 served as a screening process to differentiate between serious and not-so-serious applicants. Asked if this was legal, al-Hajj said: “I have never thought about it. But what I am doing is selling them an application form, not charging them. If you want to take an application form we charge $10. If you want to send a CV we charge nothing. We are completely within the law.”

When Walid took his case to court he learned Hadi M, who was born in Nabatieh in 1966, had told the court that he had had been unable to fulfill his end of the contract because he had been in Roumieh prison for a previous offence and offered to return the money within a few weeks. Walid confirmed that received an initial refund of $200 but has heard nothing since.

Unbeknownst to him, Hadi M. was at it again. This time in Sodeco Square, where apart from Samir, he would also ruin the day of Fadi, a craftsman who had responded to the following 23 September 2004 ad in al-Diyar: “Investment & Consultant Co. has the following open positions for Dubai: Civil engineer; mechanical engineer; architect; forman [sic] Tel/fax 01/423100 – 03056331.”

Hadi M. told Fadi that he was a business representative for the government of Dubai and that Fadi had successfully landed a job with a prominent local company. He could expect a generous salary and a comfortable standard of living. Fadi paid the airfare, waited a few weeks and then turned up to a locked office.

On reflection the deception was obvious, but applicants were blinded. “It’s funny thinking back. No one else in the company revealed their name. It was totally secretive, said one swindled applicant, who added, “The office was big and well-designed. Hadi was projecting the image of royal al-Maktoum representative. But I saw no pictures of al-Maktoum, his family, their work or their buildings.”

Applicants were usually asked for a copy of their passport, two passport photos, and certified copies of any degrees or other qualifications. Sometimes another $100 was required to obtain medical certificates – supposedly required for immigration – although the applicants were not asked to undergo any tests.

Hadi M’s behavior was also sometimes at odds with his professional image. “He drove all the way up to my house in Tripoli, in his 1999 or 2000 BMW 750, to collect the $100 from me in cash without giving me a receipt,” said another applicant. “He said: you can’t expect me to bring a receipt with me all the way up here.”

When he did give them proof of payment, it was often handwritten. “My receipt didn’t look like the receipt that a big company would issue. It was headed in Microsoft Word and written by hand in Arabic. It had no official stamp,” recalled one another of Hadi M’s victims. “After that, I knew something was wrong. Then it occurred to me he never told me his name, never given me a business card and that his computer was never switched on.”

In retrospect the warning signs were numerous and obvious. Victims were bemused by the fact that there was never any official information in the job offer about which company they would be working for or whom they should report to. “I told Hadi you have to give me the name of the company. You can’t just say al-Maktoum. That’s like saying I’ll be working for Hariri, recalled yet another duped applicant. “Doesn’t the company have a website? He said yes: www.al-maktoum.com.”

In May, EXECUTIVE called three mobile numbers, which according to a police investigation belonged to Hadi M. The first was out of service.  An elderly woman, perplexed and annoyed by the frequent calls from people trying to track down Hadi M, answered the second. A man who answered the third number saying that Hadi M. was out of the country for a month. Could it have been Hadi M? When EXECUTIVE called the mobile phone of one of his lawyers, she hung up and then turned off her phone.

If the authorities have been aware of Hadi M.’s activities since at least the end of 2003, how has it been is it possible he was able to open a further two recruitment offices over the next two years and fool dozens more people? In the document attached to Fadi’s complaint, the judge orders Hadi M. to be arrested for fraud. It appears that Hadi M. was indeed detained but then released leading to theories from his victims that he has been able to avoid jail and continue his activities because he is “protected” by a major south Lebanon politician. Some say that they were encouraged by the authorities to drop legal proceedings in return for partial reimbursement. “He can do whatever scams he wants,” contended one. “They know what he’s doing but he’s being allowed to do the same thing again and again.”

His victims say it has ultimately nothing to do with money. The damage is more emotional, even though many quit their jobs in Lebanon or missed other opportunities. “I don’t care about the money,” said Walid. “He sold me hope and then dashed it.”

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Dispatches

Those Groovy Danes

by Executive Contributor
written by Executive Contributor

The quickest way to get to Karup in the North West of Jutland from Copenhagen is to take a 45-minute internal flight. Looking out of the 50-seater, ATR 42 turbo prop, this part of Denmark is as you would expect: flat farming country, dotted with wind turbines and lakes.

In nearby Stuer, one is faced with the full Danish eco-friendly living experience: Bike-riding families and couples pulling toddlers in tasteful wooden trailers. Those who choose to drive cars, have sensible Renault Scenics and Volvo station wagons. Even the clothes are utilitarian: sandals and cargo pants; all stout walking kit. There is not one piece of litter to be seen and crossing the traffic light on red creates ripples of disapproval among the good citizens.

This is the land where women get 12 months maternity (Danish men get six months to help with the nappy changing and other nurturing duties). It is about as Utopian a society as one can imagine but until sandals with socks and drip dry shirts become the look of Milan and London, Denmark, much less provincial Jutland, will not be fashion central. And yet this town is home to Bang and Olufsen, the maker of the hippest hifis and coolest TVs on the planet.

Stuer is the home of B&O. Of a population of 15,000, 2,500 loyal and devoted employees – many are 2nd and even 3rd generation staff – work at the company’s modernist, head office. Known as the Farm, but with an uncanny resemblance to a stack of one of B&O’s mid 60’s Beomasters, the name is, no doubt, an affectionate nod to the original rural buildings where, in 1925, Peter Bang and Sven Olufsen started it all.

That was then. Next month at the Frankfurt Motor show, Bang & Olufsen, will unveil its latest stage in it is cutting edge audio-visual journey, by unveiling the its in-car system for the Audi A8. It is the $600 million Danish company’s most ambitious partnership yet and the first time the brand has ventured into in-car entertainment (so insistent is B&O on getting it right, the company always felt cars were just too awful an environment for premium listening). The event will also reflect B&O’s evolution over the past ten years from a cool but quirky hi-fi producer to a global brand that has positioned itself among the world’s most luxurious and desirable retail names.

But it was never always thus. B&O’s current CEO, the affable Torben Ballegaard Sørensen, admits that there was a time in the mid-90s when the company had lost its competitive edge. “It was a difficult period,” he admits. “B&O was inefficient and lacking focus in the face of stiff Asian competition.” When he joined B&O from Lego in 2001, Sorensen’s response was to revitalize the product, open more stores and achieve greater consistency in its distribution network. In parallel, he accelerated development and creativity by focusing on the pleasure at home principal of faultless pictures and crystal clear sound. “This was very important to us. We were maintaining our niche but making more inroads into the consumer consciousness. We also wanted to expand our customer, maybe a attract a younger customer.”

According to Sørensen, B&O wants to consolidate domination of what it sees as the high end of the home entertainment market “We are a solution provider, offering quality experience allied to service excellence and reliability.” As opposed to? “Well the mass discount market,” counters Sørensen, “which is defined by transactions, logistics and the movement of bigger volume. We only release four products each year.”

Also close to Sørensen’s heart are the company’s core internal values of excellence, originality, synthesis and passion to produce products with a long life cycle and the potential to achieve iconic status.

“The B&O customer should be passionate about the fine things in life,” says Sørensen. “He should not compromise on quality or performance. He is willing to give priority to these values. He is in a professional or creative occupation and he should be active informed an international.”

To satisfy these needs, B&O have 1,500 outlets worldwide, of which 650 are what B&O calls concept stores, similar to that on the corner of Riad Solh and Rue Weygand in the BCD. Most recently concept shops have opened in Pakistan, India, Serbia, Kazakhstan, Uzbekistan and Finland, all of which represent what B&O call expansion markets.

Even though the company is a genuine niche brand (it has a 350,000 global customer base), in Denmark, according to Sørensen “B&O occupies a lot of mental pride”. It can claim a 25% share of the Danish market (albeit in terms of revenue, not units but this is still a lot when one considers that the next best performing markets are Holland and Switzerland with 8%, followed by the rest – UK, Germany et al – with around 2-3% of their respective markets).

And the Danes sure love their B&O. “It would not be an exaggeration to say that virtually every house in Denmark has or has had a B&O item,” beams, communications executive, Iza Mikkelsen (husband and father are also present and former B&O’s employees respectively). It quite a claim given that the entry-level units start at roughly $600 for and MP3 player, while the whole nine yards of home entertainment, in effect a mini cinema, can cost around $80,000.

In the day-to-day business of brand building, B&O has also realized the value of entering into more high profile strategic partnerships. There is ongoing R&D with both Microsoft and Samsung, while B&O’s advanced aluminum technology – it is acknowledged to be one the three most competent workers with the metal in the world – has found it working alongside Lamborghini (brake calipers) Hasselblad (camera housing) and BMW (the undersill on the X5).

B&O also works with Louis Vuitton (leather MP3 holders), Alessi and Porsche. “The world is more network oriented and we work with remarkable brands. They inspire us,” says Sørensen, adding that it is part of the company’s strategy to enter into more visible alliances with other genuine blue chip brands while maintaining B&O’s brand equity.

The alliance-building will reach a new zenith with the Audi partnership, one that will launch what is arguably the most sophisticated in-car audio system ever. It was a project that had its genesis in 2000 when the two companies began tentative talks on collaboration and was fuelled further with the launch of the A8 in 2003. Both companies are also proud to show off research data that demonstrates that Audi owners buy B&O, while B&O owners buy Audis.  vice versa. “It shows that we are two brands on the up with the same buyers,” beams Dirk Hogenfeld, adding that B&O had not, however, ruled out future collaboration with other car manufacturers.

B&O had never ventured into car audio before the Audi alliance. “The environment is all wrong,” explained Hogenfeld. “There are many factors the fabric in the upholstery can make a difference as can each individual model. With the A8, B&O spent years perfecting the revolutionary tweeter that emerges from the top of the dash board between the passenger and the driver and which acts as a acoustic lens spreading out sound as it should be heard. Audi expects to sell around 1500-200 models with the B&O option representing around 10% of all A8 sales, with the majority of customers coming from Germany, US, UK and China. 

But B&O is not just about sales and strategies and alliances. It is about the men and women who are devoted to achieving what they see as the cutting edge in delivering a quality product. Venture down the corridors of the farm and you will find them, legions of devoted nerds

Enter of these doors and you might find Ove Thomsen, head of B&O’s environmental test lab putting one of the revolutionary in-car tweeters through its paces. “Audi has requested that we raise it and lower it 25,000 to make sure the wires don’t crack,” he explains above the clunking. At that very moment the tweeter stops. Thomsen, B&O’s very own Q, restarts the machine muttering something about it being not completely perfected.

Thomsen has a unique job. His department at the Farm is called the torture chamber: Literally it is where he puts B&O products through extreme conditions so that build quality is kept to a maximum. Among his tools of his trade are the “wagon train,” the “bump test” and the ruthlessly effective “drop test,”

Owners of the breakthrough all-in-one remote control (especially those with children) will be happy to know that each unit must be able to withstand 100 drops from 80 centimeters onto concrete floor, while phones and earphones must endure a similar ordeal from 180cm.

If that were not enough, TVs are subjected to the smoking chamber where in ten days Thomsen simulates the effect of ten years smoking to see the effect of smoke on the fabric and to see if it has penetrated the TV. Products are also placed in temperatures of minus 25 and over 40 degree (trivia alert: in arctic climates customers are advised to wait 24 before plugging in their sets and turning them on as the cold can crack the screen). And then of course there are the everyday items that B&O claim can easily can find their way onto and into household appliances. “Nivea is great for hands but on other surfaces can act as paint stripper,” explains Thomsen, picking up a bottle of sweat. “Well its not real sweat but we made it so it has the correct acidity of sweat. Our surfaces must survive for ten years.” 

But above all B&O is about design and it is not surprising that in the country that gave the world Lego that the creative nerve center should go by the name of Idea Land. It is a department of 17 creatives “led” by the formidable David Lewis, B&O’s design meister for the past 25 years. Lewis is technically a freelancer, who works with a separate team of six assistants in his Copenhagen practice, but it is his B&O designs that are the most visible. Lewis makes the trip to Stuer once a weak where he meets with the idea land team and revels in the “big sky” that the part of Jutland offers.

Working closely with Lewis, the design team have one overriding criteria when designing a concept that will be presented to the B&O management. “It’s got to have ‘wow’ factor even if other people hate it, wow is what we aim for you cant please everyone,” says Robert NargBurg, one of the concept designers, adding that the team does not only get their inspiration from their own northern European aesthetic but rather they marry it with influences harvested from all over the world. “We go everywhere from Hollywood to Tokyo, to film studios and car shows. We talk to people. We are after all in the entertainment business.” What about the customer? “We don’t do market research, because we believe the customer doesn’t know what he wants.”

What of the future? David Lewis, the design guru, rubs his beard. “I suppose when we don’t have CDs we might have a problem as all the mechanics will be gone. But we are not there yet,” he chuckles.

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Companies & Strategies

Something old and something new

by Marianne Stigset
written by Marianne Stigset

Uniceramic is keeping with tradition while repeatedly re-inventing itself to stay on top of a growing ceramic tile market in a volatile environment

From the brilliantly colored glazed-brick and tile murals of Mesopotamia to Antoni Gaudi’s surrealist mosaic creations, ceramics have been a mainstay in the evolution of Mediterranean art and design. Keeping the tradition alive is Uniceramic, one of the first companies to produce floor tiles in the Middle East and one of the region’s largest producers today.

Registered in 1973 by founder Joseph G. Ghorra, Uniceramic’s launch coincided with the outbreak of the civil war in Lebanon in 1975, but the unfavorable environment honed the survival skills of the company, and came in handy as it expanded its market share over the years to encompass other regional flashpoints such as Iraq.

“It was very difficult during the war,” general manager Nabil J. Ghorra recalls. “You see in our industry, gas is the main energy component that is used. It’s highly flammable, and it doesn’t like bullets and bombs much. Since we had to bring gas in every day, it was neither the easiest nor the safest thing to do at the time. Then the Israeli invasion pushed into the Bekaa where we have our plant. Most of our raw material was close to where the Israelis were, so we had to re-excavate and look for other places to find material.”

Today the company’s 42,000 m2 plant is still located in the Bekaa, near Chtaura. Its staff has grown from 138 employees in 1975 to 375 in 2005 and its production capacity has increased twelve fold over the same period. By 1996, the company went public, becoming one of only three industrial companies listed on the Beirut Stock Exchange.

The key to Uniceramic’s production increase says Ghorra, lies technology, allowing more cost effectiveness.

 “We have increased our production capacity twelve fold between 1975 and 2005, but without having to increase our number of employees by the same amount. And this month we are set to increase our annual production from 4.3 million sqm2 tiles to 6.5 million sqm2.”

Increasing production falls into the company’s two-pronged corporate strategy, based on consolidating Uniceramic’s domestic market share, while simultaneously expanding internationally.

Although the tile market in Lebanon peaked back in 1995 at 10.6 million sqm2 of tiles only to decline steadily for the following six years, it has experienced a strong recovery since 2001, reaching 10.4 million sqm2 in 2004. Unexpectedly, the figures for first quarter of 2005 read even better than last year’s.

“We witnessed a 20% increase from the first 3 months of 2004,” says Ghorra. “The market is still growing.”

In a bid to keep its share of the market pie, which increased from 26% in 2002 to over 30% in 2004, Uniceramic is taking on the market with more products, new products and an added line of interior design and architectural services.

“We used to be just manufacturers, but we saw that in Lebanon, imported goods are perceived as being better than local products,” Ghorra explains. “The Lebanese prefer Western products over Lebanese products, just as they prefer Lebanese products over other Middle Eastern products. There is a stigma there. So we had to add value to our product. We were known as a good product, but not a particularly beautiful one. That is why our “Reflection of Beauty” campaign was launched 3-4 years ago.”

Uniceramic began opening its own showrooms, displaying full-fledged ceramic bathrooms and kitchens. Initially conceived purely as a mean to inspire customers, with no sales taking place so as to not compete with the company’s wholesalers, demand from customers became such that Uniceramic eventually began selling its products, but at a higher price.

“The customer is interested in a bathroom, he is not interested in a tile,” notes Ghorra. “(Despite increasing our prices) we discovered that people still preferred to buy from us because of the service – people are ready to buy for the service. We had architects at the showroom giving them advice and this was an added value for them.”

In parallel to this, Unicermic expanded its domestic sales channels to include retail networks and projects, in addition to wholesalers.

For now, the strategy seems to be paying off. Despite a 40% dip in business due to the political upheaval sparked by the February 14th attack (which notably slowed the construction industry down as Syrian workers fled), Uniceramic is hoping to make a 50% higher turn-over than last year, and more than a 50% increase in profits.

Focus on exports

Part of this increase is set to come from the company’s export market, which boasts clients in 20 different countries and constitutes 40% of total sales. Hitherto, the bulk of Uniceramic’s export’s have gone to the region, which Ghorra views as holding significant potential.

“In developed countries, the highest consumption per capita is 6.5 sqm2 tiles per capita,” he says. “In Lebanon, we are now at a peak, with 2.5 sqm2. In some other countries on the Middle East, they are only at 0.5 sqm2. So the potential for market development is huge.”

Yet seeking out the potential in a volatile region is a path fraught with pitfalls, which Uniceramic is all too familiar with. Prior to its March 2003 invasion, Iraq represented one third of the company’s total exports. Since then, sales have come to a halt.

“We have offices there, but I haven’t been to Iraq in a year and we have no direct sales to the country anymore,” says Ghorra. “But a lot of Iraqis now live in Syria, and they buy our products from there, which is one of the reasons why Syria has now become our biggest export market.”

Although the Middle East has treated the company well, Ghorra says he is ready to get involved in more stable markets and Uniceramic is now focusing its efforts on expanding its market share in Europe and the United States.

“At the end of the day, you want to make profits,” he says. “You want to show shareholders that this company is making returns on investment – this is how you grow, by gaining the confidence of the market. If you are constantly focusing on putting out fires, you don’t get to do that. We are surviving quite well, but we will be focusing more on Europe and the United States from now on, so as to stabilize demand, and be able to grow.”

The challenge of high energy prices

Yet expanding into less volatile regions will not protect Uniceramic from the challenges posed by out-of-control energy prices, which have chewed of quite a chunk of the company’s revenues since the war on Iraq. Despite hitting record sales worth $20.9 million in 2003, Uniceramic suffered a loss of $1.36 million in 2003.

“When we realized that the war in Iraq was imminent, we feared that the regional countries that exported into the Iraqi market would dump all their products on Lebanon, which has a more open economy,” Ghorra explains. “So as to not lose our market share, we decreased our prices, based on President Bush’s prediction that oil prices would fall after the war. Our sales soared and our market share increased by 8%, but the price of oil kept going up. Essentially, we ended up with a large gap in profitability.”

With 30 to 40% of production costs stemming from energy, boosted sales could do little to save the company’s profits. Worsening the situation was the strengthened Euro, which racked up the prices of imports of spare parts and raw material.

However the strong Euro has not exclusively brought woes to the company.

“It did also have a positive effect,” says Ghorra. “People import less from European countries such as Italy and Spain, as it gets more expensive. We penetrate that segment of the market.”

By 2004, Uniceramic re-adjusted its prices and with sales only slightly below the 2003 figures at $20.7 million, closed the year with a net profit of $96,251.

Unfair trade

The threat of foreign competition however, remains a dark cloud on Uniceramic’s otherwise promising horizon. Since Lebanon’s implementation of the Greater Arab Free Trade Area’s clauses, demanding the gradual reduction of tariffs and taxes, Lebanese companies have found themselves competing with regional tile makers propped up by heavily subsidized products.

“There’s unfair trade going on,” says Ghorra. “In Egypt, tile fabricants are buying gas at subsidized rates. For 1000 kilocalories of energy, they pay 0.4 cents. We pay 6.11 cents – 14 times more. In addition to that they have cheap labor and all raw material locally available. In 2002, there were almost no imports coming from Egypt into Lebanon. In 2003, 211,000 sqm2 of tiles were imported. By 2004, this number had reached 1.3 million sqm2, and in the first 3 months alone of 2005, we have seen 903,000 sqm2 imported.”

Facing the risk of being down priced out of the market and forced to delocalize, Uniceramic is engaging in government lobbying, so as to introduce measures to limit imports from subsidized foreign industries.

“The government needs to protect us,” Ghorra argues. “Otherwise, why would investors come to Lebanon, if profitability is better elsewhere? This country needs to create 10,000 new jobs every year, but the government needs to give the incentives and the opportunities to the industries to use this labor and create new jobs.”

But the manager of the company, which saw itself rewarded the prize for best Industrial Company with an Internationally Renowned Brand in 2004, remains upbeat about the future.

“We are strengthening our trading capacity, stabilizing and securing our market shares abroad, launching 75 new references in tiles in June and July, and we will become quite aggressive on the domestic market in order to fight for our market share and consolidate.” Uniceramic appears set to keep up tradition for quite some time to come

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Executive Tools

THINKING DEEPLY

by Tommy Weir
written by Tommy Weir

Last month we promised to help you to develop your own database of accessible information that is creative and intelligent. We also want to explore ways to get more use out of 1. your brain 2. your experience and 3. all of that data that you’ve compiled over the years.

            The truth is: the education system (global) is not responding to the “Age of Intangibles and Intellectual Capital”. For the most part, education trains…or bores the creative intelligence out of people. Irrelevant rote learning that builds automatons when we what we need  are sharp minds that can absorb and respond to a myriad of questions involving diverse cultures and sophisticated markets.

            In order to re-educate ourselves, we have to begin to ask better questions and search for information that goes counter to what we’ve been taught. We do not have to agree with this ‘outside’ perspective, but the point is that at least we become aware that it exists. We also have to spread our curiosity and learning into a vast array of fields; music, science, graphics, health, art, politics etc… If all of the books on your shelves are non-fiction politics, then you may be limited in your perspectives, which in turn limit your creativity.

            In this vein, it’s important to understand how you make decisions based on data. Last month, we spoke about the fact that most people will opt for more information (data) rather than trust themselves and their “deep smarts”. We know that this is an anti-creative, time wasting strategy for the most part. So, why do so many people, companies and governments keep doing it? Because on the surface, it feels safe. Human beings fear making ‘mistakes’ and lots of data can assuage our worries of having to defend our own personal experience and learning. Reflect on this: “Instead of asking whether the way you are living, behaving, and thinking is ‘right’, ask whether the way you are living, behaving, and thinking is working or not working.” What are your outcomes? Are you happy, creative, and abundant? If your answer is no, then it’s time to look at other ways of processing information and how you translate that data into behavior.

Sometimes, the most difficult part of learning

something new is unlearning the old way.

Let’s look closer at deep smarts and it’s link to intuition. Most people are intuitive, without really understanding the power that it contains. In fact, we’ve had lots of meetings with men and women, who repeatedly say, “I knew it all along, but I couldn’t explain it.” “I wish I had just listened to myself.” Below is a questionnaire to help you ascertain how intuitive you are. Answer the questions to the best of your ability and then score it.

1- Do you usually win at gambling?

     Yes (B)             No (A)                         Score————–

2- Do you trust your feelings even when they seem to be irrational?

     Yes (B)             No (A)                         Score ————-

3- Do you like to look beneath the surface of human relationships?

     Yes (B)             No (A)                         Score————–

4- Have you ever guessed a person’s name before you heard it?

     Yes (B)             No (A)                         Score————–

5- Are you superstitious?

    Yes (B)              No (A)                         Score————-

6- Do you feel that certain places have an atmosphere?

     Yes (B)             No (A)                         Score————-

7- Do you usually win at guessing games?

     Yes (B)             No (A)                         Score————-

8- Do you sometimes distrust a person without reason?

     Yes (B)             No (A)                         Score————-

9- Are you able to distinguish between what a person is saying and what they are feeling?

     Yes (B)             No (A)                         Score————-

10- Have you ever been to a place and felt that you have been there before?

       Yes (B)           No (A)                         Score—————

11- Do you believe that dreams have meaning?

       Yes (B)           No (A)                         Score—————-

12- Do you read between the lines when you talk to people?

       Yes (B)           No (A)                         Score—————–

13- Have you ever known when a telephone was about to ring?

       Yes (B)           No (A)                         Score—————–

14- Have you ever guessed in advance what someone was about to tell you?

       Yes (B)           No (A)                         Score—————–

15- Do you believe that you can influence the roll of a dice?

       Yes (B)           No (A)                         Score——————

16- Do you sometimes say something at the exact moment someone else say it?

       Yes (B)           No (A)                         Score————-

17- Do you believe that animals have greater intuition than humans?

       Yes (B)           No (A)                         Score—————

18- Can you sense forthcoming danger?

       Yes (B)           No (A)                         Score—————-

19- Do you believe in love at first sight?

       Yes (B)           No (A)                         Score—————-

20- Do you ever sense hostility from people who appear to be friendly?

       Yes (B)           No (A)                         Score—————-

21- Do you believe in mind over matter?

       Yes (B)           No (A)                         Score—————–

22- Can you sometimes feel the emotions of someone who is not physically present?

       Yes (B)           No (A)                         Score—————–

23- Do you feel drawn to certain people even though you don’t know them well?

       Yes (B)           No (A)                         Score——————

24- Do you believe that twins have a special affinity?

       Yes (B)           No (A)                         Score——————

25- Do you have a special affinity with animals?

       Yes (B)           No (A)                         Score—————-

26- Do you believe in the laws of probability?

       Yes (B)           No (A)                         Score—————–

27- Can you sometimes foretell the future?

       Yes (B)           No (A)                         Score—————-

28- Would you go to a fortune-teller?

       Yes (B)           No (A)                         Score—————-

29- Are you usually aware of unspoken undercurrents in social situations?

       Yes (B)           No (A)                         Score—————-

30- Do you often guess the end of a story before you have reached it?

       Yes (B)           No (A)                         Score————–

31- Do you believe in reincarnation?

       Yes (B)           No (A)                         Score———–

32- Do you believe that cats are more sensitive than human beings?

       Yes (B)           No (A)                         Score————

33- Do you believe that dogs can recognize their masters by their footsteps?

       Yes (B)           No (A)                         Score————

34- Can you sense when someone is behind you even though you cannot see or hear them?

       Yes (B)          No (A)                         Score————

35- Do your dreams ever come true?

       Yes (B)           No (A)                         Score————–

36- Can you sometimes guess a person’s occupation without any real clues?

       Yes (B)           No (A)                         Score—————

37- Do odd coincidences regularly happen in your life?

       Yes (B)           No (A)                         Score—————

38- Do you ever feel strongly that something to happen in your life even when you have no proof?

       Yes (B)           No (A)                         Score—————-

39- Would you enjoy the work of a psychotherapist?

        Yes (B)          No (A)                         Score—————-

40- Do you sometimes feel that facts merely cloud an issue?

       Yes (B)           No (A)                         Score—————-

41- Would you trust your intuition even in a very important matter where a mistake would be serious?

       Yes (B)           No (A)                         Score—————

42- Do you know when it is going to rain?

       Yes (B)           No (A)                         Score—————-

43- Do you sometimes think of friends at the same moment they think of you?

       Yes (B)           No (A)                         Score—————–

44- Do you believe in natural medicines?

       Yes (B)           No (A)                         Score—————–

45- Do you believe in divination by tarots cards, I Ching, etc?

       Yes (B)           No (A)                         Score—————

46- Do you sometimes know the sender of an email without looking?

       Yes (B)           No (A)                         Score——————

 SCORING

A = 0 points

B = 2 points

82-100: Extremely powerful intuition

62-80: Strong intuitive feeling

42-60: Average intuitive ability

22-40: You get the facts, but miss the essence

0-20: Lost

Now that you have some basic data, reflect on the times in your life when you had a hunch and followed the hunch; and the times when you didn’t. Begin keeping a journal of your “deep smarts” even when you don’t act on them. Every night before you sleep, go to a quiet place and take a breath. Relax deeply and ask yourself any question that you have not able to answer intellectually. Wait for the answer, and make sure you write down the response. If you are relaxed, patient and open, we guarantee that you will be rewarded with a deeper truth than you could ever get from more data.

Be the Best!

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State department

Republicans circle wagons around Bush White House

by Claude Salhani
written by Claude Salhani

As the Bush administration gets its feet under the desk for a second term, it appears to be payback time for those who opposed the war in Iraq. Our Washington Correspondent reports on an everyday scandal in the Beltway

Members of the Republican Party are circling their political wagons around the Bush White House to protect it from an impending Left wing assault by. Democrats and Liberals, who have gone on the warpath over the possibility that presidential guru Karl Rove might have leaked sensitive information to a news columnist, blowing the cover of a CIA agent in the process.

Rove, whose official title is deputy White House chief of staff, is in fact far more than his title would let on. Rove is often called the brains behind President Bush.

It is believed Rove may be the “Deep Throat” of our times. Some have accused him of being the “source” who leaked the word on the Valerie Plame affair, and in so doing, blowing her cover as a covert operative. For the record, Mrs. Plame who was an undercover agent with the CIA is also the wife of former State Department official Joseph C. Wilson. Also for the record it is a criminal offense to knowingly reveal the name of a covert undercover agent.

The story making the rounds of the nation’s capital during the last few weeks is that in trying to discredit Wilson, Rove revealed Plame’s name to a newspaper columnist. Wilson, a critic of the U.S. invasion of Iraq had been tasked with finding out if former Iraqi President Saddam Hussein had purchased uranium from the West African country of Niger –- which he could have then used to make fuel for his alleged nuclear weapons. That, of course, is assuming Saddam had nuclear weapon in the first place.

Wilson, after flying to Niger in 2000 to investigate the matter, found no proof of uranium sales to Iraq. His report irked the Bush White House, then trying to make a case over Saddam Hussein’s allegedly being in possession of weapons of mass destruction – a case upon which the Bush administration was building the justification of the invasion of Iraq and imposing regime change in Baghdad.

Now press reports hint that Rove, who is credited with winning the 2004 presidential election for Bush, spilled the beans on Plame to get back at Wilson. An investigation is ongoing.

When asked about the investigation, the White House, however, preferred to skirt the issue, choosing to remain quiet over the matter of Rove’s unmasking of Plame.

When prodded by reporters if he had discussed the matter with Rove, and if Rove’s conduct might have been improper, the president refused to comment, saying only that there was an ongoing criminal investigation.

“I will be more than happy to comment on this matter once this investigation is complete,” said President Bush.

Meanwhile members of the Democrat Party have stepped up the pressure on the White House, demanding that Bush fire his trusted adviser, or in the very least, that Rove has his security clearance revoked pending the outcome of the investigation. However, no one in Washington truly believes Bush is likely to distance himself from Rove.

Instead, Republicans have turned to do what Republicans tend to do when they come under fire. Believing that the best defense is offense, they immediately went on the offensive, coming out all guns blazing. Among the first things they did was to turn the blame around and try to place it on Ambassador Wilson, questioning his credibility.

But there is a gap in the circled wagons. Not all Republicans are happy with the idea of Rove not playing ball the way he should have, and several senior members of the Republican Party have opted to remain on the sidelines, at least for now.

This is a story that will not go away. Quite the contrary, it will gather momentum and grow legs of its own. Milked for all its worth by the Democrats and Liberals, happy to have something they can throw at Bush.

Ultimately, Bush is safe. If things get too hot, Rove will be asked to fall on his ceremonial sword for the greater good of the neo-conservative agenda.

What does it mean? Rove and his friends will show up all over the Sunday morning talk shows, while his detractors and their friends will be on competing channels, each giving their views of events. Rove will have his additional 15 minutes of fame, or maybe of infamy, as he tries to explain the outcome of the investigation. If found guilty he will most likely refute the charges, blaming instead the “vast left-wing conspiracy.” If exonerated, he will probable say he never doubted in the American system of justice.

The president will praise Rove for his outstanding intelligence, his unfaltering dedication and his great work, and it will be back to business as usual in Washington, DC, where the media will move on to the next scandal. And there is always another good one around the corner in this town.

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For your information

Fadi Abboud

by Executive Contributor
written by Executive Contributor

After Lebanese industry had to cope with an arduous first half of 2005, Syria’s closure of its borders to cargo shipments from Lebanon dealt manufacturers another blow. Executive asked Fadi Abboud, the president of the Association of Lebanese Industrialists, how bad the problem is and what industrialists can do to cope with the current crisis

How big is the damage that the current dispute between Lebanon and Syria inflicts on Lebanese industry and economy?

The damage is quite serious. We export Lebanese industrial and agricultural products through Syria at a value of about $50 million per month. Then we have transit shipments, which are valued at about the same amount. But in my mind, the damage is beyond economics. The damage is taking toll on the people, the Syrian people who feel hurt for various reasons, and the Lebanese people who feel that they have been abused. This could develop into hatred between the two people.

Would you call it a trade war?

For a trade war, you need two parties. But you can call it a political war. We are stuck in a problem that is not of our making. It is a war between two brothers.

What can the private sector do to solve the problem?

The private sector can do very little. We do not have a major role to play. It is not that the Syrian and Lebanese industries would be upset with each other. The Syrian and Lebanese private sectors are not fighting. The role that we can play is that we can push our politicians to deal with the problems, and I would ask our counterparts in Syria to do the same.

Given that the situation has been difficult for the first half of the year, how long can Lebanese industry hold out?

Our problem is really that there is no one to deal with our problems. Until there is a government, the situation is very difficult. Let me point you to another problem, which could be as serious as what we are facing with the Syrians: our energy cost. The government before the previous government decided due to pressures from the street to put a cap on fuel prices. The cap on diesel prices, however, finished on the end of February. Now, new diesel prices are set every Thursday. Imagine that in a country where 95% of industries produce their own electricity, the price of energy changes every Thursday.

High energy costs have confronted Lebanese industry with problems for many years. Do you have any suggestions on how to alleviate the burden?

We now pay $550 for the ton of diesel fuel, which is five times the average cost for diesel fuel in the Arab world. Our competitors pay one fifth of what we are paying, and no one is dealing with this problem with imagination. If for whatever reason we cannot deal with the energy problem we are facing in Lebanon, let’s deal with the fact that our trading partners in the Arab world are subsidizing their energy. This gives the automatic right to put a customs duty as a tax to compensate all the subsidies we are missing, which is a mechanism used by every country in the world and approved by entities such as the World Trade Organization and the Greater Arab Free Trade Agreement, GAFTA.

Does that imply that you consider this to be a problem requiring a political solution?

The subsidies for energy that are found at our trading partners could be countered with customs fees. Politicians are dealing with problems as if they were political, and the industrial problem is not a problem on the plate of any of our politicians. In business, time is of the essence, and in economics, different to politics, change is possible on daily basis. A quick reaction is needed.

The billion-dollar question is, what will happen in this country if we are not able to create enough jobs in the next five years? Freedom, independence, being your own master, without a job – it doesn’t work. If this country cannot provide enough decent jobs for its own people to live, the minimum, then independence does not mean anything.

Can you as private sector not put more pressure on governmental decision makers?

Politicians have been telling us that we cannot put duty on imports because the WTO does not accept that or the European Union, or GAFTA. But these treaties tell you that if any of your industries are facing pressure, one can do whatever one has to do to sort out the problem. Energy-intensive industries, if they are not facing problems in Lebanon, who is?

Politicians are not doing anything for energy-intensive industries in Lebanon. This is beyond belief. I am sick and tired and don’t even have the energy anymore to call for a solution in sorting out the problems of energy-intensive industries in Lebanon.

Did last month’s difficulties in reaching a new government lineup contribute to your worries?

If one looked at all cabinet proposals, one can just really test all the names suggested for the economy-related ministries and you would feel that there is not really a revolution to re-write all the rules and start a new page in what is most important, creating new jobs in Lebanon. It seems that they have no regard for industry if they can find enough jobs in other sectors. A government has to provide a decent life for its citizens and if this can be achieved without industry, so be it. But the last 15 years have proven beyond any doubt that without a feasible industrial and agricultural sector, it will be virtually impossible to create enough jobs for the Lebanese people.

You mentioned international treaties that all are designed to encourage trade. Do you have any hopes that Gafta, Euromed or WTO would be beneficial to Lebanon in its difficulties with border closures by Syria?

We feel that the Lebanese who are gambling on foreign western powers to come and deal with our day-to-day problems, can be called dreamers. Unfortunately, I am not sure that western powers are always there to help. In western powers and their decisions, there is only one issue: what is best for them. And I think it is clear that we have not seen the BBC or CNN or other international media giving any importance to what is happening [at the border]. And if they are covering it, it is a very shy coverage. What I am trying to tell is that the western powers only move when their interests are in jeopardy.

What could the private sector do to circumvent the obstacles we face when trying to transit through Syria? Are there any other avenues, transport solutions, or joint venture possibilities that could be used to counter the problem?

Absolutely. We should start by managing the problem. As of today, there is no manager managing the problem that we are facing with Syrian. We can certainly use sea freight and airfreight. I am not claiming that this is a feasible solution forever but it is a solution that could help our negotiations and at the same time help us survive until we sort the other problems out.

Would it be conceivable to load the cargo of trucks stuck at the border into 747s and ferry it across?

From an industrial point of view, maybe medicine and cosmetics can be air freighted. If you are telling me that someone in Saudi Arabia is willing to send us a 747 for the grace of God, to ship our goods, it would help. But the Gulf is not buying from the Lebanese because they love the Lebanese. They would only buy from the Lebanese if what we are producing and exporting is a good deal; it has to be competitive for the right quality and right money. At the end of the day, it is a question of cost.
Many times, solutions come from big crises. Perhaps the current crisis will make us follow the avenues of sea freight and airfreight and other alternatives, and perhaps we can solve part of the problem. But I must add that this does not mean that the problem can be sorted out without proper negotiations with Syria and normalizing the relationships.

Can you tell us how many of the trucks at the border are carrying industrial cargo and how many agricultural produce?

77 % is industry, and 23 % is agriculture, that is on the borders with Syria. In general, 90 % of Lebanese exports are industrial, and 10 % are agricultural.

Why then would we hear more about rotten produce being thrown out than about industrial shipments being delayed, manufacturers being unable to fulfill contracts and losing revenues?

Because we are not as good as some others in [playing] theater; industries are not good enough in amassing 10,000 people and walking the streets. But we are learning. At the end of the day it is he who shouts more who attracts more attention. Maybe this is the lesson we should learn.

Does that mean that you would take people to the streets if things would go worse?

Indeed, if the need be. This is not my decision. It is the decision of my board and all members of the Association, but we are all now convinced that if they do not listen to logic, we should find the way in which they will listen to us.

In what time frame would you consider such a step? How long would the problem with the border blockage have to last before you take to the streets?

In actual fact, [let’s] leave alone the Syrian border problem because I don’t know who can solve this problem. I am not so sure that the solution is in this country. But when it comes to the question of diesel particularly, I cannot be at ease with myself and cannot keep my respect for myself if I would leave the situation as it is. We will use everything in the book to make them understand that there cannot be any industrial sector anywhere in the world where every Thursday we have to deal with a new tariff for diesel.

In your opinion, is there a chance for a consensus of all economic and political forces in Lebanon for changing the situation?

Let me be honest with you here. You know the donors. Even if we were all happy with each other and everyone has a big piece of the cheese, this is not going to make our donors satisfied and happy. All the donors are not convinced that we mean what we say and that we are on for a new era and a new economic approach to our problems. I would really say that we ought to prove to them that we mean what we say and that we want to create a country where we take transparency seriously and are going to deal with all the problems we are facing when it comes to corruption. Up until now, the signs are not very encouraging.

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Business

Corporations Lend a Hand

by William Long
written by William Long

Despite a certain Lebanese tendency to believe in the uniqueness of everything Lebanese, the Unity Week festival jointly organized by Nora Jumblatt and Bahiya Hariri April 9-13, as well as the various acts of corporate giving over the past two and a half months have certainly had their predecessors around the world.
Indeed, in the months after 9/11, New York City officials teamed up with local businesses and multi-national corporations to sponsor an “Open for Business” campaign that sought to bring tourists back to the Big Apple and revitalize the beleaguered economy. In Madrid too, after the train bombings that killed 191 people, local officials solicited and received enthusiastic support from the tourist sector to show the world that their city was both safe and welcoming.
In both cases, the efforts were met by widespread public and corporate support, with public events and demonstrations that signified unity in the face of terror and a determination to take direct ownership of what had become, seemingly overnight, a fragile and deeply troubling situation for all.
Of course, Unity Week was different from these and other events because it also marked the 30th anniversary of the beginning of Lebanon’s Civil War.
However, the major reason for holding the event was the assassination of Premier Rafic Hariri and the four subsequent bombings in New Jdeideh, Kaslik, Sid el Boushrieh and Broummana – events which, according to a recent UPI report, cost the Lebanese economy more than $800 million and which, perhaps more importantly, ignited widespread fear that the country might again slip back into the abyss of violent conflict.
And yet, while other post-terror revival efforts have generally seen direct corporate giving, with concerts and promotional campaigns, in particular, sponsored by various businesses, one recent act of corporate solidarity seems unique to Lebanon – mainly, the various efforts coordinated by Lebanon’s six major trade associations that will provide millions of dollars of direct support to dozens of businesses damaged in the five bombings.
Indeed, it was shortly after the first bombing in New Jdeideh that the private sector swung into action, much as it has sporadically over the past decade and a half when vital infrastructure was destroyed by Israeli attacks.
As it became apparent that the bombings would continue, and after the Sid el Boushrieh attack which devastated several industrial buildings, the Association of Lebanese Industrialists, led by Fadi Abboud, teamed up with the other five major associations in Lebanon to establish a financial support fund.
Simultaneous to this effort, Alfa, one of Lebanon’s two cellular management companies, launched a SMS campaign that allowed people to contribute to the fund by “donating” units [as Executive went to press, Alfa was not able to provide data of the campaign’s effort].
By mid-April, Abboud told Executive that the fund had raised almost $3 million, with two separate contributions from BLOM and Bank Audi of $1 million each and an additional $1 million already raised from individual and corporate contributors.
“We have not event started yet,” said Abboud in a recent interview. “There will be a publicity campaign beginning [at the end of April] where we will launch a homepage for donations so that the Diaspora can also help.”
According to Nadim Assi, the chairman of the Beirut Traders’ Association, the fund has received 62 applications from affected businesses – a number that Abboud believes may grow to 150 by the summer. In all, it is expected that almost $10 million may be needed to compensate business for their losses from the attacks – an amount mitigated by the announcement that the Al Waleed bin Talal Foundation will fully rehabilitate buildings and compensate affected businesses in the area
Of course, the uniqueness of these acts of corporate generosity rest more on the failure of the Lebanese government to provide the kinds of loans and grants offered by many governments after such attacks. However, according to some observers, the efforts should nevertheless be viewed as a part and parcel of an emerging Corporate Social Responsibility (CSR) consciousnesses in Lebanon – one that did not just simply coalesce out of thin air on February 14 and one which dovetails with an overall feeling of social responsibility amongst the Lebanese themselves.
“There are a lot of Lebanese companies that have well established CSR programs, banks especially,” noted Lubna Forzley, Public-Private Partnership Team Leader at the UNDP in Lebanon. “But, especially since few companies produce annual reports, CSR in Lebanon is rarely a written part of a company’s strategy.”
It is this fact, perhaps, among others that often makes corporate citizenship seem more ad hoc in Lebanon than a part of an ongoing, dedicated effort.
“Over the past four years, companies are making CSR more a part of their overall strategy, Forzley added. “But, especially lately, we have seen an increase in efforts.”
Forzley was quick to sound a note of caution though in looking only at one aspect of CSR when viewing corporate actions over the past two and a half months.
“CSR includes a lot of different components. Part of it is also defined as a way the business deals with a community and this includes its human resources.” Pointing to some recently published reports of companies who have engaged in mass layoffs or wage cuts, she added that, “in addition to everything that has been done, the many positive things, we also have to think that HR includes forced vacations that may have been asked for and forced layoffs, the health and safety of their workers, and compensation. The community needs to think about these parts of CSR.”
For Farid Chehab, Chairman and CEO of Leo Burnett Middle East and North Africa, recent acts of CSR in Lebanon, while commendable, should be judged relative to the amount of work that remains for the private sector.
“I think that doing such things [are being] understood by all corporations,” said Chehab, whose company donated their expertise to the design and publicity campaign for the wildly successful 5km Beirut “marathon”. “But, we need to do more,” he added. “The private sector should be less selfish and understand and have the vision that, through promoting Brand Lebanon, he is the first to profit from it.”
Of course, contributing to promoting “Brand Lebanon” has often been easier said than done – a fact of life in the country that, unfortunately, has become even more apparent at precisely the time when Lebanon most needs a tourism campaign.
According to one source at the Ministry of Tourism, no substantial allocations for promoting Lebanon have been made over the past seven months because of both the upcoming elections (which became the focus of many in government at the end of last year) and the bombings.
“You know how many times we are on hold?” asked the official sarcastically.
Indeed, because of the recent failure to form a government, right when promotion was vital, the ministry was unable to move ahead with its forthcoming multi-million dollar tourism plan – a plan that needs the approval of the Cabinet. In the process, companies have also been put off from becoming involved because of the gridlock and the perceived inability of the ministry to get its own house in order.
While Chehab believes that a strong streak of individuality also has prevented the private sector from becoming more involved in tourism promotion and other efforts, Saad Azhari, Vice Chairman of BLOM bank and also a key leader of the Banker’s Association, strongly disagreed, saying that many CSR efforts simply don’t get publicized.
“The actual fact is that some efforts are not declared,” he said. “Some companies outside [of Lebanon] do it just for publicity, but here it is more engrained, more a normal part of operating” in the relatively unique socio-economic and political environment that is Lebanon.
Thus, although CSR efforts in Lebanon may seem opportunistic at worst and ad hoc as a norm, the truth of the matter often lies outside of both these poles, as perhaps the outpouring of donations proved during Unity Week.
As Randa Armanazi, PR manager for Solidere, noted, the outpouring of resources for the events was simply astounding by any standard. Middle East Airlines, Lebanon’s national carrier, offered discounts of 30-50% on flights during the month of April. Hotels offered deep discounts. All artists also performed for free – a not unsubstantial cost. And more than 30 leading figures from the business world, legal professions, trade unions and civil society lent a hand. When something was needed, it was asked for and usually received, free of charge.
“We want to show them that our will for life cannot be defeated,” Hariri told journalists in announcing the festival. “We want our streets and our squares to be filled with joy and people and not left abandoned for chaos.”
Armanazi pointed out that it would be impossible to put a dollar figure on the amount of donations or even the costs of the celebration because so many different sectors contributed in-kind.
Among these, she included the substantial number of merchants and restaurants who slashed prices by as much as 75% to help lure people back to shopping and entertainment districts.
While hard to quantify both Paul Ariss, head of the Restaurant Association, and Assi, used words like “a miracle” and “a tsunami” to describe the effect that Unity Week had on stores and restaurants’ bottom line. Assi said that business had been down by as much as 90% in the weeks after the bombing and that, after Unity Week, had recovered somewhat to a 50% less-than-normal level. “Everywhere people are moving again,” he said hopefully. “It is slow but life is getting back slowly and surely.”
“It was a miracle,” said Ariss. “From 14 February to April 9 it was a nightmare – for all of Lebanon. During Unity Week everything changed, sales went beyond normal in the BCD and partially for all of Beirut. Now things are moving back to normal across Lebanon, in Tripoli, Sidon, all over.”
Unfortunately though, despite published reports that banks may loosen interest rate terms and extend loans generally in order to stem the severe ripple effect of economic damage since the assassination, some companies who are not receiving direct help through the bomb fund say that they may not be able to hold on for much longer. They are, said Abdullah Bitar, president of the Nabatieh traders association, in need of some civic and corporate solidarity.
“Banks need to take it easier on us,” said Bitar. “Many do not have money to pay for inventory and are being squeezed on their loans as well… the bank’s simply won’t help us.
Although loan terms are a sticky subject, Makram Sader, the director of the Banker’s Association, noted that Lebanese Banks had indeed played a hugely unprofitable role in helping the overall economy get through these difficult times. While not thought of as CSR generally, the hit that Banks have taken in concert with the Central Bank contribute to the necessity of viewing Lebanon’s entire commercial sector, including its oft-maligned banks, as key actors in the effort to re-emerge from the destruction and provocation that broke to the surface on February 14.
“We should have increased lending rates as deposit rates rose,” said Sader, who noted that 60% of Lebanese bank loans renew their interest rates every two to three months. “We should have, but we wanted to help… we are trying to give a little bit of time for the political situation.”
Of course, even keeping interest rates momentarily low may not do the job. Nor may the CSR efforts that seem to be gathering speed. Indeed, the Economist Intelligence Unit recently reported that real gross domestic product growth would most likely come in at a lackluster 2% rather than the 4.5% estimated earlier and that the crushing public debt could explode should a global downturn occur.
Of course, one thing in particular that Lebanon demonstrated during and before Unity Week was the power of its citizens to overcome hurdles – an attribute often cited by people across the political spectrum.
“They came out not because of discounts,” said Ariss. “In fact many did not even ask. People were stuck and they wanted to go out and also to share in the national economy. The Lebanese mentality is that they want to live – and eating out is one small part of that mentality.”
For Chehab, the matter is even more at the heart of the Lebanese character – just as Beirut became the undisputed heart of Lebanon during Unity Week. “They came to display physical energy in the name of Lebanese unity, they came to offer physical contribution to their commitment. They came because they were blessed with political maturity and they came because the communication they saw and heard during two weeks of preparation persuaded them to do so.”

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BLC Bank/Libano-Suisse alliance

by Executive Contributor
written by Executive Contributor

BLC Bank and Libano-Suisse Insurance have presented the first fruits of a new product partnership that enhances the choices of consumer loan customers in Lebanon. Along with a line of bancassurance products, the two companies on July 18 introduced a jointly developed unemployment credit insurance that protects buyers of BLC consumer loans against inability to meet payment obligations because of loss of employment.

The new insurance product is provided without extra charge to new loan applicants who satisfy requirements related to their age and duration of employment. As customers do not have to pay a premium for the credit insurance on top of the 7.75 and 9.25 percent flat interest rates which BLC currently charges for new consumer loans, the unemployment credit insurance is an alternative to life insurance policies which many banks have been requiring loan customers to purchase at additional expense to their loan costs.

According to BLC Bank marketing manager Maya Margie, the bank dropped the practice of having life insurance policies for customers covering the amount of their loan three years ago, because the cost of the program was over proportional to the number of actual claims. Working with Libano-Suisse Insurance, the bank for one year had been researching the possibilities to implement the unemployment credit insurance, which is now offered by BLC as the first of its kind in Lebanon and the Middle East, Margie said, “in line with our objective of being leaders instead of followers”.

In 2004, the BLC customer base grew by 12 %, and its deposit base and portfolio of personal loans increased by 24 and 38 percent, respectively as the year saw BLC Bank continue achieving its recovery from huge past losses to profitability.

In conjunction with the launch of the unemployment credit insurance, BLC and Liban-Suisse introduced six new bancassurance products under the brand name Awlawiyati. The range entails car, home, accident, term life, retirement and child education plans that are sold over the counter at BLC branches. The bank established a new insurance broking subsidiary, BLC services, to manage its insurance activities in accordance to Lebanese law.

Byblos Investment Bank re-sizing and up-sizing

Beirut’s budding investment banking landscape is in process of new diversification as Byblos Investment Bank is embellishing its ranks while other banks are reported to be looking newly into this area of activity.

The movements in the community of specialized bankers are loosely related to changes triggered by last year’s merger and acquisition operation between Bank Audi Group and Banque Saradar. While the merging banks at the time had indicated that they would aim to avoid staff redundancies, banking analysts suggested that the investment banking operations of both sides would be likely to have some overlap, since three entities would have to be consolidated – Audi Investment Bank, Lebanon Invest, and Saradar Investment House (SIH).

The re-structuring of the Audi Saradar Group’s investment banking operations led to the formation of Audi Saradar Investment Bank under chairmanship of Lebanon Invest founder, Marwan Ghandour, and with Ramzi Saliba as general manager. Four bankers of the old SIH team, who had initially stayed on with the Audi Saradar Group, felt that they could find more room to deploy their talents if they would leave Audi Saradar and thus recently parted from the group on reportedly very amicable terms with a golden handshake and with plans, according to finance insiders, to set up their own investment funds.

The setting free of investment banking talent caught the attention of at least one bank interested in creating an investment banking subsidiary and was also welcome news at Bank Byblos Group which jumped at the opportunity to upsize the team of one-year old Byblos Invest Bank. Byblos convinced three of the migratory investment bankers to choose BIB and on July 1 appointed former SIH head Joe Issa-El-Khoury to the position of general manager at Byblos Invest Bank.

According to Bank Byblos Group’s vice chairman, Semaan Bassil, BIB is poised to develop investment banking activities out of Lebanon for Sudan, Algeria and Syria where the group is presently active, and for Abu Dhabi where a new operation of the group is to be established soon. “The group believes that the excess liquidity available in the Arab world will be seeking investment venues and we aim to play, through BIB, a leading role in channeling those funds into rewarding investments,” Bassil told Executive.

Ice cold beer and the Japan connection

Every summer, in Lebanon, beer sales increase by 30%, proof, if any were needed, that the Lebanese like to crack open a cold one at the beach. In fact, according to Almaza, we apparently like a very cold beer on the beach – served straight from a special Almaza “sub-zero cooler” at -2 degrees Centigrade and so, since the beginning of June, beach resorts across the country have been serving the famous green bottle from one of three hundred sub-zero coolers distributed gratis by the company. A genuine breakthrough in beverage enjoyment or just another weapon in the annual beer wars?

One thing is certain: as the mercury rises, beer sales competition heats up. Since the overall beer market is not growing much, despite an increasing variety of cheap, obscure, often high-alcohol-content brands, competition is especially fierce. According to Almaza Marketing Director Francois Mourad the market is growing by only 3.5% a year. A sizeable portion of that growth can be attributed to the non-alcoholic beer market, of which Almaza has a share greater than 70% according to Mourad.

Although Almaza controls around 70% of Lebanon’s beer market, it isn’t resting on its laurels, said Mourad, because it expects the Government to sooner rather than later cut the 40% duties on imported beer – possibly as part of the Euromed agreement with the EU – and open the floodgates to a wider range, and higher numbers, of imported beer.

Meanwhile other beer importers continue trying to hammer away at Almaza’s market dominance. Abiramia Bros., a company that imports Effes from Turkey, Fosters from Australia and Budweiser from the United States, says it is spending $350,000 on marketing this year, including a “massive ad campaign” which includes sponsorship of two motor races and advertising on billboards and radio. It is also increasing the sales percentage in cash money it gives to its five distribution agents as an incentive for them to boost sales.

The company’s marketing director, Abdou Younes, claimed that the company’s beer sales were growing by 25%-30% a year, which imply it is eating into Almaza’s market share. For its part, Heineken is trying to wean clubbers off ready-to-drink (RTD) beverages such as Bacardi Breezer by presenting Heineken in cooler bottles “You don’t see many people drinking beer in nightclubs,” noted Mourad. “You see them drinking RTDs. That’s why we are distributing Heineken in aluminium bottles designed by a Japanese designer.”

British Mediterranean takes Khartoum

A recent move to make doing business in Sudan more palpable for Lebanese entrepreneurs is paying off for British Mediterranean Airways (BMED). In the first two months since the carrier opened its London – Beirut – Khartoum line for service between Khartoum and the Lebanese capital in the middle of May, passenger load factors developed well, according to BMED regional sales manager, Naji Mahdi.

The new service reduces travel times between Beirut and Khartoum from at least nine to under three hours each way, because in the past, passengers had to transit through other countries to reach Sudan, Mahdi said, “but we did not take advantage of this to raise our fares.”

BMED had taken first steps towards creating the Beirut – Khartoum service about 18 months ago in changing the routing of its London – Khartoum flights from going via Amman to stopping in Beirut. The door for the new service was opened fully when the civil aviation authorities in Lebanon and Sudan readily allowed BMED to carry passengers on the route under so-called fifth freedom rights. Unless they are granted these rights, airlines are not permitted to issue tickets between an intermediate and the final destination of a flight.

In its general business between Beirut and London, the airline saw no significant slump because of the political uncertainties that Lebanon experienced in the first half of the year. Most recently, BMED received some cancellations “due to whatever happened in London and in Lebanon,” Mehdi said. “We had a slight drop over last year but things are picking up and in 2005, we should be carrying the same number of passengers as last year, or slightly more.” 

L’Oreal joins forces with ESA

The international cosmetics group, L’Oreal, last month made a strong recruitment pitch and presentation of its Human Resources strategies at the Ecole Superieure des Affaires on occasion of signing a partnership agreement. Aims of the agreement include to enhance networking between ESA and leading companies and to develop the relationship between the business school and L’Oreal Lebanon. 

Under the agreement, which formalizes long-standing collaboration between the two entities, ESA students will study L’Oreal marketing cases and have better opportunities to benefit from recruitment at L’Oreal, said ESA communications director Georges Najm.

For L’Oreal, international recruitment and working with leading business schools is a priority, Jean-Claude Le Grand, the director of corporate strategic recruitment at L’Oreal, told Executive. “We manage the career of the executive personality differently. We promote angry, dynamic young people,” he said. “Other companies don’t dispatch Human Resources staff to recruit on the ground at universities and only a few companies have a strategy to recruit worldwide.”

According to Le Grand, L’Oreal has collaboration agreements with numerous important business schools and spends over 1 million euro annually as direct investment into recruiting, not counting salaries in the HR department. The company, which says it takes five to ten years to build up a L’Oreal manager, seeks to recruit 70% of its managerial staff from career starters. Besides engaging in partnerships with business schools, L’Oreal employs campus business games and internships in its efforts to attract the most talented students to its ranks. “We are not chatting about to war of talent, we are acting,” Le Grand said.

Lebanon’s first cruise ship

Seemingly unfazed by the bombings, assassinations and political turmoil which are threatening to wreck Lebanon’s summer tourism season, Lebanese  entrepreneur Merhi Abou Merhi chose June to launch Orient Queen, the world’s only cruise on a Lebanese-owned ship.

The ship-owning company Abou Merhi Lines SAL, which owns 17, primarily car-carrying vessels, purchased the roughly 16,000 tonne, 900-passenger “Bolero” cruise ship from Greek-owned Festival Cruises for $9.5 million, according to an annual report on the Website of the Paris-based shipbrokers Barry Rogliano Salles.

The Lebanese company has invested, “more than 10 million dollars” refurbishing the vessel, according to Abou Merhi Lines media manager Karim Gemayel. It was then renamed Orient Queen.

For just over a month now, Abou Merhi Lines has been offering a seven-day cruise aboard the five-star vessel around the Mediterranean – Egypt, Cyprus, Greece and Turkey – at a starting price of $1,050. The price climbs as high as $7,000 for passengers who go for the royal suite, five meals a day, private butler and the constant companionship of “two ladies,” Gemayel said.

As soon as Lebanon’s summer tourist season is over, the Orient Queen will begin offering cruises out of Dubai, before returning again to Beirut again the following summer.

Gemayel said that the weekly cruise had attracted “hundreds” of passengers in its first month, a figure he acknowledged was not particularly high for a ship which can accommodate around 900 people per cruise.

“Promoting the cruise has been difficult,” he admitted. Asked if launching the cruise in the midst of political turbulence and a months-long spate of violence might have been unwise, he said: “The people who conducted the feasibility and profitability studies all suggested we rent the boat out to any European country. We had some very good offers. But we are not in this for pecuniary gain. Our slogan is ‘For Lebanon.’ We are trying to rebuild tourism in Lebanon.”

Salvation, though, may lie in Dubai. “There is a lot of demand in Dubai,” said Elie Nakhal, head of Nakhal Travel, which is selling Orient Queen cruises.  “Dubai will compensate for any losses in Lebanon.” 

Around 60% of the passengers thus far have been Arabs – roughly half of them Lebanese, 30% have been Turks and around 6%-7% Europeans, mostly from Greece and Cyprus, Gemayel said. 

Syrian Tourism fair

Following on the heels of an April conference which saw 127 applicants from around the world bidding to develop 100 of Syria’s top tourist sites, Sadallah Agha al-Qala, Syria’s Minister of Tourism, gleefully opened the “Syrian Tourist Horizons Forum” July 5 in Damascus.
Naturally enough, the two-day event was meant to highlight some of the country’s recent (and anticipated) achievements in the sector: 9,000 new hotel beds will be added each year by 2010 at which point tourist revenues are expected to reach $6 billion annually ($2.2 billion was earned in 2004 al-Qala told the conference). And despite what the minister referred to somewhat euphemistically as “bad publicity,” the first five months of 2005 saw a 55% jump in package tours of Western tourists coming from mainland Europe – a stat that was used to justify the prediction that 3.6 million tourists will have visited Syria by year’s end, or 600,000 more that 2004.
One of the main speaker’s at the conference, however, Intercontinental Hotels Group CEO Chris Moloney, signaled at least one problem the sector faces mostly unrelated to politics or economics – an aspect that may ultimately harm the sector’s long-term prospects for growth far more than any immediate questions about the current regime’s stability or lack of stability.
“I urge you to carefully consider the unique experiences which Syria can offer compared to other destinations….. Pay attention to that aspect because it is extremely valuable and fragile,” said Moloney.
Of course, hewing to such advice may not be that easy: Outside the conference hall large, glossy displays for future developments in Palmyra, Tartus and Latakia looked more like the sorts of hotel and recreational developments found in Dubai or Las Vegas. Already, in fact, 19 of the April projects that were approved have broken ground, with some promising to bring the first real taste of the five star life to points across the country.
According to Nashaat Sanadiki, Chairman of the recently formed Federation of Syrian Chambers of Commerce, the danger of “overscale development” – development which overwhelms the natural beauty and charm of an area rather than adding to it – is both real and, he hopes, manageable.
“My view is that I would like to see Syria takes it’s share in tourism, but without harming our texture and social life,” he said. “We can do that without resembling Dubai… [but] that means we cannot sacrifice our desert area, for example, to convert it all in to 5 stars resorts.
“Where will the average Syrian go after all?”

Bordeaux alliances

It was a busy month for Lebanon’s wine producers, six of whom – Chateaux Musar, Kefraya, Ksara, Clos St Thomas, Massaya and Cave Kouroum exhibited at the biannual Vin Expo in Bordeaux, arguably the world’s premier wine fair. Back in Lebanon, July 27 saw the committee of the Union Vinicole du Liban (UVL) elect a new committee, one that for the first time represents all producers. Elsewhere, the advent of new EU export regulations is expected fast track the establishment of the much-needed and long-awaited National Wine Institute. The implications for the sector are significant. “Export is the future,” said Charles Ghostine, Managing Director of Chateau Ksara. “If we want to achieve better prices, we need a regulatory framework to underpin confidence.”

At Vin Expo, Chateau Kefraya, which took the opportunity to show the greater wine world its new premium white Casta Diva also, according to marketing manager Emile Majdalani, made exciting in roads in penetrating the non-Lebanese on trade in France as well as stirring up interest among buyers from the Russian and Scandinavian markets. “These contacts were more concrete than during the past exhibitions and offered the possibility to finally initiate an extension of our distribution to the entire French market,” he said 

Massaya, which for the time being at least is not part of the UVL, exhibited with its French partners the Brunier brothers from Chateau Vieux-Telegraph and Californian maverick wine producer Boony Doon.

The three-nation alliance reportedly caused much interest, being as it was a departure from the usual generic national or regional stand. “We got all the interest,” said Massaya’s Ramzi Ghosn. “The others were all know producers.  and more importantly our quality was endorsed by being on the same stand as the French and Californians. The wine industry is very conservative and such alliances are not common.” 

Elsewhere, Cave Kouroum seems to have emerged from its legal battle with neighboring Chateau Kefraya and established itself as one of Lebanon’s most adventurous producers. At Vin Expo, the winery in the heart of the village of Kefraya, won seven awards including, two golds.

Mobile phones (optional)

Just in the nick of time for the summer tourist season when demand for new mobile lines customarily peaks, Alfa announced last month that, on top of adding a new series of 70 mobile numbers, refills for pre-paid lines can now be purchased through 193 ATMs operated by 14 different banking instructions in Lebanon (see www.alfa.com.lb for the list of participating banks).
Unique to the ATMs: Alfa subscribers can now also purchase 72 unit cards with a 12 day validity period for $20 as well as a new 300 unit card for $80.
For downtown vendors hawking units “the old fashioned way,” the greater ease and new options offered by the ATMs doesn’t appear to be causing concern.
“I heard about this but you know the bank charges you each time you buy units from them,” explained one Hamra street vendor.
Well, not exactly. According to Alfa, if units are purchased via an ATM at one’s own bank then no commission is taken. However, if you purchase from a bank other than your own, the same fee that banks take for non-member ATM withdrawals will apply.

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Better to be safe than sorry

by Marianne Stigset
written by Marianne Stigset

The February 14th attack, followed by the bombings in New Jdeideh, Kaslik, Sad al-Boushrieh and Broumana have seen in increased demand for private security services among banks, shops, hotels, malls and large institutions as well as ongoing real estate projects.

Demand has mainly focused on electronic surveillance, monitoring systems, and security guards. Youssef Mohamed Beydoun, vice-president of the Syndicate of Security and Safety Professionals in Lebanon and general manager of Beydoun Fire and Security, estimates that business has spurted by 30-35%.

 “Banks are our main source of increased demand,” said Beydoun. “It has now become a priority for everyone to increase their security coverage, but banks in general are especially afraid thefts and hold-ups might occur due to the current political and economic climate.”

Demand for security guards has equally been boosted, most notably due to the fact that they are the most rapidly deployable form of security service, yet they still trail behind electronic surveillance systems in terms of what the market wants. Security firm, Protectron, has estimated the hike in demand at 25%, although, tight budgets force many companies to employ their won staff in a security role. The increase in human security has been deployed to check all cars entering premises or parking in the vicinity of the building, as well as inspect all clients entering the locales.

And maybe this is why the industry sees the employment of extra security guards as a stopgap measure. At around $500 per security guard per shift, the service is not cheap. “We can already see a drop in demand,” says Lotfallah Yazigi, president of Securitas in the Middle East. “It was a reaction to panic. People in residences would get together and chip-in for a guard to watch the premises for two weeks to a month, but contracts wouldn’t go much longer than that. It was a quick-fix for peace of mind but most people can’t afford this type of service in the long-run.”

Many banks, hotels, institutions and large companies, such as the Phoenicia InterContinental, which has incurred minimal costs in upgrading security, already have adequate security systems in place as part of their commitment to comply with international standards and regulations issued by headquarters. They have consultants come in to do regular check ups to ensure compliance with corporate norms.

 “We haven’t hired more people,” says Jana Sleen of the Safir Heliopolitan hotel. “What we have done is increase the number of security guard shifts and tightened security measures, especially with regards to all cars coming in. Half of our staff is from Protectron and the other half is our own staff. But otherwise, we already had cameras in place everywhere.”

The Beryte Hotel reported to have increased security staff by four, at an additional cost of $3,000 per month, to which will be added the installation of surveillance cameras, at $2,000-3,000.

“It’s an additional cost, but one that everybody has to incur right now,” says Jihad Shoughari, operations manager for the hotel. “After the attack, the army and the police went around to all the hotels in the surrounding area and asked for the films of the surveillance cameras. We have now in the process of ordering 3 or 4.”

Banks and large retailers have also reported an increase in security guards for the most part. Byblos bank is now also switching to the international security company Group 4 Total Security.

“We used to have four different local companies, but now we are switching to Group 4, because it’s a more professional, English company,” says Antoine Keldany, head of administration at Byblos bank. “Our security budget has increased, although not by much.”

ABC Mall in Achrafieh has hired 20 new security guards, at an estimated $7,000 a month, and is reportedly in the process of installing a camera surveillance system.

Universities, embassies and international organizations have for their part made few requests for additional security services. Virtually all embassies have their security equipment sent to them from their respective countries and are prohibited from purchasing any local products.

The UN, whose offices in central Beirut were reinforced with cement blocks and sandbags following the attacks, claims this was a measure that had long been in the pipeline.

“We asked the government two years ago to make this arrangement around the building, because the UN building in Beirut was non-compliant with international regulations that have been established for the institution – it had nothing to do with the attacks,” says Elias Daoud, head of security for the UN building. “Otherwise, nothing has changed.”

Despite the recent hike in demand for security services, some industry insiders are not convinced that it will necessarily entail an overall increase in the quality and profitability of the sector. According to Khlaed Jaber, general manager for Security Engineering, there are no rules in Lebanon governing security services. “We tried to push for this through the creation of a syndicate, but it turned into a forum for social events. Every company now has its own standards. We now have a lot of security providers in Lebanon, probably some 100-150, but out of these, I would say there are only 10 which are really professional, offering high quality services and products.”

“Right now the market is booming, but it’s not really profitable,” says a manager of a security company offering human guarding. “Salaries remain low, contracts are offered on a short-term basis. A lot of people working as guards view it as temporary employment, it’s not one they invest in to make a career out of.”

Despite relatively few additional security measures being added over the course of the past two months, industry insiders believe there might be a gradual shift towards a more preventive-oriented approach to security.

“The measures we are taking are not temporary, they are permanent,” says Shoughari. “It’s a trend happening throughout the Middle East – just look at the last bomb attack which hit Cairo. We are now faced with a new environment, locally, as well as internationally. The enhanced security measures are here to stay.”

Yazigi believes it is too early to tell whether the panic attack which hit the Lebanese will result in any long-term changes, but does detect a trend in the region towards greater security awareness.

Partly in response to this, Securitas will be opening the Swiss Academy for Security in Lebanon in May – a first in the region – to train professional security guards at every level.

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