State department

Parallel lives

by Washington Correspondent
written by Washington Correspondent

Last month saw many Americans – Republicans mostly – quick to seize on the perceived  similarities between Pope John Paul II and former President Ronald Reagan.

True, both men played all-important roles in helping bring about the fall of communism and the demise of the Soviet empire and playing important roles in shaping the 20th century and getting rid of oppression; one as president of a thriving democracy, and the other as the spiritual leader of the world’s 1.1 billion Catholics. Their alliance against communism seemed natural after all, but the similarities do not stop there.

Both Reagan and the pope were the targets of assassination attempts in the same year. The pope’s would be assassin, a Turk by the name of Mehmet Ali Agca, was reportedly working for the Bulgarian intelligence services who, in turn, could have been acting for the benefit of the Soviet KGB. The Soviets – or at least a certain hierarchy within the Kremlin – understood the danger a Polish pope represented.

Reagan on the other hand was shot by John Hinckley, Jr., an unstable young man, obsessed with the actress Jodie Foster and her role in, Taxi Driver, a movie that allegedly made a deep impression on him. Now you know why they give films “R” ratings.

In fact both men started out as actors; the pope playing a few minor roles on the stage in his native Krakow, where he founded an underground theatre company, writing and acting in plays that dealt with oppression. Reagan had a longer career in acting, appearing in 57 films, once with a chimpanzee.

They also loved the outdoors; as a younger the man the pope skied and was a something of a soccer player, while Regan was a high school footballer and accomplished horseman, never happier than on his California ranch.

Nancy Reagan, the former president’s widow was quoted as saying of the two men, “they were very much alike, both “Great Communicators.” In one of his more memorable speeches, Reagan, facing the Berlin Wall said in typical Hollywood fashion, “Mr. Gorbachev, tear down this wall,” while on his first visit to his native Poland as pontiff, Pope John Paul II defied the communist authorities telling his fellow Poles, “Do not be afraid.” This was later seen as the landmark speech that led to the snowball effect that eventually brought the Eastern Bloc out of communism.

Similarly, both men suffered political setbacks, but managed to remain relatively unaffected, their popularity intact. Indeed, Reagan was often referred to as “the Teflon” president, emerging relatively intact from the debacle that was the Iran-Contras weapons deal, in which the Reagan administration was found to be selling arms to Iran, then engaged in a war with Iraq, to fund the Nicaraguan Contra rebels fighting the Leftist Sandinistas. Additionally, the bombing of the U.S. Marines headquarters in Beirut, in which 241 American servicemen died, happened on Reagan’s watch. In both cases the president avoided blame.

The pope, likewise, lived through one of the worst reported crisis in the history of the Catholic Church when the scandal of sexual abuse of children by priests came to light. Hundreds of priests, primarily in the United States, were accused of sexually abusing children, with some cases dating back decades. The Catholic Church was blamed for not acting, instead, at times, covering up the actions of the delinquent priests.

Never since its founding has the shortage of priests been so acute as on John Paul II’s reign. Many analysts blame this on the pope’s insistence on maintaining celibacy in the priesthood, keeping an all-male priesthood and demanding condom free sex in an Africa riddled with Aids. For his part Regan is also accused of ignoring the real dangers of AIDS, although this is easier to say with the benefit of hindsight.

Later in life, both men were struck by terrible debilitating diseases; the pope by Parkinson’s and Reagan with Alzheimer.

Similarities followed the two men in death as well; both received grandiose funerals. In Washington, National Airport was renamed Ronald Reagan Airport, and one of the largest buildings in the city was named the Ronald Reagan Building. A nuclear aircraft carrier was named after him.

“Their legacies are tainted by the same thing that made them strong leaders: their unbending beliefs that both believed came from a higher source,” wrote Larry Mendte, an anchor with CBS. Since the pope’s death, many Catholics have demanded that John Paul II be made a saint. Maybe this is where the similarities should end.

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For your information

Riad Salameh

by Executive Editors
written by Executive Editors

Governor of the Central Bank Riad Salameh has been widely credited with steering a prudent monetary course during his time in office. Now with Lebanon on the verge of a new chapter in its history, Salameh talks to Executive about his confidence in people power, the outlook for interest rates, Basle II compliancy, and the continued stabilizing role of the central bank in a period of national change. He also warns that it is too early to predict a contraction in Lebanon’s economic growth

The IMF readjusted its GDP growth expectation for Lebanon to 4% in 2005 and even less (3.5%) in 2006. What is your expectation for GDP development in 05 and 06?

It is unrealistic to base expectations on the past two months. These were crisis months and any attempt to read into them future predictions might give the wrong picture. We need to wait for the summer season. INSEE [the French National Institute for Statistics and Economic Studies] will make a proper assessment and then release figures.

So the IMF was hasty in its forecasts?

As I said, these were devastating months for the country. The Central Bank needs time to really know what weight to give this period?

In February 2005, gross public debt increased by 5.9% in comparison to Feb 2004. Can one even dare to envision an end to the debt spiral?

One area in which Lebanon is vulnerable is in the growth of its debt. This and other matters of fiscal reform are the priority of the government. It is feasible that debt growth can be contained. There is $20 billion in Lira and other currencies and $10 billion in debt held by the central bank. Paris II is holding $2.5 billion. Any improvements in the management of the public entities will lead to more rational interest rates for the country.

Given the increased confidence in Lebanon will we see another donor conference?

We have heard that statements that there will be international, economic support for Lebanon but in what form we don’t yet know?

What would Riad Salameh like to see?

I guess one could use the same structure as Paris II and by that I mean long-term loans from other countries. With the IMF, Lebanon has a small quota and the process takes too long.

What have we learnt from the lessons of Paris II? Why should the international be convinced of Lebanon’s willing to comply with loan obligations third time around?

Many of our [Paris II] obligations were let down by a lack of political support. Today, the government is under pressure to create a modern economy and generate employment. There is power from the people. They have the awareness. They have demonstrated and they have ambition and politicians are sensitive to the needs of the people.

In theory

[Laughs]Yes. In theory

While understandable giving the current situation, the current high interest rates are affecting banks’ profitability and damaging to debtors? When can expect a drop in rates?

Interest rates are dictated by the markets and have increased in a rational way. Global rates are rising and are not the same as four years ago. They will come to a more realistic level when the international markets develop more confidence in Lebanon. What we need to do is reduce the premium by improving our economic performance by improving our country rating, which will allow us to bring interest rates on our debt down. For the moment we are paying a premium over Libor of 5% and we need to decrease it to 2%. In terms of the outlook, I can say that rates will remain stable or decrease mildly.

What has the central bank agreed with the BIS for Lebanon to ensure that Lebanon fulfills all its Basel II obligations? Are we on course for parallel development with the rest of the G10 nations?

We will comply with Basle II but the only criteria with which there is a question mark is the Lebanon’s dollarization and the weighting on foreign exposure, which does not apply [to Lebanon] and the Bank of International Settlement needs to understand the realities of this. We can be integrated into Basle II with these exceptions. Today, in the Lebanon we have a high capital adequacy and exposures in terms of mis-matching has progressively improved.

In the absence of a Lebanese equivalent of the US Chapter 11, local banks often take advantage of struggling businesses. Can we expect our own Chapter 11 anytime soon? 

There is no law and I am not sure that the Lebanese culture could bear such a law. However, the central bank recently issued Circular 41, which addresses those companies with doubtful debt and allowed them to repay with real estate or have a structured debt repayment for up to ten years. As a result $1 billion of the doubtful debt has been resolved and by 2005 the debt portfolio will be in a perfect situation.

So there is no need for a Chapter 11 style law? The current situation is satisfactory?

Yes especially since Circular 41

Do you foresee any changes in the role of BDL in the “new Lebanon”?

The law that created the central bank is 40 years old but it was a modern law for its time and is still relevant. The changes that are likely to happen in Lebanon in the coming months will be political and the central bank will continue to perform independently of this and continue to do its job.

Did you think that the cover of the April issue of Executive accurately captured the mood of the month?

The Superman cover? [laughs] in my opinion it was better than any interview. But we held out, didn’t we?

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For your information

Country risk ranking drops

by Executive Editors
written by Executive Editors

Lebanon saw its global country risk ranking drop by two notches, reinforcing its low position among the Middle East and North African (MENA) countries, according to Euromoney magazine’s twice-yearly survey. Ranked 109th globally, down from 107th in September 2004 – behind Cape Verde and Ecuador – Lebanon ranked 14th out of 19 MENA countries, scoring 36 points, well below the regional 49.14 average.

The country’s overall score regressed by 7% from the previous survey and declined by 3% on a year-on-year average.

The survey evaluates individual country risk by assigning a weighting to nine categories ranging from political risk to economic performance, debt indicators and access to bank finance. Lebanon maintained a perfect score on debt default and rescheduling, reflecting the country’s clean record in honoring its debt obligations, and also scored high on political risk and debt indicators. Lebanon scored lowest in credit ratings, access to bank finance and discount on forfeiting.

However the survey was conducted before the February 14th assassination of former premier Rafik Hariri. Since then, analysts say investors have tended to adopt a wait-and-see attitude, with no significant capital flight from the country having been registered since February.

Lebanese economist, Kamal Hamdan, maintains a positive outlook on the situation if the government meets its economic and fiscal obligations.

“Should this happen, we will be in good shape, because we are still benefiting from the effects of Paris II as well as this ‘beatific optimism’ as we characterize the behavior of investors here. It’s an optimism that goes contrary to rational economic behavior and leads investors to keep their capital and investments in Lebanon, despite the risk involved. This behavior has saved the economy from crashing time and again since 2001, and it looks as though it continues to do so.”

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Grow up

by Yasser Akkaoui
written by Yasser Akkaoui

With the rate of political assassinations slowing, life is returning to our city. The Lebanese have proved that they have little time for bad memories and even less interest in a propensity to save.

We are big spending, short-termists who have learned to live for the moment, but with such a precarious lull in the violence, we can’t but live each day as if it is our last.

Politically, the respite in targeted killings has been interpreted as a sign that, as usual, a deal was made between the Americans and the Syrians at the expense of Lebanon of course. However, judging by the relentless American pressure on Syria, the nation’s collective intelligence, this time at least, could be wrong.

The Americans simply decided not to use Lebanon as a front against Syria. They realized that some Lebanese politicians were capable of sacrificing their country, fragmenting its society, destroying all what has been rebuilt and witnessing the liquidation of all its politicians and thinkers (while the rest flee), all for the sake of other nations. The risk of loosing whatever democracy is left in this country would definitely have made the Americans look bad.

Simply put, Lebanese politicians are easier to tear apart than bring together. They are also unable to sit at a table long enough to reach an agreement. And if, by some miracle they do, they are experts in tearing up previous understandings. Our politicians always seem to look for la petite bete to start a war of words. And all the while, as their standing shrinks along with their petty quarrels, regional tensions take on nuclear proportions. One wonders how low they are prepared to go. The private sector has lost interest and has decided to go its own way, disappointed by its so-called leaders who have refused to grow up.

In this issue, we remember Dr. Basil Fuleihan, who was part of a movement for change at a time when huge ambition, not cheap sniping, was the order of the day.

At least, one year on from his death, the seeds of this dream of a beter Lebanon are still bearing fruit. Last month alone, the BCD, the much-maligned but nonetheless resilient, symbol of a new Lebanon, saw the investments from Kuwait and Abu Dhabi, of more than $1.2 billion. With this demonstration of faith in the face of an uncertain future, one is forced to ask who the true Lebanese are. Those who want to build or those who wish to dismantle.

The true Lebanese are builders.

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Lebanon – Policy left hanging

by Michael Young
written by Michael Young

Ask many Lebanese what the summer season this year meant to them, and the answer you get will probably be different than the upbeat assessments of Lebanese officials. Final figures are not out yet, but we can certainly feel that this year was a special one. However, for those in Lebanon not on vacation, we were able to measure this success most often through the breakdown in state infrastructure.

Capitalist culture is more than entrepreneurship; it’s the capacity to deliver on your promises, and Lebanon has yet to convince that it is a premier tourist destination. Here’s a layman’s view of this past summer:

On the negative side, Lebanon’s road, electrical, and telephone infrastructure were very weak links. Even in Beirut, the three-hour power cuts were not enough, as extra rationing was imposed. Outside of the capital the situation was near catastrophic, so much so that from Tripoli to Zahleh people took to the streets in protest. Resorting to generators imposed a financial burden on everyone, but particularly on those establishments catering to visitors, imposing higher costs on all. To run a country on haphazard, unregulated power generation is embarrassing when you lay claim to being an attractive tourist destination.  

The traffic situation was equally lamentable — in Beirut and from the capital toward places where tourists were likely to go. The northern highway until Jounieh was, as a norm, blocked most hours of the day, while even inside Beirut a combination of mediocre traffic management, road construction and a high volume of cars meant drivers could spend hours getting from nowhere to nowhere. This imposed further costs on the economy, well beyond what it meant for visitors from abroad. 

One can go on. The cellular telephone network was just as bad during the summer season as before. Conversations were routinely cut off, while on several days there was such volume in the system that people couldn’t even complete calls. Gasoline prices, at over a dollar per liter, were onerous, and while this reflected world prices, it was also the result of the uneconomical oil pricing system. If that wasn’t enough, as the summer ended the water began running out, so that in Beirut the national water company was roughly halving the amount of water distributed in winter.

Everywhere, the inability of the state to make basic services available shifted the financial burden onto providers and visitors, so that Lebanon was far more expensive than it needed to be. This year, most visitors were Lebanese expatriates or Arabs from the Gulf who seemed more willing to put up with this. But for the tourism market to grow dynamically, Lebanon’s appeal must spread to other target groups. The international financial crisis won’t soon be absorbed, so the country’s high prices could turn into a major Achilles heel down the road. Meanwhile, many tourists may decide that the headache of this year is not something they want to repeat for some time.  

On the more positive side, Lebanon was fun this summer, a place that managed to position itself on the radar as an international niche destination, whether as a party town, a cultural venue — given the many festivals organized around the country — or even as a gay destination, a detail that made its way into the New York Times last month, though precisely how the Lebanese authorities will react to this remains to be seen. The country is rarely boring, and even the beach infrastructure has expanded to include attractive locations all the way up the coast to Batroun, and new venues between Beirut and Sidon. The main problem is the high cost to get in, not to mention the sporadic cleanliness of the sea.

Most flagrant was the absence of any real sense that Lebanon had developed a unified tourism strategy. No one should want the state to organize Lebanon’s summer season; the state can barely organize our off season. However, government institutions could have thought up initiatives to clarify what was taking place this summer, or incentives to make the season more profitable and comfortable. Yet even simple things like an official tourism ministry brochure advertising and highlighting summer events, or more policemen deployed to regulate traffic on major thoroughfares at peak hours, were absent. Special passes to allow tourists to enjoy unlimited bus services, like all other efforts to expand or promote the use of public transportation, were simply off the agenda.

There are a host of strategies that countries will use to promote tourism, including discounts at specific tourism sites, coupons to go to certain restaurants or bars, or the opening of welcome centers in towns or areas to advise visitors about the nearby sights. These require coordination between the public and private sectors. It’s up to the state to set this strategy, even if it relies more heavily on private initiatives. Nowhere was this visible in Lebanon this summer, where the sense of free enterprise may have been high, but the imagination of officials hopelessly low. 

Michael Young

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Economics & Policy

It’s the Economy, Stupid

by Faysal Badran
written by Faysal Badran

In assessing the state of the country, at this critical juncture, there is a need to emphasize the importance of placing the economic aspirations and needs ahead of the politics. In fact, for Lebanon to be on a true trajectory of prosperity it should elevate the debate from the confessional distributions and redistributions of the pie, to the development of the economy. The major themes have so far been political. There is almost a fixation on elections, and this is totally understandable, but is it the endgame?


The priority for developing countries, in this day and age, is the ability to attract and maintain capital investment and to attain a degree of economic growth that alleviates fiscal and social imbalances. Where is Lebanon in that framework? It is not enough just to reshape the political landscape and take a broom to Syrian occupation (but it’s a start). The current political stalemate belies an inherent unwillingness of the political players to come up with solutions and face the true problem of Lebanon: its economic performance. The key to the future of Lebanon is its GDP, not in how cleverly crafted the next election law is. Prosperity is the only guarantee that sectarian extremism thinking will fade, and that Lebanon can draw on the strength of its expatriate community as well.

A pivotal legacy of Mr. Hariri was his constant focus on the economic priorities. The revamping of the infrastructure, though criticized by many, was inevitable and founded, rightly or wrongly, on spurring growth through tourism. The helmsman has gone is that we may be in a political spiral.

Getting priorities straight

Despite GDP most likely contracting, the biggest issues seem to be political which seems odd. Yes, the proper holding of elections is crucial not only to respect the will of the people, and to reflect the reshuffling of political poles post 2/14, but also to boost confidence by investors in Lebanon’s political process and cast aspirations in a more long-term light.


Syria is out, and though its influence will probably linger on for some time, it will be less of a drain on Lebanon economically. From there, we will need to find a pax economica. Now that the risks of actual armed conflict having been reduced, the main focus of attention will be the level of commercial activity and the economy’s ability to generate social peace: erasing corruption and reducing the burden of the public sector. Then what? The fighting for a slice of the pie will not matter a jot if the pie itself is miniscule and in years to come it will be the economy that will shape politics, not the other way around.

Most pundits are obsessing on how a better political environment will lubricate the economic engine. This is counterintuitive. Think about the generation that took the streets. Eventually, do they really care more about the politics or their destiny as a prosperous and vibrant society? We are entering a period where the opinions of non-sectarian portion of the economy will matter most.

And given their aspirations, they will demand a meritocracy, and will probably get it. Lebanon’s identity is built on its commerce, its banking and its openness. And these conduits of prosperity require a political agenda based essentially on promoting the economy and restoring fiscal balance.

The rebalancing of deficits will inescapably require a reduction of the size of government, its role in the economy’s fortunes, and a shifting of resources from the public sector to the productive sector. And herein lays the contradiction of Lebanon right now. All focus is on the politics, where it should be on the economy. There is in a sense a need to de politicize life in Lebanon. All current politics, and this despite the inebriating mass unity on the streets, is sectarian and divisive, and this is why it will not survive. It falls short of the aspirations of the educated elite and it goes against the process of change sweeping across the region.

The domino effect from the fall of Iraq will no doubt have repercussions for many years to come, and Lebanon is best positioned in the region to monetize this change both economically and socially. It has the best arsenal of human resources, one of the most vibrant and successful diasporas, and will have soon the most democratic system.

It will not be painless, but we are heading straight toward it. But it is crucial to set out an economic track and not be engrossed in the political system. The new political order will be shaped by the level of prosperity we achieve.

The price of failure in reviving the economy and reducing government would be too devastating to even contemplate and it is vital to work toward boosting collective purchasing power and overall wealth to defuse the confessional time bomb. If the economy plunges further it creates a Petri dish for tensions between communities. One of the overlooked and under analyzed aspects of all wars, especially the Lebanon one is the economic backdrop. We hear of foreign interference, of internal disharmony, when reading about the war, but little is said about the one major catalyst: poverty and class tension and this is what will drive political reform.

Time for a change

Anything short of seismic change toward a meritocracy will be seen as a failure by most. It must be led by the private sector and see a reduction of the size of the public sector. There is no other workable formula. High unemployment and poverty are typically mirror images of the same sequence of symptom and cause. The experience of the past decade in developing economies has demonstrated that the high priority of economic reform and privatization of inefficient public entities is key to long-term efficiency and job creation. Yet this effort, which initially leads to job cuts, is frustrated by the absence of alternative job creating mechanisms, which creates a vicious circle that does not augur well for the future.

What is needed is a private sector framework with public sector support and participation to inculcate a culture of venture capital as an effective means for job creation, accelerated growth, and enhanced innovation and competitiveness in Lebanon. We need to see a structure and a process triggered by which limited investment capital can be combined with entrepreneurial skills to break through the vicious circle of economic stagnation and public sector inefficiencies by laying a foundation for job and wealth creation.

The Gulf is a great example of economics triumphing over politics. The political systems there are slow to change but the role and size of government have been reduced and the promotion of the economy has been given top priority. This is not to say that Lebanon emulate the static monarchies of the Gulf, simply a reminder that after the current spasm of over politicization of the process in Lebanon, mouths have to be fed and it would be meager consolation if we “fix” representation in parliament but build it on the back of economic depression.

 

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Companies & Strategies

Onward and Upward

by William Long
written by William Long

While most Lebanese were transfixed by the final pullout of Syrian troops and a lively confidence vote in Parliament, for Mounir Douaidy, Solidere’s General Manager, April 26 was little different than most of his days – these days, that is – at his office in the heart of Beirut’s Central District (BCD). He was signing contracts.

Ever guarded about revealing too much in the way of exactly how many items awaited his signature in the adjacent conference room, Douaidy was nonetheless both detailed and specific in outlining to Executive why Solidere had finally met its tipping point.

“ 2004, in my opinion, was a turning point in the life of the company,” said Douaidy. “Despite all the obstacles and the difficulties, [the last ten years were crowned] with big achievements that have led to a much stronger financial situation. 2005 is Phase Two in the life of the company. It will allow the company to grow on a much stronger basis because the fundamentals that were strong in the beginning remain strong and are now even stronger.” Indeed, by most accounts, Douaidy’s estimation is correct.

Solid performance

Although Solidere’s 2004 annual report is still to be released later this month, the audited financial results for 2004 made public at the beginning of April provide exactly the kind of performance data points that Solidere always said it could generate – if it was just given the time and the good graces of geopolitical events. At least for the moment it seems, geopolitical events are in fact cooperating. And Solidere has certainly put in the time over the past decade. As Douaidy (the trained accountant and pitch man) is quick to point out, 2004 saw the country’s largest single company post its best after tax profit gain in the last five years – $54.1 million or an amount nearly triple that of 2003.

Most significantly, however, the underlying dynamics were strong. Solidere said it generated its highest sales level in a decade in 2004 – $180 million in all or nearly $100 million better than last year. Rental revenues from leased properties also came in strong at $18.6 million, up from $15.4 million in 2003. And the company’s borrowing level dropped substantially – from $320 million in 2003 to $234 million at the end of 2004 – leaving a reduced debt to equity ratio of 13.9%.

“Our plans are to continue with sustained increases in sales, not necessarily at these levels [158,000 square meters in 2004] but not less than 100,000 to 120,000 square meters of built up space,” Douaidy explained. Of course, even though the sales numbers provided the most fodder for celebration, the performance of the company’s share price – especially in the aftermath of the Hariri assassination – have also played a crucial role in supporting Douaidy’s claim that Solidere is moving inexorably forward with a sustainable, winning formula. Indeed, as was widely noted in both the international business and political pages, the company’s stock registered only a temporary hit after Hariri – Solidere’s founder and most visible backer – was killed in the BCD he helped to build.

The quick rebound of the stock price to just below its pre-February 14 level provided strong evidence for some observers that investors both believed in Solidere and, more importantly, believed in the long-term viability of the entire country.

“We are even now having regional investors coming to Beirut,” Douaidy added proudly. “Even during the last two months, those who were negotiating with us did not stop negotiating with us and in fact a certain number of deals have emerged from these negations and some of them are being signed presently.”

Thus freed, somewhat, from the political situation that gripped the rest of the country, Solidere registered a daily average of 216,388 shares traded on the Beirut Stock Exchange during the tumultuous first quarter of 2005 – up a robust 515% from the same quarter last year. What’s more, the stock price ended up closing out 8.36%percent higher for Class A shares and 9.87% higher for Class B shares compared to fourth quarter 2004. In London too, where Solidere’s global depository receipts are traded, the receipt price rose to its highest level in six years by the end of March 2005.

Of course, a key reason for the rise in both the stock price and the overall trading activity lies in last June’s successful initiation of a land-stock swap program that raised $73 million in 2004.

But another very visible indication of public confidence in Solidere – and Solidere’s own confidence in both itself and Lebanon – came when the company decided to go ahead with its plan to list on the Kuwait Stock Exchange March 8.

“We thought [these actions] would give us a much wider investor base,” said Douaidy. “Last year when we did [the land swap program] we felt as though the share price was trading at a severe undervalue….both this and the listing on the Kuwait Stock Exchange have achieved their objective by increasing our sales and requiring investors who are using the program to go and buy shares on the market,” which has also raised the stock price, he noted.

On with the Souks

Although plagued by prior delays, Douaidy said the much anticipated Souks project, which envisions a large pedestrian area filled with shops and restaurants, was finally ready to go forward immediately. The permits have been secured and all underground facilities, including the parking, have been completed. As a result, even though the January start date was not met recently, Solidere is still aiming for the Souks to come online in 2006. And when this happens, rental revenue, already rising, is expected to double with the 100,000 square meters of floor space that will be available.

Adding to the positive growth outlook over time, Solidere is also set to ramp up its land preparation and infrastructure efforts in the massive reclamation area situated near the Beirut Port and Marina.

“In the next three to four years we will start selling land on the reclamation space because today [this area] is not ready yet,” said Douaidy. “There are still waste treatment [facilities] that need to be finished. Subsequently we will do the infrastructure for the reclaimed land. Then we can start with the marketing of the reclaimed land.”

Noting that the price for built up space had increased from $950 per square meter to as high as $1,400 per square meters over the past several years, Douaidy was quick to point out that the 1.5 million square meters of land reclamation would likely be a crucial component ensuring Solidere’s profitability well into the second half of Phase Two.

During this time though, he added, Solidere intends to pursue somewhat of a different approach than during the last Phase.

Laying down foundations

“We prepare the land, we prepare the design. This is what is happening…[It allows] developers to practically start within a short period of time. This is the kind of thing we really want to do: develop the concept and sell the idea rather than do the development ourselves. We will continue to do one or two developments here and there but we would like to encourage third party developers to do it.”

Of course, despite the recent positive balance sheet, growing investor interest and the much-anticipated movement on several development fronts, risks remain – as is true for the entire Lebanese economy.

Most significantly for Solidere, when Hariri was assassinated, the company didn’t only lose its largest single shareholder, it also lost its most powerful proponent in government circles. Of course, in Lebanon, such influence goes a long way towards solving the routine, and sometimes not so routine problems of bureaucracy and competing private interests that may not just vanish with Syria’s withdrawal. As one recent report noted, before Hariri left office last year he prevailed on the Cabinet to pass a number of critical resolutions that freed Solidere to act in a more expeditious, and profitable manner. In the end, a total of 24 projects with a total value of more than $500 received the necessary permits to move forward.

Douaidy is confident that Hariri left Solidere in “safe waters.” But even though his political stature will be sorely missed, April 26 and the events that led up to it, should be well for Lebanon and Solidere.
 

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Basil Fuleihan 1963-2005

by Peter Grimsditch
written by Peter Grimsditch

If former Premier Rafic Hariri provided the grand plans and vision for how he thought Lebanon could and should grow into a modern prosperous state, Basil Fuleihan injected the precision, the research, the experience and the knowledge to put those ideas into practice. Although most recently remembered as a deputy and former Minister of Economy and Trade, Fuleihan was also recognized as a brilliant academic from the moment he graduated with distinction from the American University of Beirut in 1984 as a Bachelor of Arts in economics.

He was just 41 when he died in the Percy military hospital in Paris, 64 days after the February 14 murderous blast at St Georges that claimed the life of his friend and patron Hariri, as well as 19 others. Before becoming a deputy on Hariri’s Beirut ticket in the 2000 elections, Fuleihan had carved out a career and a reputation as a thoughtful, competent and thorough behind-the-scenes adviser on economics.

His first degree at AUB was succeeded in the following year by a Master of Arts at Yale University in International and Development Economics and the meticulous study continued until he was awarded a doctorate in economics at Columbia University in 1990.

Fuleihan worked as an adviser to the executive director of the International Monetary Fund and was well on his way to a dazzling career on a global level when he returned to Lebanon to become an economic adviser to the Ministry of Finance in 1993. And for six years until entering Parliament he passed on his infectious enthusiasm for the subject as an economics lecturer at his old university, AUB.

It was in large part down to Fuleihan’s patient homework on the subject that Lebanon was able to tap the international markets for cheaper eurobond loans to begin the process of reducing debt costs and, also in his role as an adviser to the finance ministry, he was responsible for devising reforms of the Customs administration, land registration and internal training.

Yet it was not until he became a minister that Fuleihan was in a position to publicly claim credit for his work. He was the lead negotiator for the country’s entry into the EuroMed Association Agreement. He argued persuasively – and successfully – that Lebanon should have a privileged position as far as tariffs were concerned until its economy was strong enough to withstand open competition. He also played a major role in formulating the economic plans submitted to the Paris II talks that resulted in an easing of the burden of debt service and led to the slashing of interest rates. And he took up the causes of copyright and consumer protection, issues both at the core of encouraging investment in Lebanon by major foreign companies.

But Fuleihan didn’t claim credit publicly. He wasn’t that sort of man. Totally devoid of the arrogance that plagues many politicians, Fuleihan had a ready smile, a friendly hello for all who crossed his path and a fluency on matters concerning his ministry that never deviated into the meaningless obscure generalities beloved by so many politicians.

A close and faithful ally to Hariri, Fuleihan was by his side to the last. He was a passenger in the premier’s car when it was blown to pieces.

This gentle, loving husband and father is an enormous loss to his widow Yasma, and their two young children, Rena and Rayan, to whom we extend our deepest sympathy. Our condolences, too, to Lebanon. Men of talent, integrity and honesty, like Fuleihan, are rare.

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The Buzz

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 increased demand for private security services from banks, shops, hotels, malls and large institutions, as well as real estate developers with substantial works in progress.

Unfortunately, pro-active security remains a novel concept in Lebanon. The current “boom” is still largely ad hoc, temporary and price-sensitive. In fact, security providers say, it’s a regional thing. Lebanon conforms to the Middle East pattern of taking a reactive, rather than preventive approach to private security.

“This is the trend,” says Jinane Zod, assistant managing director of Zod Security. “People only react once the damage is done.”

Although not exactly a revolution, industry insiders believe there might be a gradual shift towards a more preventive-oriented approach to security.

“The measures we are taking now 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.

One security firm that spoke to Executive, admitted that his company witnessed a 5% increase in demand after February 14th but that figure soon rocketed to 100% after the Jeddah bomb attack.

Demand has mainly focused on electronic surveillance, monitoring systems more than security guards and 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 overall sector business has spurted by 30-35%.

“Most of this new demand is coming from the banks,” he said. “It has now become a priority for everyone to increase their security coverage, but banks in general are especially afraid of robbery and hold-ups due to the current political and economic climate.”

Demand for security guards has also surged. They are an easily deployable form of security service, especially when it comes to carrying out vehicle and personal checks, yet they still trail behind electronic surveillance systems in terms of what is wanted in today’s market. Security firm, Protectron, has estimated the hike in demand for security staff to be at around on normal business 25%, although it admitted that tight budgets force many companies to employ their own staff in a security role.

And maybe this is why the industry sees the employment of extra security guards as a stopgap measure. “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 office and apartments] 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 major banks, hotels large companies and institutions, such as the Phoenicia InterContinental, which has incurred minimal costs in upgrading an already comprehensive security infrastructure, already have adequate systems in place as part of their commitment to comply with international standards and regulations issued by their head offices and who systems and procedures are regularly assessed by external consultants.

“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 into the hotel. 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 more.”

But it is the banks and shops – for obvious reasons – that have had to burden the cost of maintaining confidence among their client base. Byblos Bank has retained the services of the international Group 4 Total Security, while ABC’s popular 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 new surveillance camera system. Supermarkets Monoprix and Spinneys have also committed themselves to assuring their customers with cursory vehicle checks.

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 Haled 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,” said one 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.”

Partly in response to this lack of regulation and partly – or mostly – in response to the recent events in Lebanon and the region, Securitas will be opening the Swiss Academy for Security in Lebanon in May – a first for the region – to train professional security guards at every level.

And who said there was lack of job creation in Lebanon?
 

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Business

Conflicts of Interest

by Michael Young
written by Michael Young

In April, New York’s Columbia University issued a report that, while focused on a matter related to its Middle East studies program, may end up having a broader impact on the study of the region in the United States. More specifically, what occurred at Columbia highlighted the uneasy relationship between education and public funding, and whether universities can use tax dollars to advance what, to critics at least, are ideological agendas.

The Columbia story revolved around whether Middle East studies professors (principally Joseph Massad and Hamid Dabashi) had abused their position by intimidating students, but also by imposing their pro-Palestinian sympathies in the classroom. When the university administration initially failed to respond to some students’ complaints, the latter made a film documenting their grievances, which was produced by a pro-Israel outfit known as the David Project.

Spurred into action by the film, Columbia appointed a panel to look into the students’ accusations. However, this only led to new controversy when, as a New York Times editorial put it in early April, the administration appointed “one member who had been the dissertation adviser for a professor who had drawn criticism and [appointed] three members who had expressed anti-Israel views that, critics allege, might incline them to soft-pedal complaints.” While the panel report was subsequently considered objective, the university had merely created a new point of contention in order to end another.

The Columbia hullabaloo will not go away easily, largely because it has become so deeply politicized. As Massad told a Times interviewer, “I am simply an entry point for right-wing forces that want to destroy academic freedom.” Massad and his allies believe the issue is whether they can continue to defend the Palestinian cause on U.S. campuses in the face of what they consider a pro-Israel onslaught. For supporters of Israel, the issue boils down to whether the university is the right place to advance, often aggressively, a particular ideology, particularly one which many of them dislike.

There is no consensual answer on either side. However, there is a legitimate protest that has continued to dog the debate, namely whether it is up to the public to continue financing, through Title VI of the National Education Act, Middle East studies centers in American universities where the ideological disputations are taking place. The act, passed in 1958, was designed to allow public funding for area studies on the grounds that the added knowledge could served American national security interests. Partly, this meant that scholars would more readily take one issues relevant to U.S. foreign policy. Over time, however, as the Israeli-American scholar Martin Kramer wrote in his influential pamphlet Ivory Towers on Sand, an indictment of U.S. Middle East studies, the funding became “a secure semi-entitlement” where many academics gradually came to reject the very principle of Title VI funding, namely collaborating with the government on policy issues.

Instead, funded Middle East centers began resisting official efforts to take advantage of their expertise by arguing that academic freedom demanded drawing a clear line between government and university. This self-imposed isolation, in turn, made government less reliant on scholars. Kramer quoted a 1981 Rand report on Middle East studies as saying: “We found in talking with faculty at area centers that their own training often makes it difficult for them to translate scholarly research into an applied format useful to policymakers.”

This perceived irrelevance effectively marginalized Middle East studies centers in American policymaking circles, to the advantage of more practical think tanks. Yet as French Middle East scholar Gilles Kepel recently warned in the Financial Times, “This battle, over the ‘right’ and ‘wrong’ approaches to teaching the region’s politics, history and culture, has already caused considerable damage to academia and is now jeopardizing U.S. ability to decipher a complex area in which America is deeply engaged.”

Meanwhile, the notion that academic freedom meant taking money from the government while giving nothing in return proved unsustainable. That’s why the House of Representatives recently passed the International Studies in Higher Education Act (which is currently being debated in the Senate), to provide greater oversight over federal funding to study centers. Many Middle East academics have reacted by crying “censorship”, and Massad’s insistence that both he and academic freedom were being targeted by “right-wing forces” was directed both at the House legislation and at people like Kramer.

There is little evidence for the charge. The House act protects against anything that would “mandate, direct, or control an institution of higher education’s specific instructional content, curriculum, or program of instruction.” However, if one mistrusts government, doesn’t it make more sense to simply forego its money and search for “independent” funding in the private sector? In that way, disputes like those at Columbia would be less about “censorship” and more about actual competence and significance.
 

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