Special Report

Media commentary

by Thomas Schellen
written by Thomas Schellen

Once, responsibility was not the big thing in serious media, and serious media were those British newspapers that took you two minutes to fold into a readable format while taking the train to work. Today, successful advertising agencies are serious media, responsibility is what all serious media aspire to, and Middle Eastern journalism is ethically challenged.

Are regional media going where the consumer wants or where special interests herd them. It is not an overt theme. Special interests are by and large an open secret: everybody knows it goes on but nobody really  tries to do anything about.

Take the recent libel case reported in the London Guardian in which Sheika Mouza, wife of the Qatari emir, Sheikh Hamad Bin Khalifa Al-Thani, filed a libel suit against the largest daily in post-Saddam Iraq, Azzaman, published by Saad Al-Bazzaz. During the trial in British court, papers were presented to show that Al-Bazzaz had received £2.5 million by bank wire from Saudi Arabia, presumably to finance the paper, which was established in London and then moved to Iraq after the fall of Saddam Hussein. Media reports in Qatar suggested that certain Saudi officials, angered by the Sheika’s initiatives in furthering women’s education, used the funds to press for the printing of the slanderous material. While conceding that Azzaman, when still based in London, had indeed libeled Sheika Mouza, the lawyers for Al-Bazzaz denied that the paper and its owner had been involved in a propaganda plot instigated in Riyadh.

Consider it an example of the not-so-uncommon special-interest media activities in the Middle East. Anyone in this region who would be honestly surprised by the thought that one party could covertly finance a media published in Europe or elsewhere by a willing propagandist and use this tool to undermine the name of another party would have to be oblivious to the region’s habits of intrigue and disinformation. These patterns have been etched into the history of Arab journalism for about 50 years.

When Egyptian journalist and activist Saad Ibrahim told a Beirut media conference last year that the credibility of Arab journalism had waned and vanished in the same degree to which the region’s media of that epoch had been willing to distort the realities when proclaiming constant victories in the fight against the state of Israel – he harvested anything but unilateral consent from Lebanese journalists in the audience. Ibrahim linked the failing honesty of Arab media to the pressures from governments to the lies of the past. Did he overstep a taboo line?

In discussing the region’s special-interest journalism, one has to accept that loyalty to persons carries an image of normalcy and honor in Middle Eastern culture. This perception of the virtue of loyalty may weigh in favor of partisanship when individual journalists and entire media organizations tend to discount the concepts of impartiality and relentless pursuit of facts. Thus, journalists and media owners in particular have to ask very carefully what is to be gained and what is to be lost by prioritizing loyalty – which is perhaps the same challenge American media faced frequently during the war on Iraq.

But this constellation of priorities can never allow for media to knowingly condone outright lies or even concoct them and it cannot be an answer to the problem of special interests – particularly the kind of special interests that are motivated by sheer greed, cowardice, or foolish disdain for essential human dignity. If some media sell out for such despicable reasons, it is the duty of all other media to stand up to their malice. The only other option is to cease being media. To achieve this, media in the region have still a long distance to cover.

Another claw at the throat of Lebanese media is the absence of transparency in addressing special interest problems within the profession. A leading example is the accreditation of journalists through the Order of the Press. It is a well-known and thoroughly unhealthy situation that qualified Lebanese journalists have for years been unable to gain entry into the syndicate of journalists at the press order. But there has never been an OFFICIAL explanation. 

Under the table, the conspiracy theory is that a single large secto-political interest group rigged the game by registering a bunch of new print publications. Admitting new journalists freely to the professional organization, so goes the theory, would give this group the opportunity to have excessive numbers of its followers to be accredited and subsequently gain dominion over the syndicate.   

The allegation is not so implausible that it could be dismissed lightly. Stranger things have happened in Lebanon. However, the people who should be able to clarify the situation – media people the lot of them – would not do so. When asked about the causes of the accreditation blockage, media leaders from the two branches of the press order and from major newspapers repeatedly seemed curiously non-committal. Some paid lip service to the need for change of the situation, others just played out the lamest of excuses. None seemed very interested to press the matter and go on record with statements that would open the issue to journalistic investigation.

Balance of precarious powers on the small Lebanese stage is the paradigm of coexistence. It would be naïve to expect the established media to seek direct confrontation with irrational forces powerful enough and perfectly willing to control their existence. This is the kind of thing that revolutionary media do in novels and movies but if it happens at all in real life, it is a slow and arduous going . Consequently, the direction of politically effective Lebanese media for some time to come must be expected to be dependent on special interests rather than reader interest. In this scenario, the problem of economic interests looks like a temporal nuisance.  

Here now is one question to ask: how does this lack of media accountability, transparency and integrity affect media consumers? The obvious answer is, it drives intelligent readers and viewers away. This is the moment to shift to a larger horizon, by taking into consideration the situation of the mass media at large and risking another look to the online world and its meaning for the media.

Check the blog – the current whole new phenomenon of online communication. Short for web-log, a blog is essentially a personal internet homepage oriented towards ongoing dialogue about topical or personal content. A blog is low-cost, can be continuously updated with material, and alerts the network to new postings. Blogs attracted about 32 million readers in the US in 2004, according to studies published in December (at the same time, 58% of the US population doesn’t know what a blog is).

In 2004, blogging rose to fame in the US when bloggers uncovered journalistic inaccuracies by mainstream media. Blogging is now being associated with “grassroots” or “participatory” journalism, phrases stipulating that the blog is to the modern individual what Gutenberg’s press was to Martin Luther, the door granting entry to publishing.

Blogs will be the absolute thing for perhaps a few years and in the longer perspective, the idea of participatory journalism has yet to answer many questions. But the amazing involvement of bloggers in political and civic responsibility is a contra-indicator to the idea that shrinking newspaper readership (which is a universal experience of print media) can be blamed on the general dwindling of civil virtues.

If people don’t read newspapers or magazines, it’s because they are not interesting enough. Stakeholder trust is the working capital of any media. It makes a qualitative but perhaps not so much a quantitative difference whether media organizations deny their main stakeholder basis – their audience – because they are stuck on outdated models or are slaves to the desires of special interests.

The future of the media is stakeholder responsibility. All parties have to take their roles and influence more seriously and think of the consequences of what they do. Newspapers, media and advertising industry have one big, shared responsibility in this: listening to the audience. It may be too idealistic to be for real, but at least in the way of a better vision it could happen that greater demand for quality journalism, formulated eloquently by the very real sophisticated media audiences of Lebanon, whether using blogs, letters to the editor, or any other means of proactivity in communication, would add significant momentum to the demise of special interest tyranny from the media domain here.

Participatory journalism in this society may open new horizons for journalism and become part of an antidote to also the economic troubles of media organizations here, and elsewhere. The good associate news on the business side is that online advertising – which has once again a positive outlook – and the emergence of corporate blogs in marketing are opening new pathways for media revenues.

NB: For the record, this writer was alerted to the news story on the Azzaman investigation by a blog, maintained by a Lebanese born academic in California under the name angryarab.    

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Special Report

Media overview

by Thomas Schellen
written by Thomas Schellen

The Lebanese journalistic media and advertising industry today are sharing a single berth in a slow boat to an uncertain future. It has been a rough ride, and even taking into consideration the most optimistic estimates, it is not expected to turn into a pleasure cruise for at least another 18 months.

With a few positive exceptions – this magazine having the pleasant experience of being among them – the country’s print and even audiovisual media outlets have seen advertising revenue dwindle and hover at unsustainable levels. For at least three years now, adspend on the national level was depressed, and, by best estimates, did not exceed $70 million. The largest share went to television advertising and then to print, outdoor media and finally radio. It is no secret that this revenue should only able to feed one or perhaps two TV stations, less than a handful of dailies and a smallish bouquet of other print media. Yet, a glance at the list of active print media kept at the publishers’ syndicate at the Lebanese Order of the Press shows that there are over 200 periodicals registered and running under non-political licenses. Those with a coveted political license number 30 to 35.

Even more bizarre, is that fact that these figures seem quite modest when compared to the total number of non-political and political licenses on record (including non-operational licenses) at the syndicate, which total 1,400 and 110, respectively. But it is still a considerable amount when measured against the size of the Lebanese market. And it decidedly humongous when viewed against the print media’s share of 25% to 30% of the adspend pie, knowing that advertising revenue is the economic lifeblood of not only broadcasters and magazines but also daily print publications. 

The one daily newspaper with a different recent experience could be Al Balad, which claimed after its first year on the market that its readership reach had grown to nearly 40% of all newspaper readers and over 16% of all Lebanese above 15 years of age. The newspaper said at the end of January that its circulation is about 35,000, a figure about a third below the 50,000 free three-month trial subscriptions it placed on the market in its launch phase but definitely impressive by Beirut standards.

One may want to remember in this context, though, that the ad industry’s professional media buyers here have long grown wary of print-run claims by any media. Liberal inflation of circulation figures is one of the industry’s more notorious habits, even if they are held in check by independent audit firms and liability issues. Professional audit firms in the sector – whose business it is to monitor media – are fighting for a change of these practices in the Middle East, most recently at a publishing conference held last month in Dubai. They never tire to tell publishers that fake circulation muscles only lead to the deflation of rate card values and harm their business in the long run as badly as steroids harm an athlete. 

For the journalism side of many Lebanese publications, the economic reality of the past five years has been shattering. Publishers could rarely afford to invest into newsroom training or staff increases. Numerous magazines were forced to operate with skeletal editorial staff; and at struggling dailies, one finds veteran journalists who were denied salary raises for six or more years in a row.

Although professionalism is not entirely lacking from the trade, the results were discouraging. “Professional journalists do not get support from their employers. Novices lack proper basic training,” assessed Magda Abu-Fadil, director of the Institute for Professional Journalists at the Lebanese American University.

From the employer perspective, these were scary years in which survival took precedence over improvements of quality. From the employee perspective, it was a scary job market in which publishers could dictate conditions. Overall, only the most enthusiastic or longsuffering media owners, editors and journalists seemed able to keep their eyes on the ambitions of delivering authentic journalism. 

What has not helped the situation is the constant onslaught of partisan mentalities at media outlets, invading from both business and political angles. The malaise seems almost hereditary in the political press where more courageous journalists sometimes admitted that over many years they saw no escape from prostituting themselves to those in power. But under their economic pressures, newspaper and periodical publishers – who were justifiably worried over their advertising sales – would increasingly succumb to stroking their ad clients with unwarranted editorial niceties or they might swing to another version of anti-journalism by refusing to cover newsworthy events at companies if ad space was not secured before hand. Media outlets lending themselves excessively to such practices did not only drive their own professional reputation into the lowest basement, they would also give the entire realm of journalism an image of disrepute with advertisers.

The saving grace for Lebanese journalism in the past used to be that media exhibited a relatively high level of integrity. They might have bowed less or more deeply to political and business interests – but they did not prostrate themselves so relentlessly as media in other Arab countries. Journalism practitioners and theoreticists here maintain that Lebanon still enjoys a relative large margin of press freedom. In the words of Abu-Fadil, media here are “not entirely free but reasonably free.”

The diversity of views and open debate of issues in the political publications and audiovisual media indeed continues to thrive around the campfires of Lebanon’s intelligentsia, despite the limited number of political licenses and the odd incidence of intimidation, temporary clampdown of publications and arrest of publishers. Although the intrusions were grave, they were not unbearable for the media, maintained one journalist from a family embedded in the national newspaper culture, who added that the most notorious case, the forced closure of television station Murr TV, followed the letter of the media law, indicating more a negligence in drafting of the law rather blatant and willful abuse of it.   

However, the diversity of Lebanese media should not be seen as a sector struggling towards Volatire’s ideal. Rather it reflects the multi-faceted rivalries of the country’s multi-communal society, noted Ramez Maluf, director of the Beirut Institute for Media Arts, a journalism institution also located at the Lebanese American University. In this perception, media might exist in a frame of diversity but are partisan at the core, which hints that many in the field would find nothing objectionable in seeing their opponents’ freedom of expression curtailed.

This state of journalism in Lebanon also transpires in the preoccupation of the local media with the petty affairs of politics, and this lowers the ability of Lebanese media to garner respect for their coverage of Middle Eastern affairs, Maluf said. As media based in the Gulf region are becoming more active and numerous, they are more successful than Beirut-based journalism in attracting audiences on the Arab peninsula because of their greater coverage of Arab affairs and Arab interests. This is especially visible in the satellite television market, where the news broadcasts by Lebanese channels such as LBC/Hayat and Future are less of a reference than those of Al Jazeera and Al Arabiya, two Gulf-based 24-hour news channels.

Consequently, the fact that job opportunities for graduates of the LAU journalism programs saw an upswing in the last two years was not driven by local demand. For the most recent class of journalism graduates, Maluf claimed most positions could be found “rather easily if they were willing to relocate.”

The remaining area of Lebanese media dominance is entertainment, usually fairly removed from all things journalism. Thus, a batch of young aspiring media career starters here recently considered themselves lucky to have the chance to work on the production of programs like Star Academy, where their responsibility consisted largely of switching cameras on and off whenever the participants in the show would discuss dangerous topics, e.g. politics or religion.  

The reality TV surge of the recent past in Lebanon may fit the national tastes but it still can be expected to taper off and settle in a less prominent space in the entertainment industry. On journalistic terms, Lebanese media thus might find growth in the coming years in their own domestic market and backyard of local coverage, provided that the nation’s political and economic life gains a surer footing following the decisive election processes this summer. This notwithstanding, however, the Lebanese media experience of being the regional benchmark seems on the way out, except for those productions and social publications where the country’s comparative liberalism gives it an edge over other Middle Eastern locations.

Does that mean that the Gulf, specifically media locations in Dubai and Qatar, can be expected to step in to the role of centers in serious journalism? The UAE would certainly like to. When staging last month what was billed as the inaugural Middle East Publishing Conference, officials of the Dubai Technology and Media Free Zone and the Dubai Consultancy, Research and Media Centre enthused full power about their business location when addressing the, by organizer estimates, 300 participants at the event that had been co-sponsored by two international associations for newspaper and magazine publishers.

Announcing in by now habitual fashion another mega-project – this time a $70 million Publishing Pavilion at the emerging $270 million International Media Production Zone in Dubai – the UAE executives dangled utopian numbers in front of publishers by boasting a target potential of 300 million people for print and publishing ventures in the region and throw in another 2 billion potential customers between Tehran and Dhaka.

Dubai may have been “bigging-it-up” at the conference but it was left to a Lebanese, As-Safir’s Talal Salman, to offer words of caution of a profound Arab media crisis, which he attributed to the “emptiness of the political role in the Arab world.”

The absence of real figures was the greatest weakness at the conference, commented Lebanese journalist and publishing entrepreneur Khaled Kassar, one of very few to attend the $1,000 per participant event from Beirut. “I went to the conference expecting to get data and studies about the region, but that was lacking,” he said.

The most meaningful numbers on the Gulf media evolution presented at the event came when Ahmad ibn Byat, director general of the Dubai Technology and Media Free Zone, told participants that publishing activities in the UAE grew by 42% over the past two years, with anticipation of future growth at 15 to 30%. Byat also said that Dubai has been at the forefront of creating the infrastructure and conditions for the expansion of the publishing industry and that publishing has reached a stage of maturity in the Middle East.

This is exactly what sober observers of the media environment from all sides – advertising, publishing, and journalism – in this town doubt. “I have yet to see real press freedom practiced there,” said Abu-Fadil about the Gulf region. The very creation of a free zone is a sign of an anomaly that betrays problems with press freedom, said Eli Khoury, CEO/CCO of Saatchi & Saatchi Levant in an interview with Executive. And Lebanese journalists who had migrated from Beirut to Dubai told of increasing competitive pressures and climbing living expenses in the emirate, but not of increasing press freedom. All that, as true as it rings, does not indicate that the Lebanese media can take it easy.

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Cover story

As a new government finds its feet, Executive assesses its credentials and looks back at the post-war economic policies and asks if there ever were any

by Anthony Mills
written by Anthony Mills

Memories are short. Twelve years on, the man the people had brought down was invited to head a new government. For those who remember the burning tires and momentary anarchy, there was an uneasy, not to mention unwelcome, sense of déjà vu. It is also ironic that his path to power was, last summer, paved with similar scenes of violent public demonstrations that prompted his demise 12 years earlier.

That it should happen in the southern suburbs of Beirut is also not surprising. In fact, it is amazing that the rioting of last summer did not take place earlier. The area, according to social economists, has one of the highest population density rates in the Arab world. The percentage of youths per household is highest in the country. The supply of labor is the highest and local demand the lowest.

Elsewhere in Lebanon, the situation isn’t much better. A desk study carried out in 2003 by the Consultation and Research Institute for the ministry of industry put unemployment at around 13% to 14% of the active population in a country, which traditionally exports 25,000 of its skilled and semi-skilled workers every year. Given the level of migration and the resultant replacement of those who have left, the state of the Lebanese labor market in 30 years time in terms of skills and structure, is too scary to think about.

But arguably, the biggest cancer that is eating away at the economy is the huge waste of public money used to prop up the so-called geographical and sectarian equilibrium. When the country is in a de facto state of bankruptcy and has one of the highest teacher to student ratios in the world, plans to build new schools are madness, as is the apparent policy of the government to manage public expenditure with community and sectarian considerations. There is a difference between state intervention and state mismanagement, such as what is happening at EDL.

Granted, in terms of availability of public services, the Lebanese are better off than they were 12 years ago, but they are worse off in terms of actual access to these services. The 16 to 24 demographic faces discouraging job prospects in a country where the cost of living is high and where there is conspicuous consumption among a few. 

None of this was helped by the appointment of Tripoli’s favorite son. In political terms, he was a dinosaur, and investors would not have been filled with confidence. Hariri was no angel but at least the Lebanese were buoyed by the panache with he signed $300 million deals at the drop of a hat. They felt they were part of a genuine emerging market. Karami reminds them of who they really are.

Essentially, Hariri’s connections with Saudi Arabia, Jordan, Egypt, France, the EU and the US had become a liability. He was seen as a modern, moderate Muslim, on whom one could count, and who defended freedom. In this context, Syria no longer needed a man like Hariri. What they did need was a man like Karami, who had no ties with anyone except Syria (even if those ties have been strained in the past) and who has, on many occasions, proved his obedience. He got off to a cracking start by insulting the US ambassador.

The consensus is that his government has neither the vision, the ability nor the time to carry out a focused, genuine economic policy. It has been in office for four months but in reality it is still carried along by the momentum generated by the Hariri administration, while the real power rests in the interior ministry. The effects of Paris II have taken the edge off the public debt and we have seen a decrease in debt servicing as a percentage of total public revenues and as a percentage of total public expenditure. We have also seen a decrease in interest rates. The debt that will come to maturity in April has been rescheduled. Fortunately, relations are good between the minister of finance and the governor of the central bank as well as the fiscal and monetary authorities, and the banking system. The atmosphere appears favorable to the postponement of the remaining part of the debt.

Rather ominously however, Karami has spoken of increasing salaries, frozen since 1996. Karami likes to increase salaries. He did the same thing under President Elias Hrawi, which led to devaluation of the Lebanese pound. He wanted to give too much even though the coffers were empty and it had an adverse effect on those unfortunate employees paid in Lebanese pounds.

The new government has also run into controversy with the announcement that it has unilaterally stopped the Manara conference center project. In reality the project is allegedly sited on one plot of land that belongs to the state and two others that belong to private individuals, both of whom are suing. An act of revenge or simply a messy project that got shelved? If it was the latter, then the government is one again guilty of sloppy communication and complete transparency..

Probably the biggest shambles was the appointment and justification of the new ministers and senior public officials. Karami’s “shall I bring them from the moon?” comment that was meant to highlight his despair at having to work with who he has, was neither credible nor a vote of confidence in his team, most of whom, given the providence of their boss, have, not surprisingly, been branded mediocre sycophants who have sought public office at any cost.

Who do we have? Minister of the environment, Wi’am Wahhab, was a minor employee for Ghazi Aridi and owes his job to his good relations with Rustum Ghazali as does minister of state, Yusuf Salameh. Talal Arslan’s appointment is easy to explain, given the current position of his neighborhood rival, while minister of culture, Naji Boustany, as a  lawyer, is close to defense ministry and is by default a man of the intelligence services. Even Wafa Hamzeh, who is universally recognized as capable and modern, can be traced back to Nabih Berri. 

Elsewhere, there have been changes at the head of the CDR and IDAL, all carried out to advance electoral goals or to develop administrative cronyism. Even Fadl Shalaq, whose reappointment to the CDR was seen as a positive move, is not untainted by controversy. 

But the consensus is that there is only one person who is doing anything in terms of managing finance and that is Riad Salameh, whose mandate ends in July. It remains to be seen if the government keeps a man who has prevented financial meltdown and who at the very least has mitigated the economic effects of the financial crisis.

But old habits die hard. One ex-government minister expressed surprise when his entourage regularly and openly fought against his nomination of competent people. He realized that they saw such people as ‘ambitious,’ and the feudal mindset cannot accept competent (or ambitious) people in the right place. The foundation of cronyism is allegiance and by and large these people are incompetent.

And so the Lebanese juggernaut rumbles on. If the economy is to have a chance, the state needs to adopt an economic policy with clear goals with respect to public service, wages, jobs, education, health care, Lebanon used to be a country of the middle class, of social mobility, since the 1950s. Things weren’t always equal, but there were opportunities. Shiites (and Christians for that matter) from Baalbek had the same access and attitude to education, culture, work and ethics. That was, and still could be the force of Lebanon, not just concrete projects. What is needed is a social democracy and not revert back 30-years to the actions of feudal lords operating above a national consensus. The Lebanese are still waiting.

(BOX)

In 1992, the last time Omar Karami held office, the country lurched, punch drunk into crisis. Inflation stood at around 120%. It may have been at the tapering off of an eight-year hyperinflation era (in 1987 was at 500%), but it was crippling the spending power of an already battered nation. Despite wage adjustments in the private and public sector, any gains were cancelled out as fast they were made.

After the riots of May 19, 1992, the state appointed a committee of eight economists to assess the economic and financial situation and propose a recovery program to deal with the deteriorating economic crisis. The team quickly proposed that public spending be controlled, especially those current expenditures with no developmental content such as the bill of wages and related expenditures on those institutions established to cope with the effects of the civil war and an introduction of radical reform in the public sector to cope with the increasing levels of poverty that were beginning to bite.

A middle ranking civil servant, such as a teacher at the Lebanese University, was earning a measly $30 a month. In a period during which the Lebanese looked for an improvement in living conditions after so many years of civil and regional conflict it is hardly surprising that, given the gulf that existed between the aspirations of a people mauled by war and the reality of the fiscal situation, that social unrest occurred.

However, honest and sober reflection of the so-called post-war boom initiated by Karami’s successor, reveals that growth was not as spectacular as we all thought. Considering the fact that the economy was so degraded, Lebanon should have been looking at 20% to 30% growth, instead of the modest 5% to 6% it registered until 1997.

But until then, people liked the way Hariri worked because he was servicing his local, regional and international contacts through various projects. Hariri was a way of giving people the impression things were working, when in fact they weren’t. He was successful when there was the Oslo Agreement and ambitious peace schemes in the region. There were visions of motorways and railways from Istanbul to Haifa. All the projects in Lebanon at that time were done within a regional context. But then the assassination of Rabin marked the beginning of Lebanon’s economic crisis. Investors began pulling out. Hariri bet big but failed to stem the growing power of the security services, failed to stop embezzlement and failed to address relations with Syria.

Growth became recession and slowly over a three-year period it dropped back to zero and it has climbed to the supposed 5% growth we have today, achieved mainly on the back of tourism and post 9/11 Gulf money, both of which cannot realistically lays claims to being the cornerstone of a serious national economic plan.

There once was a plan. In 1992, the CDR launched the National Emergency and Recovery Program (NERP) followed in 1994 by the Parallel Program for Reconstruction and Development (PPRD). The Horizon 2000, Lebanon’s major 12-year reconstruction program, followed in 1995. It was a period during which the government expected an average growth rate of 8%, during which time it would attempt to transfer the deficit in cycles and achieve a surplus in the budget by 1999.

So what went wrong? One of the reasons was that region had played catch while the Lebanese were at war. Where once Lebanon had confidently played the role of middleman in the 60s and 70s, the Gulf Arabs had developed their own infrastructure, ports and airports and had boned up on some of the major activities at which Lebanon excelled, such as banking and tourism. It was easy; they had money and they had a vision, while the Lebanese sat back and waited for the phone to ring. It didn’t.

To make matters worse, Lebanon’s policy was one that catered to investment rather than job creation and the development of the niche sectors in which they could still compete. The result is that today, agriculture and industry are both on their knees. Only recently, have Lebanon’s external obligations such as the Euro Med agreement, WTO membership and IMF meetings woken up the government to the needs of the real economy sectors. It was never part of a strategy.

In 1998, the then finance minister George Corm, did commission a quasi-five year plan by Monitor and Harvard business school. The report may now be gathering dust, but many of the proposals, at the time considered controversial, were dedicated to areas that had been until then, largely ignored by the government.

Essentially, the determinants of growth since 1992 have been driven by consumption and imports, heavy investment in the rehabilitation of the public sector and infrastructure and a traditional tendency to invest in the real estate sector.

According to economist Kamal Hamdan, this is the, “undeclared hidden philosophy of the Lebanese elite,” who he claims, “have, since the 50s, held the conviction that as long as there is was reasonable security, justice and some infrastructure, the economy, through the natural forces of the market, would yield a high growth rate which would in turn lead to social development and absorb any social antagonism.”

Whether one agrees with Hamdan, it would be hard to argue that there has been a real economic developmental plan, sectoral strategy, or job creation.

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Region

After Operation “Iraqi Freedom” comes “Expanding Freedom.”

by Nicholas Blanford & Claude Salhani
written by Nicholas Blanford & Claude Salhani

One could be forgiven for thinking that given the unfolding debacle in Iraq, US President George W. Bush may have preferred to be a little more circumspect in his inaugural address, perhaps dwelling on domestic issues such as the economy. Instead, an apparently unbowed Bush delivered a forthright speech in which he pledged no less than bringing freedom and democracy to the benighted corners of the world.

During his 22-minute address, Bush said it is “the policy of the United States to seek and support the growth of democratic movements and institutions in every nation and culture, with the ultimate goal of ending tyranny in our world.” The president affirmed his policy of “exporting freedom,” saying that: “The best hope for peace in our world is the expansion of freedom in all the world.”

Of course, it is unclear exactly what sort of democracy Bush envisages for the rest of the world. After all, the democratic experiment underway in Iraq may well end up producing a Shiite-dominated, Islamist-tinted government in Baghdad more interested in a withdrawal of foreign troops and shoring up relations with its neighbors, including Syria and Iran, than doing the bidding of the Bush administration. Indeed, the transitional government that will be created from the January 30 elections will need all the credibility it can get given the predicted Sunni absence from the polls due to opposition to the process or fear of reprisals by insurgents.

It has been suggested that one way the new Iraqi government could bolster its nationalist credentials and address Sunni fears of marginalization is if it demands a timetable for the withdrawal of the coalition forces from Iraq. However, the turmoil in Iraq is such that Shiite candidates who had supported the call for a time-tabled withdrawal of foreign troops are changing their minds, fearing that the absence of an international protector could strengthen the position of the Sunni Baathist insurgents and their Islamist allies.

Still, even if Iraq begins to stabilize after the elections – which seems highly unlikely – the political evolution in that country portends an outcome far removed from the Bush administration’s pre-invasion dream of a US-friendly beacon of democracy shining the light of freedom on its autocratic neighbors while bestowing lucrative oil and reconstruction contracts to American companies and providing basing rights for US troops in perpetuity.

Letting people decide their own fate can be inimical to US foreign policy interests. For all President Bush’s fine words on freedom, Washington traditionally has favored a more hardheaded attitude toward the Arab world, supporting oppressive regimes and glossing over their inequities so long as they remain cooperative with the US. That realpolitik tradition is despised by the neo-conservative ideologues who view the world in black and white terms, favoring decisiveness over nuance, confrontation over subtlety. As such Bush’s vow to root out despotism wherever it is found and replace it with the seeds of democracy is music to their ears.

Indeed, instead of being chastened by the chaos in Iraq, the Bush administration appears to be on the offensive, increasing its political and diplomatic pressure on Syria and Iran. During her confirmation hearings, US Secretary of State designate Condoleeza Rice told the Senate Foreign Relations Committee that “the time for diplomacy is now”. But the signals emanating from Washington remain bellicose rather than diplomatic. Anonymous administration officials have hinted darkly at possible military action against Syria for its alleged support for Iraqi insurgents and against Iran’s budding nuclear program.

It is hard to imagine that the Bush administration is seriously considering a major military campaign against Iran, not least because American forces are overstretched in Afghanistan and Iraq and there are insufficient funds for a new military adventure.

More likely, but still fraught with risk, are pin-point precision bombings of suspected Iranian nuclear sites. The New Yorker magazine reported in January that US special forces teams are in Iran scouting out potential targets. Furthermore, there have been sporadic reports for some months of suspected US planes penetrating Iranian airspace presumably for reconnaissance purposes.

Neo-conservatives who support a military strike against Iran are adopting the same mantra that helped fuel the march on Baghdad – that the Iranian people detest their theocratic rulers and would welcome regime change in Tehran. It is true that a large percentage of Iran’s youth resent the lack of individual and political liberties. Like much of the Middle East, Tehran and other Iranian cities abound with satellite dishes allowing people to tune into Western television broadcasts.

Many of Iran’s young – the “Nike-Levis-cellular-phone-user-Instant Messaging generation” – look towards America and the West with a certain amount of envy, yearning to join the international consumer community where a free society would give them the choice of selecting their own life-styles. But the Bush administration should understand that the instant the first American (or Israeli) bomb is dropped on Iran, these pro-Western Nike-Levis-clad, cell phone-IM-users will turn against the US as Iranian national pride kicks in.

If the Bush administration chooses to use the threat of military action to cow or even change the regimes in Damascus and Tehran, what tools will it use to promote democracy in other Arab countries, including its purported allies? For the real test of President Bush’s commitment to freedom and democracy is not in its stance toward countries like Syria and Iran, but in its attitude toward its allies in the Arab world, such as Egypt, Jordan, Saudi Arabia, Kuwait and Tunisia. All those countries have less than satisfactory human rights records and little in the way of democratic traditions.

Bush said in his speech that “we will defend ourselves and our friends by force of arms when necessary,” while adding that promoting democracy was “not primarily the task of arms.” Yet Bush’s attempts to foster democracy without the use of the gun have been less than impressive. The Greater Middle East Initiative (GMEI), the Bush administration’s bid to encourage democratic reforms in the Middle East, met with a hostile reaction from Arab governments when its contents were leaked prematurely to the media a year ago. It was regarded as unwarranted meddling by the US in the Arab world’s internal affairs and derided for failing to refer to the Arab-Israeli conflict as a source of regional instability.

The subject of reform was tackled by Arab leaders with some reluctance at the Arab League summit in May. The result was the Tunis Declaration, a half-hearted commitment to promoting human rights, freedom of expression, judicial independence and widening the role of women in society. The following month, Bush unveiled a revised version of the GMEI (now known as the Broader Middle East and North Africa Initiative) at the G-8 summit in June, whereupon it promptly sank without trace.

How Bush intends to renew his push for democracy in the Arab world remains to be seen. Equally unclear is whether Bush is really willing to allow Arab countries to develop their own brand of democracy in tune with their cultural, social, religious and ethnic realities – which could result in governments hostile to the US.

Then there is the Bush administration’s policies toward Israel, the ultimate Achilles heel for US aspirations to promote democracy in the Arab world. For most Arabs, Bush’s unflinching support for Israeli Prime Minister Ariel Sharon and his aggressive policies toward the Palestinians simply makes a mockery of the US president’s sweeping declarations on “freedom and democracy”.

Arab civil society movements and human rights organizations are gradually emerging and are generally supportive of Bush’s broader aims on democracy. Yet the Bush administration’s constant excusing of Sharon’s excesses undermines the efforts of Arab reformists. Who, after all, wants to be seen allied with an American administration that endorses Israel’s permanent colonization of part of the West Bank and turns a blind eye to the Israeli Army’s violent tactics against the Palestinians.

Flights of rhetorical fancy on freedom and democracy at the inauguration of a president flushed with electoral victory is one thing. Translating those lofty aspirations into effective policy is something else entirely.

Nicholas Blanford is a Beirut-based correspondent. Claude Salhani is foreign editor and a political analyst with United Press International in Washington, DC

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Q&A: Joseph Coubat

by Executive Contributor
written by Executive Contributor

Lebanon’s buoyant tourist boom means that more luxury hotels are springing up in Beirut. A Hilton and Four Seasons are currently works in progress and at least three boutique hotels are planned for the downtown area. The sudden vogue for boutique hotel activity might challenge the cozy niche enjoyed by the InterContinental Le Vendôme and the Albergo. Vendôme general manager, Joseph Coubat, who was part of the original team when the hotel opened nine years ago as its financial controller, and then spent four years as resident manager at the InterContinental Phoenicia before moving back to manage the Vendôme, explains to EXECUTIVE how he intends to consolidate the Vendôme’s position at the forefront of Lebanon’s luxury hotel bracket. 

You are planning a marketing campaign. What are the objectives and how much will you be spending?

Communication-wise, we are being a bit more aggressive, to make sure our target knows what we are and what we have to offer. But unlike the Phoenicia we are not targeting a wide range of customers. We’re investing a lot on the positioning of the hotel. We want to communicate to our clients the fact that we are the top boutique hotel in Lebanon. Our main job is to combine the InterContinental positioning with the boutique hotel quality. There are very few boutique hotels within the InterContinental chain.

As for the cost, we can’t disclose figures for that. It’s company policy. But each of the 20 suites being renovated is costing a little above $400,000. We have invested something like $2 million renovating the rooms. We will be fully renovating the Sydney’s club bar at a cost of around a million dollars. We will be renovating the lobby again. And the Vendôme holding company has decided to purchase the land next to the Vendôme and work on an extension with additional 60 square meter rooms not exceeding 100 in total, all facing the sea. There will also be a Grand Royal Suite, a rooftop bar and pool, a gym, a small spa, and parking facilities, all of which will be ready by 2007.

How much will the extension project cost?

The land cost around $7 million. As far as construction is concerned, we are still in negotiations. The new building will form one structure with the old building. Overall, the Vendôme will undergo a face-lift, to make it more attractive from the exterior. For the moment we are relying a lot on the interior, on the decoration and the exterior is for the moment not really in line. From the exterior, most people don’t see us as a top hotel. From the road, it’s a building like any other.

Is the project in part a response to the fact that your leisure space is currently limited?

It is. For the moment we are compensating by providing complimentary access to top leisure facilities in Beirut with transportation through our limousine service. However, in preparation for the long run and coming competition we know we need to expand our facilities, which today are lacking.

At least three boutique hotels are slated for the downtown area. How will this affect business?

It depends on your definition of boutique. If it is a hotel with 30 rooms, a small property, nice, charming, then we will definitely have a lot of competition. If you define a boutique hotel as that plus excellent service, detail, refined food, 24-hour service, then we have a very good competitive edge. To be competitive on room size, charm and appearance is very easy. You invest the money and you get it. Anyone can invest in Louis XV furniture and artifacts. It’s more difficult to train your people to provide excellent, detailed, personalized service and anticipative attention. Having your initials on your pillowcase, your toothpaste ready and your baggage packed by a butler make the difference.

How would you assess the level of staff training and service industry standards in Lebanon?

We have a training academy. Training was our first priority nine years ago. It remains so today. The level of service provided in this sector in Lebanon is comparable – and sometimes superior – to the level of service in Europe. It is comparable as well to any other hub country in the Middle East, like Dubai. This is because of the level of graduates and the training we provide them. We have a Guest Satisfaction Tracking System overseen by the British company TNS. It monitors the level of service provided by hotels in Europe, the Middle East and Africa. For a year now, the Vendôme has occupied the top spot. Repeat business accounts for almost 60% of all clients, but employee retention is also a priority.

What were your average occupancy, room rates and revenues for 2004?

Occupancy was 80%. Our target for next year is 81%. We closed the year at a rate of $330. And our revenues were above $12 million.

The ministry of tourism has refused to give you five-star status? Why? Do you care?

The ministry should review the classification process. The old criteria are outdated. They won’t give us five stars because we don’t have a swimming pool. If you have a three square meter pool you get the five stars. You have five-star hotels whose room rates are four times lower than ours. The refusal to give us five-star status has never been a handicap. We have our reputation. My main concern is preparing the hotel to take on the coming competition. We have a lot of international chains opening hotels here. We want our hotel to be the hardest place to get a room in.

(OPTIONAL CUT) What are your main revenue streams? In particular, how do your F&B outlets perform?

About 60% of our revenue stream is generated by the rooms. The rest comes from food and beverage and other operating departments. That’s a big portion. F&B is very successful here, and that’s with only two outlets – Sydney’s and Au Premier. F&B is our window to the local market and to the promotion of our property – especially for the corporate market.

What is the profile of the Vendôme guest? Has it changed over the four years since September 11? How have you reacted to that evolution?

Since the events of September 11 and the SARS virus, the leisure section has increased tremendously. A number of factors have raised the profile of regional tourism and have led to an increase in demand for Beirut. During the leisure period, or high season period, around 70% of guests come from Gulf Cooperation Council [GCC] countries. During the business season, or low season, the origin is spread more between Gulf nationals and an increasing number of tourists from Europe.

There is a perception that one of the reasons many Gulf Arabs come to Lebanon is for the prostitutes. Some luxury hotels’ reputations have been affected. Has yours? Are prostitutes active in your hotel?

It’s a problem in Beirut. We have to face it. It’s not just a reputation. It’s a reality. However, the Vendôme policy is to stop all prostitutes from entering the hotel. However, during the summer, our guests from Arab countries are usually families and

often royalty. We do, though, of course suffer because of prostitution. And especially a place like Sydney’s, which is open 24 hours, can, if not controlled, become a hub for this type of activity. By now, though, we have a full profile of all the prostitutes in Beirut. We know who they are. That doesn’t mean we don’t sometimes have ‘incidents.’

Incidents?

Sometimes a guest brings a prostitute with him to his room. We cannot stop the client doing that. We cannot intimidate the client. But we make sure that when the lady leaves our staff escorts her. We have had incidents where we stopped certain ladies either entering or leaving the hotel and it emerged that they weren’t prostitutes. But the way they were dressed or ‘groomed’ made us think they were prostitutes. We had a big, big, big problem. A lot of people from outside were interfering, saying: ‘how could you do that to this lady. I know her.’ It’s a sensitive issue.

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Shopping Blues

by Executive Contributor
written by Executive Contributor

February 1997, when Hamra was blocked with shoppers and traffic was but a distant memory. The ads on international and regional satellite TV for the Lebanon’s February shopping festival may have become less frequent in the recent years, but few could have predicted its outright cancellation, hot on the back of record tourism figures and a new wave of modern massive shopping malls opening. To make matters worse, the decision came with no official explanation. “Political instability was the cause behind the cancellation,” said a source at the ministry of tourism. “The government didn’t want to allocate any resources to prepare for it.”

Merchants, however, will go ahead with the month long extravaganza as planned. “We prefer not to make any cancellations,” said Mohammed al-Khatib, President of Beirut’s Hamra shop owners. “Anyway they [government] didn’t do much last year,” he added.

The government’s role in the shopping festival, the first of which took place in 1997, is to coordinate all marketing efforts towards promoting the month long purchasing spree – be it through advertisements or hotel and air discounts. However, since 1999, the government has appeared to lose interest and tightened its belt and there has been little or no progress in developing Lebanon into a regional retail hub like Dubai.

Last year, during the first quarter of 2004, there were 202,422 visitors that came to Lebanon – a 33% year-on-year increase. However, economists predict, that while Lebanon’s overall tourism momentum will continue, monthly arrivals over the period of the “Non-Shopping Festival” will dip. In a somewhat damning indictment of ministerial planning and continuity, tourism minister Farid Khazen in January admitted that inadequate planning was the main cause for the cancellation of the festival. “We didn’t have enough time to achieve preparations,” said Khazen meekly, no doubt referring to the cabinet reshuffle in October.

MTC all set to slash

“It was one of the smoothest transitions we ever had,” said Said Nasir, MTC Lebanon’s chief commercial officer, speaking about replacing the telecommunications network inherited from Libancell by the Intelligence Network (IN) in mid January. A few people had trouble sending SMS for two days, but apart from that, the company received no complaints.

“IN is more transparent and easier to use,” said Nasir, “as both calls and SMS are not indicated in units, but in dollars. IN also enabled us to introduce a large number of value added services, which so far were reserved for people with a fixed line. Finally, as everything is indicated in dollars, it will also be easier to implement new tariffs.”

So far, tariffs have remained exactly the same: $0.47 cents for a phone call and $0.10 cents for sending an SMS.

MTC manages one of Lebanon’s two state-owned telecommunication networks, but can only do so within a pricing strategy determined by the ministry of telecommunications (MoT). However, according to Nasir, the MoT is serious about substantially reducing tariffs, maybe as early as spring. “The MoT is sensitive to public complaints and is well aware that Lebanon has one the world’s highest tariffs. In any case,” he added, “global research has shown that reducing tariffs will not reduce revenues. On the contrary, revenues increase as people are inclined to talk more.”

As early as June 2004, when MTC took over from Libancell, the company received a government proposal with seven possible ways of reducing tariffs, which included: a direct percentage cut, the introduction of off-peak tariffs, the billing of seconds instead of minutes and reduced tariffs for a client’s five to eight most dialled numbers.

Bling Bling

For a tranche of the Lebanese population, who in the words of one economist are “committed to conspicuous consumption,” New Year’s Eve was another opportunity to spend, spend, spend! Lebanon’s finances may be squeezed, but the country is still liquid; especially, it seems, on this biggest of party nights. One restaurateur revealed that revelers at his establishment had forked out as much as $1,000 each, double the average wage.

But just how much was spent? Economist Marwan Iskander conservatively estimated that around 25,000 to 30,000 people went out on New Year’s Eve, each spending on average $100 per person. This translates into rough countrywide 2004-2005 New Year revenue of around $3 million. “That’s a good figure for Lebanon,” Iskander said.

“New Year’s Eve is a big money night for us in terms of revenue,” acknowledged InterContinental Phoenicia sales director Maha Bourachi, who revealed that around 1,300 merrymakers paid up to $600 for dinner and live performances by Arab music stars Najwa Karam, Fadi Shaker and Nancy Ajam. In total, Bourachi said business for the night, including rooms, generated over half a million dollars for the hotel, roughly 16.5% of the country’s taking for the night, if Iskandar’s figure is to be believed.

Elsewhere, 1,400 punters, many from as far away as Japan, India and the United States, paid as much as $200 per head, to be – and be seen – at the hot-ticket, “Bling, Bling” party, billed as the biggest private party in town. Held at the Forum de Beyrouth, the bash generated revenues of around $200,000.

Not to be outdone, across town at the Regency Palace Hotel in Jounieh, 3,000 to 4,000 guests paid up to $400 a head to see Haifa Wehbeh, Georges Wassouf and the Four Cats. Wehbeh’s fee for the evening was a reported $30,000 per hour. Nice work if you can find it.

Bank shuffle signals end of an era

Fouad Siniora, the former minister of finance, was appointed as the new head of Banque de la Méditerranée, one of Lebanon’s largest and best capitalized banks. Siniora replaces Moustafa Razian, who helmed the bank for more than a decade, while Siniora during the same period intermittently took charge of the country’s finances. Banque de la Méditerranée is principally owned by the former prime minister Rafik Hariri, and that both Siniora and Razian have been Hariri’s advisors and partners within the Méditerranée group for decades. Razian – whose pay off was rumored to be in the eight figures – is expected to run Allied Bank on a full time basis. Allied Bank became Banque de la Méditerranée’s wholly owned subsidiary back in 2001, and is now aiming at becoming a specialized retail bank.

There is a sense of déjà vu. Siniora’s appointment is not a first. He was chairman of the bank prior to his first appointment as finance minister during Hariri’s first term in office as prime minister between 1992and 1999. Siniora’s re-appointment in the private sector has been interpreted by many within Lebanon’s banking sector as a sign that he is not likely to stage a comeback as finance minister any time in the medium or even long-term. Indeed, as many have pointed out, a chairman of a major bank such as Méditerranée needs to commit fully to the development of the institution and cannot afford to swap hats to suit the political climate. An intriguing notion then arises: should Hariri return for a third time, he would surely appoint a “new” finance minister. Say you read it here first.

IDAL targets local investors

The Investment Development Authority of Lebanon (IDAL) has wrapped up a nationwide campaign to raise awareness among Lebanese investors of the benefits of the Investment Development Law, raising the question what has it been doing for the four years that the law has been on the statute books. “We decided to launch this campaign now as we realized that too many people were either not familiar with the investment law or just didn’t understand how it applied to local investors,” an IDAL spokesman explained.

Entitled “IDAL beside you to achieve your investments”, the 2 ½ month long campaign which ended on January 31, 2005, held conferences in several regional Chambers of Commerce, to explain Investment Development Law 360 and offer incentives to assist potential investors implement and develop their projects according to a solid marketing strategy.

“Due to their unfamiliarity with the law, some potential investors aren’t aware of the many advantages the law offers, such as fiscal incentives, discounted work permits and so on,” added the IDAL spokesman. Adopted by the Lebanese parliament on August 16, 2001, the Investment Development Law grants a series of incentives to investors so as to stimulate the country’s social and economic development, as well as enhance its competitiveness.

Targeting the productive sectors of the economy such as industry, agriculture, agro-industries, tourism, ICT and media, the campaign also sought to encourage regional investment in Lebanon. “By launching this campaign throughout the country, we are also hoping to create more of an equilibrium, investment wise, between the regions”, the spokesman added.

IDAL was established in 1994 as a public institution charged with the promotion of investments in Lebanon and assistance to investors in the development of their projects. A One-Stop-Shop facility, it is meant to bypass all public administrations and authorities in issuing permits and licenses to investors.

Born again!

Born Interactive and Orange Clicks, two Lebanese agencies, merged on January 1, 2005, creating Born Interactive-OC, one of Lebanon’s largest interactive technology companies. Based in Beirut, the company is expecting a turnover of $1 million for the year 2005, 50% of which will stem from regional clients.

“The aim of this merger is to enhance growth and expansion for both of us,” said Fadi Sabbagha, general manager of Born Interactive. “By increasing our production capacity we can meet the growing demand for big, regional projects and compete with global and regional agencies.”

“Reaching a critical size is the main issue,” added Walid Hanna, general manager of Orange Clicks. “Because we have high fixed costs, we can double or even triple our revenue by increasing profit.”

While Orange Clicks has developed an important client base in Lebanon and in the Gulf countries, Born Interactive has built a portfolio of clients ranging from Lebanon to North Africa, France and the USA. “The two companies are very complementary in terms of market penetration,” said Hanna. “Furthermore, from an IT point of view, we complement each other as well: they have know-how that we don’t and vice versa.”

Both companies maintained the entirety of their staff during the merger, reaching a total number of 25 employees – a figure that is expected to increase. “We share the same company culture and vision,” said Sabbagh. “Although we plan on recruiting and expanding, we are also ensuring that our clients do not feel the transition.”

“Business wise this was a smart move,” admitted an industry insider. “In the website and e-solution industry, they are two of the most serious players on the Lebanese market.” The new company’s shareholders, composed of Walid Hanna and members of the Sabbagha family, elected Fadi Sabbagha as CEO. Hanna will be a board member and a minority shareholder, whose share is registered under the name of the TRINEC Group.

The SABIS effect

The SABIS International School will create a third school in Lebanon after signing a contract with Intered (the managing arm of the SABIS School network) and the Beirut-based Abniah general contractor company on October 21, 2004. The move comes as part of a greater international strategy, which will see the opening of six new schools in Syria, Bahrain, the UAE and the United States. 

The new school will be located on the hills of Adma and is scheduled to open its doors to students during the 2005-2006 academic year. The 75,000m2 purpose-built campus will be comprised of ten buildings, including educational facilities, a performance hall and sports facilities, such as an Olympic-size swimming pool and a soccer field. It will offer kindergarten, primary and secondary classes, with the capacity to accommodate up to 1,800 students.

An educational system which started in Choueifat, Lebanon in 1886 as an all-girls school, SABIS now counts 27 schools across four continents – the Middle East, Africa, Europe and the United States – totaling approximately 25,000 students. It is all part of the school’s strategy of catering to “mobile” families. “We have 29 different nationalities at Choueifat, including children of United Nations employees, of foreign companies. Families that move around,” said Victor Saad, VP Operations and Developments.

The tuition fees for the SABIS schools vary, even within countries. At Choueifat, fees range from LL5.4 million per year at kindergarten level to LL6.1 million per year for the upper secondary classes. Fees at the school in Khoura are less. Those for Adma have not yet been set.

“Tuition fees are set according to local culture and income levels,” Saad explained. “You can’t have an expensive school in an area where people can’t afford to pay for it, but although the tuition fees are lower, the school will provide the same services and obtain the same results.”

Dora Mall

The much-heralded $80 million, 200,000m2 City Mall in Dorah on the northern edge of Beirut finally threw open its doors, after some delay, in time for Christmas. Behind the doors, though, much was still missing. Only the 11,000m2 ground-floor hypermarket anchor Casino Geant – the first in Lebanon – has been completed. Still to come, according to Michel Abchee, CEO of City Mall creators ADMIC, are ground floor specialty shops (in February), more stores and a food court on the upper level (in March or April), an 18,000m2 BHV outlet (which will serve as a second anchor), a sporting goods store (anchor number three) and a nine-screen multiplex cinema, both by the end of 2005.

The opening of the only Casino Geant, in a first phase, was part of a calculated, staggered approach, Abchee explained. “If we had opened the whole thing at once it would have been unmanageable,” he said. On opening day, wires protruding from the walls of the empty halls leading to Casino Geant from the underground City Mall car park spoke of ongoing finishing work. Inside the hypermarket, a few of the items on display bore no prices and salespeople were unable to say what the prices were. One salesman spoke of chaos.

But Abchee was upbeat. “It was a rushed opening, but a good opening,” he declared. “We worked long hours to ensure it. But we opened because we were ready. Of course, people are still working but very little was unfinished. Prices change before, during and after any mall opening, to suit the market. There were a huge number of products. Some didn’t arrive on time. All employees were trained; some were trained better than others. Mistakes happen. But a phased opening was the right thing to do.”

Real estate observers were impressed. “It has everything time-wise, size-wise and location-wise to make it a success,” said real estate expert Raja Makarem of RAMCO. “Success doesn’t depend on the opening. It depends on quality. And quality depends on professionalism and expertise – which the Abchee brothers have. They know how to run a good mall.”

Tsunami fallout

In December 2004, tour operators Emirates Holidays paid a marketing visit to Beirut, together with the ministry of tourism of Mauritius – a small, scenic island in the Indian Ocean – and the Mauritian Tourism Promotion Board, to tap into growing Arab tourist interest in Southeast Asian destinations. The visit was robust and upbeat, Emirates Holidays vice president, John Felix, said: “Interest in the Middle East in exotic destinations is increasing. Mauritius is one of them. Travelers are becoming more sophisticated. They are looking for affordable luxury. The uniqueness of destinations is becoming more appealing. Honeymooners, for example, want exclusive destinations and we can offer that.”

Then came the wave. A death toll of 200,000 is not good news for tour operators. “There are no more bookings for Southeast Asian destinations,” lamented Lilian Daher, assistant to Nakhal Travel Manager Elie Nakhal, “even those not affected by the tsunami. We have a person who deals with Southeast Asia bookings. Now she is doing nothing. We will have to find other destinations for her.”

Before the tidal wave, in the run-up to Christmas, Nakhal had been flooded with Southeast Asia bookings.  Daher said she feared there would be no revival for at least six months. “There is no traffic towards South East Asia,” said an equally somber Ghassan Hitti, manager of the Association of Travel Agents in Lebanon. Things may pick up at the start of the season in mid-April. But there won’t be as many as before. People are afraid.” Emirates Holidays in Beirut were unavailable for comment.

Reaching for the stars

French-registered Star Airlines will begin services between Paris and Beirut on February 17, initially offering round trip fares starting at $452. Star will join more than 45 airlines already flying in and out of Beirut under an ‘open skies’ policy instituted four years ago. Until the high season kicks off in June, the airline will be offering two flights to Paris a week, leaving on Mondays and Fridays at 1:00am. Starting June 14, a Wednesday flight will be added.

Star says it is tapping into demand among the Lebanese in Lebanon and those who have emigrated to France for a cheaper alternative to the hitherto only direct link between Beirut and Paris offered by national carrier MEA in conjunction with Air France. In the past, travelers seeking lower fares had to use airlines offering an indirect service to Paris via a hub in Europe. Examples are Cyprus Airways, Alitalia, KLM, Lufthansa and Czech Airways.  It is from airlines like this that Star hopes to poach passengers.

“We won’t be able to take a share of the MEA/Air France clients because they have three flights a day, a frequent flier program, and bigger aircraft offering a more exclusive business class,” acknowledged Samaha.

Star will be operating a 164-seat Airbus 320 on the Beirut-Paris route. Interest in the service has indeed been strongest in Lebanon and among the many Lebanese expatriates living in France. “At a later stage we will be targeting tourists. That will require a lot of work, because it takes time to establish and develop a product. For the moment our main target is the Lebanese,” said Samaha.

An MEA employee, speaking on the condition of anonymity, said: “Star Airlines offers two flights a week. Business travelers and frequent fliers will always want the flexibility of three flights a day. Star may attract leisure travelers who don’t need to come back ‘the day after tomorrow.’”

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Editorial

Hate campaign

by Yasser Akkaoui
written by Yasser Akkaoui

The shot most of us saw as George Bush gave his second inaugural speech had John Kerry in the background.  The expression on his face was one of respect and understanding. The contest was over and now, even though he fought tooth and nail to remove Bush from office, he no doubt conceded that, at the end of the day, his ticket was not convincing enough for him to be standing at the lectern that day. Essentially, the battle was over who could aggregate the greatest interest in a plan that could satisfy the electoral needs, not between two individuals looking to feed their egos and those of their cronies.

In fact, ex-presidents Clinton and Carter and even senator Kerry, still, even in defeat, represent the USA and what it stands for, both at home and abroad. Dedicating one’s life to the public interest and the promotion of common values continues to occupy them to the extent that those whom they fought in elections often assign them the role of envoys.

There is mutual respect

In Lebanon, as the election build-up gathers momentum and with a new election law on trial, candidates are starting to show their colors at public appearances, accepting wedding invitations and unexpectedly attending funerals of “close friends”, in a bid to improve their chances at the ballot box. While all politicians need exposure at election time, the current crop of Lebanese candidates cannot back up the schmoozing with a coherent political vision. Swinging from left to right like a wayward pendulum, they have no idea what they stand for and find it almost impossible to present a mandate to their electorate and succeed only in insulting the intelligence of the people they seek to represent.

What is more offensive is the amount of hatred they reserve for each other. Their campaigns revolve more around how much pain they can inflict on the other during and after the elections and at times they seem no more eloquent that traditional story tellers of old, labeling any opponent an enemy of the state, a status automatically conferred upon him, if he is defeated.

However, the only enemy of the state is their ignorance. 

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Me, myself and Iraq

by Michael Young
written by Michael Young

A principal prop of liberal Western capitalist culture is individualism. The grand transformation of the European order came when people hitherto perceived mainly as components of larger social structures (often under the ultimate authority of a king endorsed by the Divine) slowly established secular systems where individuals played the defining role. The individual could now shape his own life narrative much as he pleased, agreed a contract with society to avoid mutual harm, but otherwise acted as an autonomous unit whose individuality was best embodied in the institution of democratic elections – “one man, one vote.”

So obvious were the merits of this scheme that it was with growing consternation that the United States struggled with it as the scheduled date for Iraqi parliamentary elections approached at the end of last month. The reason was that under the system chosen to govern the elections, individuals in Iraq might, in theory, have gained, but relations between the country’s religious communities, which are far more important in shaping social behavior, lost. Why is that? Because the electoral system chosen by the UN, and approved by the US-led Coalition Provisional Authority, virtually ensured that Iraq’s Sunni Arabs would boycott the process, fearing it would grant too much power to the Shiite community. The election law made the country a single constituency, with nationwide (and closed) slates of candidates competing for seats on the basis of proportional representation. The idea was that given a relatively high turnout by all communities, the ensuing parliament would essentially reflect Iraq’s communal and ethnic makeup. This rationale broke down, however, when Sunni Arabs said “no thank you.” For weeks politicians and analysts thought of ways to bring Sunni Arabs back into the fold to ensure the legitimacy of the new Iraqi order. Then one word began increasingly appearing in the media: “Lebanon.” For example, writing in the DAILY STAR, even someone as sympathetic to Arab nationalism as British journalist Patrick Seale could not help but observe: “The answer [in Iraq] might be to devise a system in which posts and power in a new Iraq are shared equitably between the communities, on the model of the National Pact that Lebanon adopted in 1943 to satisfy the aspirations of Muslims and Christians.”

Indeed, as the American concept of democracy–with its focus on the individual as a benchmark – faltered, consideration of more relevant regional alternatives became unavoidable. The Lebanese “consociational” system (based on a power-sharing agreement between the country’s varied communities) suddenly seemed to offer a possible way out of the Iraqi morass. Not surprisingly, at the end of December US officials began floating the idea of reserving parliamentary seats for Sunni Arabs, to ensure a balance in the legislature that will also be writing a constitution. Just as predictably, however, none of these officials wanted to go on the record with the proposal, and very soon it was Iraq’s election board that shot the idea down, with little public reaction from Washington. This was revealing, since in the American interpretation of individual-based democracy, communal set-asides are, simply, an aberration. The highest embodiment of individual rights is not, or should not be, the traditional religious, sectarian or tribal community, but the state and its representative institutions. But for a moment, the Americans did blink.

As well they should have, since Lebanon, for all its problems, has shown that a Middle Eastern country relying on a consociational system can also be relatively liberal, open, and devoted to the free market (even if the country daily witnesses appalling abuse of the notion, though almost never the free market’s being called into question). However, Lebanon’s civil war clouds the picture. For most outsiders, the consociational system led to the conflict of 1975-1990; but what they cannot understand is that the system also allowed Lebanon to survive as a single multi-communal society despite 15 years of carnage.

It would surely be too simple to transpose the Lebanese system to Iraq. However, as the US and a post-election Iraqi authority contemplate what types of political mechanisms might best apply to Iraq in the future, a first step is necessary: to reconsider the admirable, but also in the Iraqi case probably inapplicable, individual-based notion of majority democracy, and look at alternatives – most notably introduction of a consociational system that can better play off Iraq’s more traditional social structures. This effort would, at the least, enrich a global debate on democracy that far too often hits a brick wall when considering societies where sub-state groups are potentially more powerful than the state. Modern democracy is often too wedded to the idea of classical Western statehood for its proponents to readily consider that when a state is weak, the room for liberty might actually expand. Yes, a consociational system might make the Iraqi state less powerful, but it might also bring it much closer to liberal capitalist culture than any other.

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Economics & Policy

What goes down…

by Faysal Badran
written by Faysal Badran

Over the past few months, there seems to have been excessive but not unusual focus by market commentators and, to some extent, mainstream Wall Street strategists, about the dollar’s direction. In Lebanon, a highly dollarized economy, the issue has also been on the forefront as many Lebanese gauge their wealth in dollar terms. Those who have not diversified their liquid assets have seen their purchasing power halved vis-à-vis the euro, and the drop has been especially painful for importers of European goods.

This focus appears odd, since most of the large decline in the greenback started in early 2001 and has run nearly 40% against the euro (30% in Dollar Index terms). While the fundamental backdrop continues to be unkind to the dollar, there are some signs that in the immediate future, the drop may have reached a point of exhaustion of sorts. The overwhelming fiscal deterioration, the gradual erosion of federal re-flation attempts and ensuing poor maneuverability of monetary tools to the massive debt overhang, and the weak perception of US policy abroad are all well known fuel agents for the multi-decade bear market. And in some respect, a case can be made for the secular decline to continue well into the early part of the century, but for the near term, a different set of dynamics, more relevant for gauging trajectory at inflection points are telling a different story.

The short dollar trade from a technical perspective is crowded. The consensus is greatly leaning against the US currency, reaching only 4% of Bullish Sentiment according to Market Vane, and nearly all major media vehicles are writing the dollar’s epitaph. There is no real new dollar crisis, just a continuation of policies that do not favor the Treasury’s “strong dollar policy” dogma. But the acceptance of the dollar’s decline has become too widespread, and to some degree, this asymmetrical market situation will need to be corrected. With yield spreads converging on a 10 year note basis between the dollar and euro, there is room for the dollar to move up, in a countertrend fashion. Such moves can be brutal, especially since they mostly happen in a backdrop of continued “bad news.” The consensus view of how to solve the burgeoning US trade deficit gives the falling dollar a key roll. This view follows traditional economic theory, which supposes that a fall in the value of a nation’s currency, relative to the currencies of its trading partners, will eventually improve the trade balance of that nation. Alan Greenspan, the Chairman of the Federal Reserve, has made this argument. Early in 2004, he said: “The currency depreciation we have experienced of late should eventually help to contain our current account deficit as foreign producers export less to the United States.”
 

In the chain of reasoning behind this theory, the falling dollar presumably affects the trade balance in two different ways. First, as the value of the US dollar falls, the value of foreign currencies will rise; consequently the US dollar price of imports will also rise. Since, as a general economic principle, higher prices should reduce demand, the level of imports to the US should fall. And as demand for higher-priced imports falls, the US trade deficit will improve. Greenspan’s comment refers specifically to this effect. As a corollary of this, the higher price of imports will stimulate demand for equivalent goods that are produced domestically (so-called domestic substitution, such as buying US produced wine instead of imported wine).

Second, in the traditional theory, the lower dollar will also improve the US trade balance through the export side of the equation. Just as imports will become more expensive because of the lower value of the dollar, US exports will become less expensive in their foreign markets. And just as higher prices should curtail import demand, the lower dollar prices of US exports should stimulate demand for US made goods and services in foreign markets. In theory, through the intermediary of the lower dollar, the combination of higher prices for imports here and lower prices for US exports abroad will gradually bring down the huge trade deficit.


The US dollar has indeed fallen in value – for over two years now – but in reality how effective will this prove in improving the nation’s trade balance? Beginning in early 2002, the dollar had a value of about 117 (the US Dollar Index), measured against a group of major foreign currencies. It now stands at about 85, a decline of nearly 27%. Half of this decline has occurred since early this year, when Greenspan made the comment quoted above. A decline of this magnitude and over this length of time should certainly be sufficient to see whether the lower dollar has begun to have the desired effect of increasing US exports and decreasing imports.

To estimate the effectiveness of the lower dollar, we can compare the level of exports, imports, and the trade deficit in March 2002 with the most recent figures available when this was written. Over this time period, exports have increased 21% while imports have increased 35%. The monthly trade deficit itself has increased 70%, from $31.5 billion in March 2002 to $54 billion in August 2004. In other words, while the lower dollar may certainly have helped to increase exports, its effect on imports contradicts theoretical expectations, as they have grown even faster than exports. The result is a mushrooming trade deficit that expands even as the dollar falls. The situation not only runs counter to theoretical expectations, but to Greenspan’s expectations as well. One can only wonder what might be wrong with the theory.

When reality contradicts theory (whether in economics or another science), the source of the problem often lies in the assumptions that a theory makes about reality. In this case, traditional theory assumes that the value of our trading partners’ currencies float against the dollar. That is, the values of currencies are relative to each other: when the dollar falls in value, foreign currencies should increase in value relative to the dollar, and vice versa. But the real world is different. The value of some currencies does rise and fall against the dollar. However, the value of other currencies, notably those of some Asian countries, is either tied directly to the level of the dollar (a so-called hard peg) or tightly controlled relative to the dollar (a so-called soft peg).

For Lebanon, the collapse of the dollar has meant, along with lower rates, less pressure on the Lebanese Pound. Some pundits argue that had the dollar been too strong, some pressure on the local currency might have materialized. It is key here to remember that the low inflation/low interest rate environment in US has been a positive factor on monetary stability in Lebanon.

It is also relevant to note that in fundamental terms, the euro, Swiss et al, are not exactly safe havens when you consider the sticky unemployment and structural imbalance, not to mention immigration headaches. So while dollar bears, rightly, pound the table on poor US ingredients and misguided monetary chefs, a lot can also be said about European macroeconomic influences. Germany, the engine of Europe, is stalled in most statistical measures, and unemployment refuses to drop below 10%. The European central bank is caught in the straightjacket of inflation fighting and simply watches as the deflationary impact of a massive upward move in the euro hits home.

The blend of overdone technical factors and overly telegraphed risks make the dollar worth watching on the upside. Long term dollar based investors may want to look at decreasing their holdings in non dollar zones from a purely tactical perspective. The natural caveat to this scenario, which seems to point to a possible 15% up move in the dollar, is a sudden geopolitical event, or a negative systemic even in the US financial market, such as a large failure or a sharp dislocation in fixed income markets.

Here it is worth noting that the degree of complacency prevalent toward the euro (and most other major currencies) has an analog in the stock and junk bond market. The stock market euphoria goes unabated, still punch drunk from election fantasies, and junk bond spreads have narrowed to dangerous levels. It is possible for an asset market correction in the US to coincide with a dollar upswing, but only temporarily. If the secular bear in stocks returns with a vengeance, the dollar swoon would take on a new, more violent form.

In the meantime, a high degree of caution should be used when considering non dollar investments, as 2005 could be the year of the greenback bounce back. For the Lebanese trader, it seems some relief is on the way, and for investors, a chance to exit the dollar appears on the horizon in the year ahead.

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Society

It ain’t easy being green but industry is adapting

by Tarek Zein
written by Tarek Zein

Last month saw two major local cement producers, Holcim Lebanon and Cimenterie Nationale, both acquire an ISO 14001 accreditation – the International Standard Organization’s guideline for environmental management tools – and later announce that they planned to invest more than $5 million over the next five years and $15 million in the next four years, respectively, for the amelioration of the environmental performance of their plants in Chekka, an area blighted by environmental problems.

In fact, since 1996, Lebanese industrialists have plowed more than $250 million into safeguarding the environment. The simple truth is that a sound environmental policy enhances productivity, reduces operating costs, improves sales, bolsters marketing efforts and creates a better working atmosphere. What is even more surprising is that Lebanese industrialists have taken the hint. “In our case, our $30 million investment in environmentally friendly equipment, which we have installed over the past 10 years, has allowed us to pollute less,” said Pierre Doumet, chairman and CEO of Cimenterie Nationale. “And since we are not polluting, this means that we are not tossing dust in the atmosphere, and dust is essentially production as it is either our raw material or our end product. Thus, instead of polluting our atmosphere with our end product, we are now recuperating it, recycling it and becoming more effective. It is a virtual cycle,” said Doumet, whose company exported 40% of its 1.6 million tons of cement produced in 2004.

There are currently nine companies in Lebanon that are ISO 14001 certified, with over 15 others set to get it, including Sibline, another local cement company. There are a further 12 companies working on cleaner production processes and over 40 others implementing an Environmental Management System (EMS) without being ISO certified. Nearly all of these environmentally friendly companies utilize their ISO 14001 certification and EMS.

“It is a means to enter into foreign markets and sell to consumers that opt for products that have not damaged the environment,” said Fadi Abboud, president of the Lebanese Industrial Association. However, Cimenterie Nationale is one of the few that went for the ISO 14001 certification for ethical and marketing reasons. “We decided to acquire the certification because the Lebanese tend not to believe their own people and we were continuously being accused of killing people by polluting. So we thought it would be better to have an international body to back our work for protecting the environment,” said Doumet who added that the certification was granted by the auditing department of the Association of German Cement Manufacturers. This new environmental trend within industrialists is likely to exponentially grow as it is the fruit of a decade of work orchestrated by a special environmental committee integrated within the Lebanese Industrial Association (LIA) – which is in direct partnership with the ministry of environment.

The environmental committee was created in 1994 with sole purpose to study the best environmentally friendly policy the industrial sector should adopt and then implement it. And when the committee found out in 1998 that ‘cleaner production’ was the best policy to espouse, it has since been working on helping companies throughout Lebanon understand the benefits of being environmentally friendly as well as drafting a common strategy that would make Lebanese industrialists abide by the international environmental standards and laws while making them more competitive. “We are planning to finish the final draft of this common strategy by February. It will explain what laws and standards to opt for, how to enforce the strategy through economical rewards by describing what should be the stick and the carrot for industrialists and how we will deal with industrial waste,” said Hisham Abou Jaoude, the secretary of the LIA’s environmental committee. “It will also include certain requests directed towards the Central Bank as well as the government.”

Changing the status quo

According to Abou Jaoude, one of the main problems hindering the adoption speed of EMS is caused by the lack of soft loans and the allocation of money for environmental purposes. “If I was to go to a bank and request a loan in order to implement EMS, the banker would simply stare at me astonishingly, as if I was insane,” said Abou Jaoude, “and we want to work with the Central Bank to find a way to change this mentality and help reduce interest rates on loans related to the environment.” A United Nations Environmental Protection (UNEP) study clearly illustrates the financing problem in Lebanon by stating that it is not beneficial for a firm to implement EMS or introduce cleaner production processes if loans are shadowed by an interest rate above 5%. “One of the main problems for small and medium sized (SMEs) companies is to find cash to invest in environmental policy and machinery. If you look at it coldly as an investor, maybe you don’t get an internal rate of return that warrants the investment purely on financial ground, but believe me it is still rewarding and is hugely satisfying on many other levels,” said Doumet.

Setting the bar

Being environmentally friendly has become a good benchmarking tool worldwide because if a company is reducing its waste, then it is also reducing it cost, which in turn makes the business more effective – due to the utilization of BAT (Best Available Technology) – and competitive. However, SMEs have a clear disadvantage in adopting environmentally friendly policies due to tough access to cash. SMITE, a Mediterranean information web-based node for the SMEs, will help improve competitiveness of SMEs through IT-based environmental business planning – a new tool that is expected to re-orient production processes, products and services; ensure and consolidate efficiency, quality, occupational health and safety and environmental performance; and increase productivity efficiency by reducing environmental burdening. The multi-party project will support SMEs of the food, textile and hotel sectors with up-to-date tools and access to environmental information.

Industrial Waste

“The common strategy drafted by LIA’s environmental committee plans to solve up to 70% of all national industrial waste through an intra-industry solution,” said Abou Jaoude. As an example, in 1994, the Ministry of Environment ordered Sidem, an aluminum production company, that it should treat the liquid waste that was polluting the shores of Kesrouan by purchasing a treatment plant. After investing $750,000 and being reassured by the ministry of environment that the sludge that will be produced by the treatment plant will be stored in a safe location, Sidem employees were ready to re-activate the plant. However, one problem emerged: the ministry of environment had not found a location to store the sludge and the treatment plant remained silent till 2004, when Sidem found a solution to their problem by entering into talks with Holcim Lebanon. After running several tests, Holcim discovered that the sludge that was produced by Sidem could be used as a raw material, allowing the environmentally friendly treatment plant to run. “This is the kind of intra-industry environmental partnership we want to introduce by setting a bank for industrial waste. And later on, we could also find solutions that would allow the industrial sector to solve household waste,” Abou Jaoude added. Abboud, who has been constantly pushing for the adoption of environmental policies, believes that all the steps that have been taken by his association and companies are a good start for the country’s environment. However, many problems are still widely present. “At the moment it is so very expensive to recycle in this country hence you would see whenever you are driving near the port of Beirut hundreds and hundreds of trucks filled with aluminum, steel, brass and copper because we cannot afford to recycle them if the ton of diesel is $400 and the ton of fuel is $500,” said Abboud. “All solutions with the environment start with industrialists because if we recycle what we should be recycling, then half of our problem would be solved. The government needs to understand this and lend us a firmer hand.”

What is ISO 14001 and EMS?

ISO 14001 is a standard in the ISO 14000 series that provides a specification for a complete and effective EMS. As a specification standard, it can be used as an audit tool, to evaluate whether an organization has a complete EMS in place. ISO 14001 specifies the elements and tools that must be in place for an EMS to be complete and effective.

These tools can provide significant tangible economic benefits, including reduced raw material/resource use; reduced energy consumption; improved process efficiency; reduced waste generation and disposal costs; and utilization of recoverable resources.

An EMS is a structure of connected elements that define how an organization manages its environmental impacts. These elements include policies, organizational structure, procedures, goals and objectives, and defined processes. In order to be effective, all of these various elements must work together cohesively and be a part of the overall business management system.

What EMS elements are required by ISO 14001?

ISO 14001 states that a comprehensive EMS must include the following elements or activities:

– Establishing an environmental policy

– Establishing environmental objectives and targets and implementing plans for meeting these

– Evaluating environmental aspects and impacts

– Identifying regulatory requirements and evaluating compliance with requirements – Defining roles and responsibilities

– Identifying and providing necessary training

– Communicating effectively

– Documenting processes that affect environmental impacts

– Controlling parameters that affect environmental impacts

– Evaluating which suppliers’ goods and services affect environmental impacts

– Preparing for emergency situations

– Monitoring and measuring critical environmental parameters

– Initiating corrective actions when problems occur

– Maintaining environmental records – Auditing the EMS

– Evaluating and reviewing the EMS to ensure it is effective, suitable, and adequate for your organization.

Does ISO 14001 set emissions or discharge limits?

Absolutely not. ISO 14001 helps organizations to develop and implement their own, unique environmental management system. You set your own policies, determine your own objectives and targets, and define your own procedures. Then your systems help you to meet your policy and objectives. ISO 14001 tells you what elements need to be in place; you decide exactly how to define and implement those elements.

What kind of organization can use ISO 14001?

ISO 14001 is intended for any kind of organization – business, school, hospital, non-profit, etc. – that wants to implement or improve its environmental management system. It applies equally well to both service and manufacturing organizations and to both non-profit organizations and for-profit businesses. ISO 14001 provides plenty of flexibility to do what’s right for your own unique organization.

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