Land of miracles

by Yasser Akkaoui December 1, 2004

written by Yasser Akkaoui

Never has the Lebanese entrepreneurial spirit been so successful in confronting adversity. Not since the freewheeling days of the civil war has it risen to the challenge of leading the way in its journey from underdeveloped economy into emerging market and its role as the region’s creative hub, in a time of raging uncertainty, both at home and abroad.

In Lebanon, a complete absence of public policy for economic growth, coupled with the eroding effects of self-interest by those who claim to serve the national good, has contrived to sabotage the natural instincts of free enterprise, while from Ramallah to Falluja, the region continues to bubble and spit on the region’s hotplate. Where economic freedom is either snuffed out by the specter of terror or squeezed by those who refuse to embrace sound economic principals, the Lebanese entrepreneur survives and thrives.

Lebanese industry should be out for the count. Faced with an indifferent government and the region’s highest fuel bill, it not only lives on but, in 2004, recorded increased exports. The banking sector continues to demonstrate its vision by expanding beyond its borders, while Lebanese capital markets have also shown they can punch above their weight. Then there is tourism, touted as the cornerstone of Lebanon’s future, has been wholly driven by the private sector. The Lebanese property developer has also been busy, accepting and meeting the challenge of increased demand for luxury living and new retail developments. It is amazing that such growth can occur in such a seemingly barren economic landscape. Imagine what could be done in a more transparent and competitive environment.

In this annual issue, EXECUTIVE is, more than ever before, fulfilling its editorial mission by reporting the local, regional and international achievements of corporate Lebanon across all sectors, giving it the importance it deserves. EXECUTIVE has proved that it is the true voice of corporate Lebanon by bringing together in this remarkable publication the ideas, thoughts and opinions of over 50 experts and insiders. Their collaboration is a mark of mutual respect and an affirmation of the partnership that EXECUTIVE has fostered over the years. The result is an unprecedented, objective and genuine portrait of the forces that drive the engines of our economy.

EXECUTIVE salutes Lebanese industry, Lebanese business and Lebanese businesspeople; they have shown that the free entrepreneurial mind is bigger than ignorance and parochial dogma.

December 1, 2004 0 comments

Cover story

Coup in Africa

by Peter Speetjens November 30, 2004

written by Peter Speetjens

On October 9, Jose Olo Obongo, attorney general of Equatorial Guinea, announced to file an extradition request with the Lebanese authorities for three businessmen who we shall call EC, KF, and HM. The trio, all wealthy Lebanese, are suspected to be part of what is rapidly unravelling into an international scandal, stretching across continents and involving some of the world’s most high-profile personalities.

To insiders, it has become known as the “time share coup,” linking over a dozen multi-millionaires from Lebanon, South Africa and Britain, who have allegedly chipped in to finance a group of mercenaries led by a British ex-SAS officer Simon Mann to topple Teodoro Obiang Nguema, president of Equatorial Guinea, the oil rich nation that has become known as the “Kuwait of Africa.”

The plot could have been lifted from the pages of The Dogs of War, replete as it is with secret agents, front companies, mercenaries, and shadowy links to the intelligence services and political elite of Great Britain, the United States, as well as Spain, which it is alleged, had planned to land a force of 500 marines in Equatorial Guinea as soon as the shooting started.

But on March 7, a Boeing 727 carrying 67 South African mercenaries landed in Zimbabwe at Harare International Airport. They were to meet with Mann to buy weapons from the Zimbabwean Defense Industries. The shopping list was extensive: 61 AK47 assault rifles, with 75,000 rounds of ammunition, 20 light machine guns, RPG launchers and 150 hand grenades.

Unfortunately, the Zimbabwean army was waiting. The next day in Equatorial Guinea Nick du Toit, a South African mercenary turned arms dealer and 15 ‘associates’ were also arrested. The two governments had been tipped off by the South African intelligence services that the two gangs were part of the same private army. For his part, South Africa’s intelligence minister, Ronnie Kasrils, praised his security services, which he claimed had infiltrated his country’s swollen ranks of guns for hire.

After his arrest, Mann, speaking through his lawyers, maintained that he and his men were on their way to guard a mine in Congo, even producing a contract to back up their claim, despite the fact that he and his men were carrying an awful lot of hardware to just guard a mine.

Rather more embarrassing was Du Toit’s admission on March 25 that Mann’s story was “a smokescreen” and that he, Du Toit, was in fact leading an advance party for Mann’s main group. While hardly a unique military master plan, this was a similar modus operandi to that used by Executive Outcomes, the mercenary outfit that operated in Angola and Sierra Leone in the mid-1990s and which employed both Mann and Du Toit.

Then there was the issue of who was financing the whole operation. This is where the story is elevated from a botched coup attempt into an international scandal; and this where the three Lebanese come in. In his confession, Du Toit mentions EC, a wealthy and high profile London-based Lebanese businessman, along with several British millionaires as the financial backers of the coup. Mann backed the claim. “EC had done his homework and knew I had worked with Tony Buckingham,” wrote Mann in his confession, while he maintains it was EC who introduced him to Severo Moto, Equatorial Guinea’s opposition leader living in exile in Spain.

“I met Moto in Madrid,” Mann also wrote. “He was a good and honest man. He once studied to be a priest, but had stopped to better take care of his people. They asked me if I could accompany Moto home, the moment a military and popular uprising would take place. I agreed in an attempt to help the good cause.”

According to the authorities of Equatorial Guinea and Zimbabwe, Moto had offered Mann $1.8 million and a considerable oil concession. They also accused the Spanish government of being involved, citing as evidence, the presence of two Spanish naval vessels off the coast of Equatorial Guinea on March 8. Spain has, of course, denied the allegations.

Du Toit and Mann later withdrew the confessions, arguing that they were made under torture. In a letter smuggled out of prison to his wife but later intercepted by Zimbabwean authorities, Mann urgently pleaded for help. Again EC is mentioned.

Mann writes that he met him in January 2003 and goes on to say: “Our situation is not good and very urgent. What will get us out is MAJOR CLOUT. We need heavy influence of the sort that Smelly, Scratcher and David Hart can provide,” adding: “our lawyers get no reply from Smelly and Scratcher, who [were] asked to ring them back after the Grand Prix was over. This is not going well. It may be that getting us out comes down to a large splodge of wonga! Of course investors did not expect this to happen. Did I?”

“Smelly” is EC, while “Scratcher” is none other than Mark Thatcher, son of former British Prime Minister Margaret Thatcher. It is not the first time his name has cropped up in this shadowy world. For years the British press has wondered how a private school dropout, amassed an estimated $90 million fortune.

It is thought that, apart from marrying an American millionaire’s daughter, “the boy Mark” received ‘payments’ of up to $12 million in the $20 billion Al Yamami arms deal between Britain and Saudi Arabia. In 1989, the British National Audit Office (NAO) conducted an official investigation into Thatcher’s finances, the details of which remain a state secret. It is the only inquiry in the NAO’s 100-year history that remains off limits to the public.

Mark Thatcher also happens to be Mann’s neighbor in, Capetown’s affluent Constantia neighborhood. When he was arrested in his pyjamas in XXXX, his suitcases were packed and his $3.5 million house put on the market. His wife and children had already left for Texas. Understandably, Thatcher’s lawyers maintain their client had nothing to do with the coup. They claim the $200,000 Mann was owed by Thatcher was for a mining operation in Sudan.

But Mann’s letter is not the only reference to EC and Thatcher.

This summer, Simon Mann’s accountant, 24-year-old James Kershaw, turned himself in to South African police. He had had in his possession the so-called “Wonga (money) List,” which names all those who invested in the coup, including EC and Mark Thatcher. Kershaw has since entered a special witness protection program.

And Thatcher’s is not the only name drawn from the upper-echelons of British politics. So too is millionaire David Hart, the man who, as part of Margaret Thatcher’s government, broke the power of Britain’s miners in the mid-80s. Another on the list is disgraced Conservative peer and bestselling author Jeffrey Archer, who recently spent 2.5 years in prison after being convicted of perjury. Archer, also a friend of EC, initially claimed to have had no contact with Mann. However, when it was proven he transferred some $135,000 to one of Mann’s many offshore accounts, he claimed he didn’t know the money was meant for a coup.

Back in Zimbabwe, Mann has been sentenced to seven years imprisonment, while his men face up to 12 months in jail. Nick du Toit awaits trial in Equatorial Guinea. The country is also actively seeks the extradition of Mark Thatcher and his fellow investors. Their chances of success are slim, especially as much of the evidence was obtained under torture. Equatorial Guinea also has a poor human rights record and still carries the death penalty.

Meanwhile the battle to extradite EC, KF and HM goes on. Last month, Jose Olo Obongo presented his case for extradition, accompanied by his lawyers, Henri Page from the British law firm Penningtons and his Lebanese counterpart Michel Tueni. According to Page, the request is based first of all on the confessions made by Mann and Du Toit. “I prefer to call them statements,” he said, “for they are much more than just an I-did-it confession.”

Next to the statements, Page pointed to the letter written by Simon Mann to his wife, the famous “wonga list” and especially to the contract signed between a company owned by KF and HK, Asian Trading and Investment Group SAL, and Mann’s Logo Logistics. The $5 million contract details a “mining, fishing, aviation and commercial security projects in a country in West Africa.”

“Finally,” he said, “we have further evidence that cannot be disclosed at this stage yet.” Page has also taken legal action against several banks in the Channel Island tax haven of Guernsey in an attempt to force them to open Mann’s accounts, which will not be an easy nut to crack.

The case continues.

(BOX)

KF is a 30-something Lebanese businessman, who runs an oil and gas servicing company in the Middle East and Sudan. Speaking exclusively to EXECUTIVE, KF admitted that EC and HM are both friends and business associates. He also admitted to being a good friend of Severo Moto, the Equatorial Guinean opposition leader who lives in exile in Spain, the country’s former colonial ruler.

“I love that man,” KF said. “He is a man with a vision. He is well respected in Spain and the USA, the main powerbrokers in Equatorial Guinea, and I believe sooner or later he will become president.”

KF went on to say that he met Simon Mann and went into business with him. He denies, however, that he knew anything about a coup. “The proof they have,” KF said, “is first of all the confession of Simon Mann and Nick du Toit, but both were obtained under torture and have been since been retracted. They are worth nothing, while the letter to his wife is not admissible in court.”

“Thirdly,” he said, “our contract with Mann’s Logo Logistics is registered and completely legitimate, and it had nothing to do with a coup.”

According to KF there is something fishy about the whole case. “EC did introduce Mann to Moto,” he said, “but it was Mann who first contacted EC.” Mann was asked by a powerful Russian diamond dealer to make a risk assessment of Equatorial Guinea with an eye on mining opportunities. That’s why Mann not only met Moto, but many Guineans. So far, no one has examined that road.”

“Another strange thing,” he added, “is the fact that Nick du Toit founded a company called Triple Options with the brother of several Obiang family members. The company dealt with fishing, air transportation, as well as training the presidential guard. Why would he risk all that in a coup?”

According to Page, however, “it is clear that Du Toit’s Triple Option was but a front company, and you need local partners in Equatorial Guinea to set up a company.”

KF concluded by saying that: “If the whole thing was a coup attempt, it’s clear that the money we invested was used for quite different purposes. And if it was a coup attempt, it’s unfortunate it failed, as Obiang is a ruthless dictator, who is even accused of having eaten his opponents’ testicles.”

It might be more than coincidence, KF maintained, that Du Toit’s lawyer was found dead on October 11, the niece of Severo Moto was found dead a few days earlier and the head of the Red Cross, Elias Marco, who made remarks about the prison system, was killed in a mysterious hit and run accident in September.”

(Box ) Lebanon’s millionaire man of mystery

Born in Nigeria, EC, who is accused of having put $750,000 into the coup, is a very wealthy and influential business tycoon of Lebanese descent. He is worth an estimated $250 million, supposedly from oil trading. He owns villas in Nigeria and Switzerland, as well as a $25 million mansion in Chelsea, London. Not much is known about EC, now in his late 50s. He was, until very recently, known as “the kingmaker of Nigeria” with business interests all over Africa, including Chad, Libya, Sudan and Senegal.

He is very discrete, yet well connected and counts friends Syrian millionaire Wafic Said, Mark Thatcher and Lord Jeffrey Archer, the latter two being implicated in the Equatorial Guinea coup plot. He married three times, once to Hayat Mroue, now Lady Palumbo. One of his daughters is a photo artist, while a son is a minor actor in Holby City, a UK hospital drama. He also starred in Steven Spielberg’s Band of Brothers. (In June 2003, he was involved in a minor scandal when his girlfriend, a fellow actor in Holby City fell to her death in suspicious circumstances from his Chelsea apartment.

EC categorically denies his involvement in the coup

(Box) Gentleman soldier Simon Mann

Simon Mann is the son of George Mann, a former English cricket captain and heir to the Watney Mann brewery. Mann first studied among the sons of princes and politicians at Eton and went on to Sandhurst to embark on a military career. He eventually joined the elite Special Air Services (SAS) and served in Cyprus, Northern Ireland and Central America. In 1981, he left the army to set up his own security company, specializing in computers and bodyguards. In 1989 however, he was asked to return to the British army to be the right hand man of General Peter de la Billiere, the commander of the British forces in the Gulf War and himself a former SAS officer, who in the 1960s fought Britain’s secret war in Yemen.

In the early 1990s, Mann met with Anthony Buckingham, a former marine and owner of a string of oil and diamond companies, in which he made a fortune in Africa. In 1993, Mann, Buckingham and Luther Eben Barlow, a former commander of the elite South African Buffalo 32 battalion, registered the company Executive Outcomes (EO) on the Isle of Man.

EO offered everything from military training and security to actual warfare. In 1993 it signed a contract with the Angolan government to clear the country from rebels. Value: some $40 million and an oil concession. In 1996, it signed a contract with the government of Sierra Leone to do the same. Value: some $36 million and a diamond concession. In both operations, Nick du Toit served as commanding officer.

After South Africa introduced a ban on mercenary activities, EO officially ceased to exist, yet it continued its activities under other names, such as Sandline International and Lifeguard. Mann, with Tim Spicer, returned to Sierra Leone in 1998 and Papua New Guinea in 1999. EO, or remnants of the company, still has interests in several African countries, among which are Angola, Sudan and Uganda.

Until he was arrested in Zimbabwe, the former British special forces officer led a millionaire lifestyle, owning the former Rothshild estate in Hampshire, a multimillion dollar villa in Capetown and flew the world in his private jet. In early September, he was sentenced to seven and a half years imprisonment for possession of illegal weapons and spends his days in the notorious Chikurubi prison in the Zimbabwean capital of Harare.

(BOX) President Teodoro Nguema Obiang and family

Born in 1942, Teodoro Nguema Obiang came to power through a coup d’etat in 1979 that toppled his uncle Francisco Macias Nguema, Equatorial Guinea’s first post-independence president. Nguema was one of Africa’s most notorious dictators, who banned anything that remotely reminded him of ex-colonial masters Spain and the Catholic Church. By the end of his reign, one third of the population was either dead or in exile.

The current president has a slightly better reputation. He started his reign robustly by executing his uncle and releasing some 5,000 political prisoners, but today heads one of the world’s most repressive regimes. According to organizations such as Human Rights Watch and Amnesty International, there are no free elections, no freedom of speech, while torture is common practice.

But what else can one expect in a country where last year state radio declared that the President is “a God who is in permanent contact with the Almighty and can kill anyone without being called into account.”

With an eye on the country’s abominable human rights record and a death threat sent to its US ambassador, the USA closed its embassy in 1995. Under the reign of George Bush however, the embassy was reopened following intensive lobbying by US oil firms such as Exxon, Chevron, Marathon and Amerada, which profit from Africa’s third largest offshore oil reserves, found in the mid-90s in the bay of Equatorial Guinea. So far however, the population has not benefited from the black gold. According to the IMF some 75% of the income goes directly in the pocket of President Obiang and his family.

An official investigation led by US Senator Carl Levin has found that the US oil firms mentioned above directly transferred funds into Obiang’s accounts at Washington’s Riggs Bank, reaching estimated $700 million. The accounts have been frozen, while the prestigious Riggs “diplomats” Bank has been fined $25 million. Meanwhile, America’s financial supervising body, SEC, has started an official investigation into the behavior of US oil firms operating in Equatorial Guinea. Though on paper, one of the richest countries in the world, Equatorial Guinea and its 500,000 inhabitants remain among the very poorest.

Finally, mid-October President Obiang arrested his brother Armengol, head of security, and 27 of his followers, accusing them of attempting to stage a coup against him. According to opposition figures in Spain, the cash-stripped Obiang had asked his brother to give up part of the $450 million he has stashed away in Egypt, but Armengol allegedly refused.

November 30, 2004 0 comments

For your information

Des Hetherington

by Executive Contributor November 30, 2004

written by Executive Contributor

British Mediterranean Airways, the carrier offering daily service between Beirut and London Heathrow, has added two new destinations to their schedule this year and just resumed flying to Georgia’s capital Tbilisi. Although attracting less media attention than its larger partner, British Airways, commands BMED has interesting stories to tell and things to celebrate. On reaching the corporate milestone of accomplishing 10 years of operations, BMED CEO Des Hetherington came to Beirut. Executive talked to him about the airline’s experience with the Lebanese market and its performance in a time that brings many challenges to the air transport business.

Why did you choose Beirut to stage a birthday bash on your 10^th anniversary?

The 10^th anniversary is a significant anniversary in any industry and particularly the airline industry, and of course Beirut is our spiritual home because that’s where it all started.

How was BMED performing over the last 18 months in Beirut and the Levant?

Business hasn’t been as good out of Beirut as we had hoped it to be. But overall, our business here has been approximately the same this year as it was last year.

If performance here was less than perfect, was that related to the fact that Beirut has open skies while the hinterland airports do not, meaning you cannot offer flights between Beirut and nearby destinations such as Amman or Damascus?

No, that’s never been the most important. The most important thing in terms of getting the economics right is the number of customers we bring from the Lebanon to the UK but also from the Lebanon to the rest of the world. As you know, BMED is a franchise partner of British Air and 40% of the customers that we transport between London and Beirut actually go from the Lebanon to other parts of the world, or from other parts of the world to the Lebanon.

Isn’t it correct that BMED was going up and acquiring planes at a time when your partner airline BA was forced to downsize in 2002/2003?

The start to answer that question is that people have to understand that BMED is a completely different sized animal from BA. British Airways operates about 350 aircraft; we operate six. We therefore have the ability almost to go against the trend where every airline in the world has had a very difficult three years after the tragic events of 9/11. As you rightly said, we have expanded our operations. We have increased our number of customers, number of aircraft, the number of destinations. So for example, in the last two years we started new routes to Tashkent in Uzbekistan, to Khartoum in Sudan, to Yekaterinburg in Russia.

How many destinations do you have now in total, and how is the situation in Georgia where service had been halted over a year ago?

We have 15 destinations in 14 countries, and I am delighted to say that on this Sunday [October 31] we resumed service to Tbilisi where we had had very artificial differences with the old government. After the new government came in as part of the rose revolution at the end of October 2003, we were immediately contacted and the differences have been resolved.

And your basic business split is between the Middle East – North Africa region and central Asia?

We like to think of it as three businesses within our business. One is the heartland, that is Lebanon, Syria and Jordan. The second area is Egypt, Ethiopia and Sudan. The third area, which is growing faster than the first two, is central Asia, that great sway of countries from the Caucasus to the western borders of China.

Can you disclose any turnover figures and passenger numbers?

Yes, last year was the best year in the company’s history, following the previous year, which was also the best year in the company’s history, and which we hope will be followed by this year. This year, we will look after about 370,000 customers. We have a turnover of about $180 million and provided fuel – that is the one difficulty we will all have to come to terms with in the industry – we will have record numbers compared to previous years.

How much of that turnover comes out of Beirut or the heartland business?

Specifically out of the Lebanon, approximately 13% of all the revenue in our business.

Apart from the volatility of oil prices, how important is the potential volatility of political circumstances on your particular business model, as you fly to some destinations that are slightly more volatile than the big markets?

It has an impact and it would be a lie to say otherwise. However, it is extreme political circumstances that have an impact on our business. The events in Iraq were the most extreme version of that, and during the April-May 2003 period, our business to Syria, Jordan, and Lebanon, was significantly lower. The interesting fact is, however, that immediately after the formal end of the war, our business has recovered very quickly.

In terms of your corporate culture, are you more “B,” as in British or more “Med,” as in Mediterranean?

I think we are more B – that’s the proper B as opposed to the unmentionable B. One of the things that we have done recently is that we changed our branding, from British Mediterranean Airways to BMED. The reason we made that change that the name was a bit of a mouthful, particularly when you using it in advertising or PR. So BMED actually no longer means Mediterranean, it doesn’t actually mean a great deal, just BMED.

What core values do you espouse in your corporate culture?

When we opened the business we were just 40 people and we had a great esprit de corps, everybody knew everybody. We have grown to a business with 650 people with different cultures and different languages but we wanted to maintain our esprit de corps, and I think so far, we have been able to do that. Our three priorities are safety, service, and having fun. That’s what its all about. And if you want to test the corporate culture of BMED, the best place to test it overseas is here in Beirut. We got a fantastic team here.

The hot topic in Lebanon over past six months was increase in inbound tourism. Did that show in your business?

I am a very, very pleased to say that we started to see an increase in European business and in particular British customers coming back to Lebanon. The other interesting development in terms of tourism is that Beirut is starting to be seen as a short break destination. Certain British customers can come here and spend three nights over a long weekend, enjoy the sights of Beirut or go up to the Bekaa. That market is growing.

What are your plans for developing the service to Beirut in the near or mid term?

We now have 16 services per week, so just slightly more than two services per day to cover four destinations, two in Syria, one in Jordan, one in Lebanon. I would like to get back to a level as in the year before the intifada was declared, in October/November 2000. In that year, we had a daily terminating service to Beirut, eight flights per week and we had our services to Jordan, which essentially were stand-alone services.

So one year from now, how many BMED flights would you like to see coming into Beirut?

I’d like to see a straightforward daily service that comes to Beirut and goes back from Beirut. I’d like to see us get back up to about 20, 22 services a week to the region but I think it is going to take a couple of years to do that.

How about the diplomatic interference and possible repercussions on Lebanon and Syria from UN resolution 1559? Could that affect you?

You are now taking me to areas of politics and I find business difficult enough…. No, because my understanding of the political scene is that the British government would need to place those sanctions on my business. I don’t see any of that. I see a great willingness particularly from the European Union to engage in not only with the four countries in the region but I see great willingness from the EU and very much from our own government in the United Kingdom to assist in the process of regional stability and I applaud that.

November 30, 2004 0 comments

For your information

IMF

by Executive Contributor November 30, 2004

written by Executive Contributor

The International Monetary Fund (IMF) has opened its regional office in Beirut tasked with helping Middle East countries, including Afghanistan, upgrade their economic, monetary and fiscal policies. The Middle East Technical Assistance Centre (METAC) will initially provide Afghanistan, Egypt, Iraq, Jordan, Lebanon, Libya, the Palestinian territories, Sudan, Syria and Yemen with technical assistance in the domains of central banking (banking supervision, structuring, payment systems, resources management and monetary operations) as well as public expenditure, revenue and tax management.

METAC, which will employ between 10 and 12 staff, is the fifth regional IMF office of its kind. Others already exist for East and West Africa, the Caribbean, and the Pacific. Initially, the emphasis of this office was to be focused on post-conflict countries such as Iraq, Afghanistan, the Palestinian territories, and Sudan. But its scope has since been broadened.

Significantly, the inauguration coincided with a warning in Beirut by visiting IMF managing director Rodrigo de Rato that Lebanon is still economically vulnerable (primarily because of its massive public debt) and he urged the government to enact long overdue reforms. METAC will be offering assistance. But observers caution that in the absence of political will on the part of the Government this assistance will be worthless.

“We can design a program,” said METAC Coordinator Sami Geadah, “but if there’s no political will it will lead to nothing. Why establish the office?”

“I am afraid that in the absence of a local Government policy, this office will play a substitute role,” said economist Kamal Hamdan. “The pre-requisite for its success is a Government predisposition to the implementation of big reforms.”

Asked if that predisposition existed in Lebanon, he responded: “I don’t think so.”

The choice, he added, is stark: “Either they go for reform, or we will continue approaching a catastrophe.”

Vinifest

Last month saw Vinifest, Lebanon’s first wine festival, held at the marina in the St Georges bay. The four day event, which included live music, brought together almost all of Lebanon’s wine producers (the only absentees being Massaya and Heritage), many of whom were initially skeptical of the concept. “We didn’t think that many people would be prepared to pay the $10 entry,” said Natalie Touma of Clos St Thomas. “Happily, I was proved wrong. We were packed every night. Fadi Gerges of Clos de Cana, who brought along a cart full of grapes and three young ladies to tread them, was also encouraged by the reaction of the public. “We did very well. It was very exciting. People tasted my wines and then called over to their friends to come and try it. I even took orders.”

The festival is a much-needed boost for Lebanon’s $27 million wine sector. Filled with promise only a few years ago, it has seen its wine tourism initiative sink without a trace and the prestigious OIV congress, initially earmarked for Beirut in 2005, cancelled. Contributing to the sector’s stuttering progress is apparent never ending delay in the establishment of a national wine institute, which is essential for the regulation of sector that can be prone to abuse.

Overall, however, the performance graph is nudging upwards. Lebanese wines are winning more and more plaudits abroad and Ramzi Ghosn of Massaya, which was not present at Vinifest, believes the industry should have more vision to capitalize on these successes. “As a wine party, I hear it [Vinifest] was a success, but we should be looking to hold bigger, more adventurous festivals to attract the international buyers and high-profile wine writers. Then we can say we have a wine festival.”

Daily Star heading for Dubai

The Daily Star, Lebanon’s only English language paper, is planning a move to Dubai Media City as early as January 2005. According to the newspaper’s publisher, Jamil Mroueh, the move is designed to improve both regional coverage and sales. The decision to move was also influenced by the mouth-watering tax advantages and the superior communication infrastructure the Emirate can offer.

“It’s not so much a move to Dubai,” Mroueh said, “as an expansion into the Gulf. The Lebanon [news] desk and its sales department will remain in Beirut. In fact, the reader should not even notice that we have moved, apart from the fact that the regional coverage will much better.”

In recent months, Mroueh has inked deals to print and distribute The Daily Star with The International Herald Tribune in six Gulf States, including Dubai, Kuwait and Qatar and the paper is already distributed in Syria, Jordan and Egypt, indicating that the Daily Star’s dream of becoming the region’s leading English language paper is finally becoming reality.

“In terms of sales,” Mroueh explained, “each of the six Gulf markets alone is bigger than Lebanon, as each has a much bigger expatriate and business community. From there, we will improve our coverage of Saudi Arabia. So, both in terms of coverage and sales it just doesn’t make sense to remain in Beirut.”

Following the merger with the International Herald Tribune, The Daily Star experienced considerable expansion and hoped to cover the Middle East from Beirut. Over the last few months however, up to 30 journalists and other staff have been laid off. This, according to Mroueh, was solely related to “the change of strategy,” and they will be eventually be replaced by locally hired staff in Dubai and the rest of the Gulf.

Spirits

It takes optimism to open an ad agency in today’s depressed advertising market. Hani Haddad, manager of the newly set up Spirits agency, has plenty. “I have 17 years experience in advertising in Lebanon. I know exactly what the market needs,” he declared. “We have a totally new perception, and big aims. We’re going to tackle matters completely differently,” he declared.

According to Haddad, there is a niche in Lebanon’s advertising market for a firm that offers only high-quality, top-level services to demanding clients; something akin to a private bank in the finance world.

“For the moment, ad agencies don’t provide this in Lebanon,” he observed. “Clients are hassled with very bad quality services. They have to deal with a number of different people at agencies, and get confused. You can’t find, anywhere, good handling of accounts. Our agency, on the other hand, will have no junior account managers. Clients will be handled by one person and everyone will have an international background.”

Haddad has spared no cost packaging his agency in an air of exclusivity – he is renting expensive high-tech offices in downtown Beirut and has spent big bucks acquiring the right staff. “It was a big investment,” said Haddad, who spent $200,000 setting up the agency. “But since we’re honest and ambitious, we can go a long way.”

So far, the company counts 10 employees and 12 existing clients spanning the fast-moving consumer goods, banking, insurance and services.

Corruption

Lebanon has dropped 19 places on a list of 146 countries ranked according to perceptions of corruption by Transparency International, an international non-governmental organization devoted to combating corruption. Lebanon’s separately-listed corruption index score also dropped, from 3.0 to 2.7 on a scale of 0 to 10, with 10 indicating no corruption. Lebanon’s rank of 97 ties it with Algeria, Macedonia, Nicaragua, Serbia and Montenegro. Lebanon was first listed in 2003; this year, a further 13 countries were added to the list.

“These results are quite dramatic,” warned Transparency International Regional Executive Director Charles Adwan. “In the past year, we have moved from one corruption scandal to another, with no serious way of legally dealing with them. There is no faith in a judiciary that should be the main safety net against corruption, but is in fact politicized.”

“Everyone knows that certain ministers and parliamentarians are corrupt, but nothing is done,” he added. The problem is aggravated, observers note, by the fact that Lebanon’s government and politicians talk publicly about cracking down on corruption, raising expectations which are then dashed. “When you disappoint expectations, the perception of corruption is heightened,” explained Adwan.

Economists warn that the perception of corruption in Lebanon is creating a barrier to investment. “Investment is far below its potential. Most investors are Lebanese expatriates and other Arabs. They are investing for emotional, not economic, reasons,” stated Adwan. “Many Western investors initially interested in Lebanon change their minds after being extorted by local politicians.”

Observers say they expect Lebanon’s corruption rating to drop further unless a number of practical steps are taken immediately. All agree that laws covering access to information and conflicts of interest should be passed as soon as possible. Politicians must be freely elected so that they can be held accountable by the electorate, while the independence and integrity of the judiciary must be strengthened. Lastly, the public sector must be seen to shed inefficient and “dead wood” employees.

Electricity

Electricity consumers are still seething over recent power outages – the latest manifestation of Lebanon’s ongoing electricity crisis at Electrite Du Liban (EDL), which is being held responsible for up to 30% of Lebanon’s public debt. According to Mahmoud Baroud of the ministry of energy & water, it costs the government $1 billion a year to provide Lebanon with an average of 18 hours of electricity a day.

Because the state-owned electricity company is unable, at daily peak hours as well as throughout the height of summer and depths of winter, to produce enough electricity to support both private and industrial consumption, it has introduced exorbitantly high peak hour industrial rates to force companies to use generators.

Therefore, between the hours of 6:00am and 9:00am, 6:00pm and 9:00pm, and for 24 hours a day throughout the months of July and August, and February and March, industry pays LL320 ($0.21)/kw-hour. The off-peak industrial rate is LL80 ($0.05)/Kw-hour.

Federation of Lebanese Industrialists general manager Saad Oueini said that since the most recent power cuts, industrial electricity costs rose by another 20% to 30%.

“We think the government can afford to offer a standard industrial rate of LL100 ($0.07). For the moment, all the industries that use a lot of electricity can no longer compete with those in other countries. If nothing is done, these industries will have to shut down,” he fumed.

Meanwhile, the public is being forced to cope with paying up to 30% more to use a generator, even if it means flouting a 1992 law prohibiting their use within administrative Beirut. “Even I buy candles,” said Baroud.

Not just cosmetics

In a major expansion of their capacities, Lebanese industrial conglomerate, Malia Holding, last month inaugurated a new manufacturing plant for its Cosmaline subsidiary. The new factory represents a $13 million investment and marks the fourth enlargement of production capacities in the company’s 50-year history.

Cosmaline evolved from a maker of beauty products under license from foreign manufacturers into a major Middle Eastern producer of hair and skin care products, insecticides and detergents. The firm maintains a research and development department and successfully brought several in-house developed brands to market.

With the increase of their facilities from 9,000 to 16,000 square meters, the 2004 Cosmaline expansion is geared especially towards exports to Europe, Malia chairman Jacques Sarraf told Executive. Deliveries already go to Cyprus, Greece and Russia and the manufacturer is in discussions over entering the French, Benelux, German and Turkish markets, he said.

Coincidental to the Cosmaline plant inauguration, October also saw the first market action by Malia subsidiary, Euroline, a fashion retail company. Under the rationale of diversifying the Malia Holding activities beyond health and beauty products, Euroline partnered with the Eid family in setting up a boutique for upscale Italian clothing brand Paul & Shark in downtown Beirut.

Paul & Shark products had been previously sold in Lebanon through Eid stores but the joint venture aims for a higher penetration of the market for glamorous high-tech sportswear with a maritime flavor. In addition to the downtown boutique, further Paul & Shark stores are in the pipeline for Lebanon. However, Euroline also has ambitions of bringing the business with Paul & Shark to Syria and even take it to Iraq, said Sarraf.

New broadband, joy

The largest Lebanese data network operator, GlobalCom Data Services (GDS), in early October announced the creation of a wireless broadband service, which will finally provide fast internet access to residential internet subscribers. Operated in partnership with the ministry of telecommunications and three Internet Service Providers, the service would offer home users a choice of 128, 256, or 512 kbps in access speed for fees ranging between $45 and approximately $150 per month, said GDS director Mahassen Ajam.

Wireless broadband would be at least three times faster than dial-up phone access.

GDS set a realistic target of 20,000 subscribers at the end of the first year of operations, with coverage to all cities in Lebanon. According to Ajam, GDS invested $12 million into the establishment of the wireless network, without receiving any public sector sponsorship. Observers commented that the service is a good step forward but noted that a fee of $45 for broadband access is by international standards not exactly cheap while the investment volume appeared high for the network’s capacity.

During a press conference announcing the new service, telecommunications minister Jean-Louis Qordahi confirmed to Executive that the MOT participates in the revenue of the wireless broadband service and reaffirmed the ministry’s commitment to fighting all forms of illegal internet access provision. When the independent regulatory authority on telecommunications has been installed, a licensing scheme would replace the current arrangement of profit sharing. “Our policy is to liberalize the market and have the awarding of licenses based on qualifications,” the minister said.

As the new wireless broadband is available at a lesser cost but without the service levels that GDS guarantees to corporate customers, the company declared the new offer to be designed exclusively for residential users. But it is unlikely that GDS or its partner ISPs IDM, Terranet and Cyberia, would refuse subscriptions from small businesses and home offices.

Freeing trade in services

Lebanon wants to spearhead a regional agreement for liberalization of trade in services. This is the aim which the director general at the ministry of economy and trade, Fady Makki, outlined to the audience in a conference on liberalization of trade in services in the Arab world in the middle of last month.

According to Makki, official delegations from five Arab countries had just a week earlier completed their first meetings of a first round of talks on regional liberalization of trade in services. Called the Beirut round, the target of the negotiations was to implement an agreement on free trade in services by beginning of 2006. The pact could enter into effect after ratification by only three Arab countries and Lebanon and Jordan would be among the first three countries that are “prime candidates to ratify intra-Arab free trade in services,” he said.

However, awareness of the issue in Lebanon was not yet strong, Makki warned, and urged the country’s professionals to communicate their demands and expectations from such an agreement to the ministry, for inclusion in the Lebanese delegation’s agenda.

The conference was organized by recent business services enterprise, World Trade Center Beirut, which plans to stage annual conferences on trade liberalization. A related theme, specifically the role of cross border investments in the Arab world, was the topic also of another conference, convened over the same two days by the Union of Arab Banks at the Phoenicia Intercontinental. The events coincided due to their timing immediately prior to the beginning of Ramadan.

While they saw value in the opportunities to meet with colleagues on the sidelines of the event, several Lebanese bankers opined that in terms of lectures and presentations such conferences generally would not offer many additional perspectives to similar events held in the past.

November 30, 2004 0 comments

Feature

Sanctions in Syria

by Rhonda Roumani November 30, 2004

written by Rhonda Roumani

US exports to Syria in 2003 may have totaled a meager $214 million, but they were vital in maintaining and developing Syria’s energy, telecom, IT and health sectors. The May 2004 sanctions have come at a particularly bad time for a Syria as it struggles down the path of economic reform and as it hopes to attract~~opening up~~ to outside investors, . Adding to their frustrations, Syrian businessmen and American businesses complain that the laws surrounding sanctions are unclear, the process of obtaining export licenses is at a standstill and a breakdown in trust threatens future investments.

M~~and have~~ ~~forced both Syrian businessmen and American businesses in Syria to do what they can to get by in a~~ ~~murky legal~~ ~~environment~~, ~~where laws surrounding sanctions are unclear, the process of obtaining export licenses has come to a standstill, and a breakdown in trust threatens future investments. While m~~any local businessmen are making do by finding alternatives to US-made products from European or Asian trading partners, . Others are working around the system, procuring US parts from neighboring countries like Jordan and Lebanon. Mothers are reportedly working around the system. Without any formal US monitoring system in place, some businesses are securing US parts from neighbouring countries like Jordan and Lebanon. Legal or otherwise, many US products are still openly available on the Syrian market. But Syrian businesses fear that the long-term consequences of sanctions on Syria, especially if prolonged or extended, may produce some hazardous long-term effects, hampering technological development in key sectors and making the reform process in Syria all the more difficult.

Last year, UK-based Petrofac, PetroCanada and US-based Occidental petroleum won a $750 million gas exploration bid in Palmyra. While sanctions have yet to touch US investments, oil and gas companies must now deal with basic logistical questions, such as how to repair valves and pumps involving US drilling and oil field equipment, the exports of which totaled $20 million in 2003.

According to Samir Seifan, the Syrian representative for Petrofac, much of the equipment can be sourced from other countries, such as Japan, Germany or the UK. While Syria has the option to look elsewhere for future investments in the case of further sanctions, the Syrians may soon face the problem of acquiring crucial technology. Oil and gas companies fear that sanctions might present them with technological problems, as special software for seismic surveys is manufactured solely by US companies.

“Some companies are not inclined to spend a lot of money until they know what will happen in Syria,” said Seifan. “But Iran has been under US sanctions for 25 years and the oil and gas industry there is working very well.” Petrofac, PetroCanada and Occidental Petroleum are in the final stages of the negotiating process with the Syrian government, which is expected to be finalized by the end of the year.

US telecommunications exports, which totaled $3.8 million last year, may face similar problems in acquiring and servicing technology, despite special clauses in the sanctions to exempt ~~certain key areas. Under sanctions,~~ “information and information materials, as well as telecommunications equipment and associated items to promote the free flow of information.” ~~are all supposed to be waived.~~ While the full extent of the impact of the sanctions on the IT field is unclear, difficulties in obtaining export licenses remain a major obstacle.

“Washington used to mainly be concerned with encryption and other high tech products,” said Abdel Ghani Attar, the Syrian representative for IBM in Syria and other major IT and Telecom US companies. Attar just received his first export license under the new sanctions exemptions. “Now they look at everything. Even special delegations come from Washington for PLCs [Pre License Checks] and PSVs [Post Shipment Verifications] that used to be handled exclusively by the US embassy.”

The threat of US sanctions has long hung over Syria’s efforts to upgrade its Internet backbone – given the sector’s dominance by US manufacturers – as Syrian authorities are reportedly concerned that US servers and equipment might not be serviceable under a stricter sanctions regime. However, ~~depsite~~ despite sanctions exemptions concerning telecommunications equipment or the availability of equipment from other countries, work is reportedly progressing. Firas Bakour, CEO of Syrian IT player INANA Group and one of the founding fathers of the Syrian Computer Society’s (SCS) internet service, says Syria’s internet backbone should be up and running by the end of the year.

Sanctions have even touched the health sector, which is supposed to be protected from sanctions. Nagy Saba, an American-educated physician and head of Biocenter Medical Laboratory, one of a few privately owned labs in Syria, says that getting parts and supplies for much of his US-made equipment has become virtually impossible because of the difficulty of attaining export licenses.

~~In the health sector, one~~Another businessman, who imports sterilization equipment products from a major US company, says that manufacturers are now hesitant to even get involved in Syria at all.

“We worked hard to introduce US machines to Syrian hospitals on the basis that its consumables would be available,” said the businessman, who asked not to be named. “Our supplier has been reluctant to even apply for an export license to allow for the product’s export.”

Other sectors dominated by US producers have also been affected. Local agents for US irrigation equipment manufactures, for example, are at a loss over what to do. While other importers can find alternatives made elsewhere, cutting-edge replacements are limited to Australian companies, given Syria’s trade ban on Israeli products.

~~Stigmas and standards~~A climate of fear

Perhaps the biggest concern of Syrian businesses is that investors will be scared away because of the stigma associated with the sanctions. A director of a yearly trade fair in Damascus that normally includes about a dozen US businesses expects no US companies to participate this year.

“The standard of companies willing to do business in Syria is going down,” he said, asking not to be named. “It was always hard to attract companies to deal with Syria, because of sanctions. Now it’s even harder. Even middle-sized companies are not coming. Larger companies are not willing to take the risk. In the end, Syrian businessmen will find a way to service their customer’s needs. But all these sanctions hurt our reputation abroad.”

The majority of Syrian businessmen with historical ties to US companies say they have declined to skirt the US law and are looking to the day when they can resume their work with US companies. But in a country struggling to undergo economic and political reform, many fear that sanctions will put Syria back by scaring off outside investors, already rare in Syria due to financial and government contracting restrictions , and that such a setback will also hinder future technological development.

“It’s the indirect effects of sanctions that could hurt us most,” said INANA’s Bakour. “We need direct strategic alliances with global companies to keep our cutting edge. Many of these firms are afraid to get involved in Syria for fear of further sanctions.”

Many worry that the fear of investment has begun to spread to European companies. ~~Europe~~Europe is is Syria’s main trading partner, with a large portion of Syria’s trade going to Italy, France and Germany. ~~, with TK of Syria’s trade going to Italy, France and Germany~~.Reports this month that the EU and Syria will soon sign the EU Association Agreement may help alleviate some concerns amongst Europeans. ~~And w~~T~~hile t~~he US failed to gain EU backing for sanctions, but a negative environment for investing may still nonetheless ward off some European investors, businessmen said. Some European companies and others have taken advantage of the situation, filling in where US companies once operated.

According to IBM’s Attar, a French company has stepped in to handle some telecommunications projects that were formerly handled by the Americans.

“European, Chinese and Turkish companies are doing so much better these days – as are the Iranians,” said Attar. “The people most affected are the representatives for US companies – those that were the most loyal to the US.” Others are weary.

Bakour says that in a recent deal, a credit card company that is new to Syria needed to find alternative sources of technology normally provided by US companies. “A French supplier refused to send the equipment to Syria because the Commercial Bank of Syria was specifically mentioned by name,” said Bakour.

While the fact that the sanctions have not yet been implemented on CBS gives many Syrians hope a compromise can be reached, CBS transactions with US-based banks are reportedly blocked. Even credit card transactions to purchase items online involving US banks are prohibited, pending Washington’s ruling on CBS.

Searching for alternatives

Mark Antakli is a young US businessman who works for Intraco Trading Syria, the distributor for General Motors in Syria, selling Chevrolets, Cadillacs and Hummers on the Syrian market. Since the implementation of the sanctions last May, Antakli, whose father hails from Syria, said his primary struggle has been how to service GM cars for his customers.

“We don’t want to jeopardize our relationship with GM,” says Antakli. “Several people are buying parts from Lebanon and bringing it here. We can fix the vehicles, but we can not buy the parts.”

Last year, the ministry of health bought 39 ambulances from GM. Antakli said that although these vehicles are protected from sanctions because they are considered medical equipment, he still cannot get the parts to service them, echoing the concerns of Saba and other medical equipment suppliers. UN vehicles that have come out of Iraq also cannot be serviced.

To fill the gap, GM and other US companies are also changing their supply chains to comply with US sanctions against Syria and possible future measures in the Arab World by replacing US models normally sold in Syria with GM vehicles manufactured elsewhere. A new pick up truck currently manufactured in Brazil is expected to be sold in Syria in the near future, and GM-owned Daewoo plants in South Korea are now being sold under the Chevrolet label in Syria. GM is also working on building a Cadillac in China and is looking to build other car lines in Australia as well, including the Chevrolet Caprice and Lumina.

“We are seeing a general shift automotive products in the region,” Antakli said. “GM is taking another look at supplying US made vehicles to the Arab World.” According to Antakli, GM sells over 70,000 GM vehicles in the Middle East, but less than 30,000 will be built in North America. GM hopes to have 100,000 units, or 10 percent of the market share of the Middle East market by 2006, Antakli said. While the Middle East is not the world’s largest automotive market, major manufacturers cannot ignore an entire region’s annual automobile sales.

~~Building bridges~~A growing rift

Local agents for US companies say that for now they hope to ride out the sanctions, keeping close ties with US businesses with which they have cultivated relationships for years. If things continue to be undefined, and responses to export license requests do not come soon, however, local agents will have to take a hard look at other options.

“The sanctions have hurt my enthusiasm to deal with US companies in the future because it is too much of a headache and because there are quite a lot of alternatives,” said Attar. Syrian businessmen have been watching closely as US-Syrian relations have come to heads in the last month over Lebanon, Iraq and the issue of Palestinian militant groups operating from Syrian soil. Even with a slight relaxing of tensions after ~~last month’s~~the visit of Undersecretary of State William Burns in September and an announcement that the US and Syria may begin to work together on Iraq, Syrians have become even more skeptical of US intensions. Many fear what a further deterioration in US-Syrian relations might mean for the country’s economic health.

“I suspect sanctions will go farther,” said Ghassan Habash, the deputy minister of economy and trade for Syria. “The impact of the sanctions may be indirect, if the US puts pressure on US companies in Europe not to deal with Syria. For that reason, we can only wait to see what will happen.”

Many of these US and Syrian businessmen remain perplexed at the decision to impose sanctions on Syria, especially at a time when the US is promoting democracy and free trade in the Middle East and North Africa.

~~has promoted its Broader Middle East and North Africa Initiative CHECK of bringing democracy and free trade to the region.~~

“They hurt American interests, not Syria interests,” said Antakli. “It hurts the people value American products and business principles. Through trade you can build dialogue and understanding between countries. That will benefit not only the US, but Syria and the entire region.”

Others hope a solution will come about quickly, before the risks to Syrian society become more apparent and businesses begin to really feel the financial burden, and opportunities for popular reconciliation are lost.

“It will affect my ability to keep up to date in the future,” said Saba, who speaks impeccable English and is furious about the sanctions and the message that Syrians are gleaning about the United States from this. “They are talking about building bridges in the Arab world. I lived in the United States and experienced American life first hand, and I can explain American values to Syrians in detail. But how can I dispel growing negative feelings about the United States throughout the region under the circumstances?”

Rhonda Roumani is a freelance journalist based in Damascus

November 30, 2004 0 comments

Special Section

Boutique hotels

by Anthony Mills November 1, 2004

written by Anthony Mills

The buzzword among real estate developers is boutique. As the hotel sector continues to expand with new, bigger hotels – a Hyatt, Four Seasons, and Hilton are all under construction – developers have also hit on the notion that not only is small beautiful, it is also lucrative. It has taken a while for the penny to drop. More than a billion dollars has been invested in hotels since 1995, and only one developer in Beirut, hospitality mogul Bechara Namour, has gone boutique with his 30-room Relais & Chateaux Albergo on Abdel Wahab El Inglizi (even the gilt-edged InterContinental Le Vendôme doesn’t really qualify as boutique). But this is set to change.

At least four boutique hotel projects, with a combined investment of close to $500 million, are already underway in the downtown area, a prime attraction for increasing numbers of both Gulf Arab and Western tourists. There is unconfirmed talk of a fifth boutique project on Uruguay Street, and Solidere is being inundated with inquires by developers eager to cash in on what they see as the shape of things to come.

Real estate insiders and hospitality executives unanimously agree that the boutique hotel segment in Lebanon holds potential, not least because visitors to Lebanon are among the biggest-spending tourists in the world. “A visit to Lebanon is expensive. Life here is expensive. So, the quality of service must be high. Boutique hotels will appeal to them,” said Albergo general manager Michel Chardigny.

“There’s no doubt there’s a market,” concurred real estate adviser Michael Dunn, “although it is fairly seasonal. There are more and more Gulf Arabs, and if we get it right they’ll come all year round. But the boutique hotels will really have to market themselves.”

Out of town, Gulf Arabs accounted for the vast majority of guests at the recently opened Chateau Raphael boutique hotel in Maameltein – a Jounieh coastal strip notorious for its nightlife – according to one of the hotel’s employees. The “Chateau” opened for the beginning of the summer season and offers 17 suites (seven duplexes, seven junior suites, and a royal suite) ranging in rack rates from $285 to $715, as well as two restaurants (one Lebanese and one Italian/Chinese) and a swimming pool.

“We had a group from Germany and we have one coming from Cyprus, but most of the visitors in the summer were Gulf Arabs from Kuwait and Saudi Arabia,” the manager explained. Currently, only two rooms are occupied. “Dead season,” the employee explained.

The Chateau was originally earmarked as the boutique arm of the Safir Hotel group, which runs the Beirut Safir Heliopolitan Hotel, but a spokesperson for the chain said negotiations fell through. Chateau Raphael owner George Anastasiades, who also owns Anastasia Travel, was not available for comment.

Chardigny said the boutique hotel sector potential in Lebanon reflected a global shift in guest preferences towards smaller, more personable, and quieter hotels.

“All around the world now people don’t like big hotels anymore. It’s a new phenomenon. Over the last five years or so, people have begun attaching much more importance to privacy, discretion and top-quality personalized service. I think the time of the big ‘palaces’ like the Savoy is over. Now, rich people want to feel as though they are at home,” said Chardigny.

Some real estate insiders predict that emerging boutique hotels, particularly those associated with international brand names, will provide serious competition for the so far unchallenged Albergo.

“I think they’ll knock the Albergo off its perch. It’ll be downgraded to a three-star boutique hotel,” contended one real estate insider. “If you look at the bar, it’s horrible. The reception area? It’s horrible. It doesn’t create a nice atmosphere when you walk in. The restaurant is, boudoirish, feminine and tacky. The swimming pool might as well not be there.”

Chardigny, however, does not seem concerned. “Everyone is a competitor. For the moment Relais & Chateaux are the best quality chain. But the others are very good too. We are worried. We will wait and see.”

While developers are busy as the proverbial bees, real estate experts doubt that all will be genuine boutique hotels. So what’s the magic formula? According to Dunn, a guest must feel that they are unique, that they couldn’t possibly get a better hotel. A car should be waiting for them at the airport. And from then on, they must be continuously coddled, in a luxurious environment of discrete but unmistakable exclusivity. “It’s service, service, service,” he said. “You’ve forgotten your toothbrush? Don’t worry. Your trousers are pressed at three in the morning. You have a bottle of champagne in bed. These hotels are for spoiled people who want to be pampered. Most hotel rooms are so unmemorable.”

The developers of the Abchee Group boutique hotel next to the Virgin Megastore declined to talk to EXECUTIVE about the project, saying it was too early to do so. But Solidere, the company responsible for most of the revitalization of downtown, said the building had been designed by world-renowned architect Kevin Dash and constituted an overall investment of roughly $70 million. The building will offer private parking and will boast several high-end retail outlets – the marketing of which is to be overseen by RAMCO Real Estate Advisors.

But the project has its critics: one real estate consultant, who asked not to be named, said: “It’s too noisy for a boutique hotel, probably too busy. A traffic intersection like that is going to be busy all through the night, and for the next number of years dirty, dusty and noisy. I’m very surprised, unless their objective is to make money out of the shops.”

Construction of the boutique hotel close to the Banque Audi headquarters downtown represents an $85 million investment by Al-Mawarid Bank, owned by the Kheireddine family. The project – to be completed by the end of 2007 – is the brainchild of Al-Mawarid Chairman Salim Kheireddine. Tranquility will be ensured by the hotel’s location on a roughly 8,000 square meter plot of land in a peaceful corner of the downtown district known as Wadi Abou Jamil. The hotel will be composed of 10 inter-connected buildings arranged around a sizeable garden courtyard. It will incorporate an above-ground built-up area of 15,000 square meters – including three restaurants – and a below-ground area of around 45,000 meters servicing the hotel. Al-Mawarid is hoping to engage in a partnership with the “W” chain luxury boutique hotel arm of Sheraton’s Starwood Group,but is also involved in talks with two other leading hotel chains.

The all-suites hotel will count a hundred “keys”– almost too many for a boutique hotel. The smallest suite will cover about 55 square meters and the largest around 300. Rates will range from about $350 to several thousand.

Naturally keen to emphasize one of the key attributes of any successful boutique hotel, Marwan Kheireddine, Al-Mawarid general manager, said: “The service will be by far superior to existing levels of service in Beirut hotels. Our clients will be high net worth individuals – either tourists or business people – demanding, and willing to pay for, exclusive, personalized services.”

As part of a third boutique hotel development project – owned by Solidere – a building roughly opposite the upper end of Maarad Street, and called “Le Grand Theatre,” or “Grand Theater,” a reference to its previous incarnation, is also being refurbished. It will adjoin two constructed buildings, which will house a boutique hotel and restaurants. The premises will be leased to a tenant, who would manage the entire complex.

Meanwhile, development of an old salmon-colored building abutting the Riyadh El-Solh Square car park, is being overseen by sole owner Mousbah Bakri, who has already spent tens of millions of dollars buying the building from former shareholders – both family members and previous tenants – and refurbishing.

Interestingly, Bakri said he would have preferred to develop office space in the building. But according to the terms of the contract under which he repossessed the building from Solidere, he is obliged to ensure that it retains its original function – that of hotel. Nonetheless, he is equally confident that his boutique hotel will perform, especially among Western tourists enamored with the idea of staying in a quaint heritage-laden building at the heart of the renascent downtown district.

Although some real estate observers suggested Bakri’s hotel would actually do better than the grander boutique hotels under construction, others questioned the building’s suitability for a hotel project, saying the rooms would be too small, and the building was too old. “You would have to spend more money than it was worth,” said one developer.

Solidere is confident the boutique hotels will enhance the appeal of the capital’s Central District. “The developers are doing a wonderful job,” stated Solidere executive Monib Hammoud. “The boutique hotels will complement the other hotels in Lebanon. They will reposition Beirut on the international architecture and design level and will help upgrade the tourist industry to international standards.”

However, as the boutique hotel craze takes hold, it is also attracting profit-hungry investors who don’t know what it takes to establish a successful boutique hotel. And the last thing Solidere wants sullying the Central District is a string of failed boutique hotels. “Many people are approaching us with plans to develop a boutique hotel,” observed Hammoud. “Many don’t have the right conception of what a boutique hotel is. We monitor the supply. We don’t want oversupply. We make sure the mix and the balance are respected.”

“Most prospective developers don’t bother to spend the money on acquiring the necessary expertise for a feasibility study or market research,” said Kheireddine. “There is room for a couple of boutique hotels downtown. That’s all.”

Not everyone is convinced that Gulf Arabs will, in fact, flock to the new boutique hotels. Albergo Manager Chardigny said that although some Gulf Arabs do stay at his hotel, most visitors hail instead from Europe and America. “It’s not really Gulf Arabs’ style,” he said. Other observers agreed that Gulf Arabs may prove hard to lure away from glamorous hotels like the Phoenicia and those that have mushroomed across the Gulf.

Dunn disagreed: “Gulf Arabs love places like boutique hotels,” he said. “And they’ve got the money to pay.”

“The vast majority of our clients are going to be from the Gulf,” echoed Kheireddine. “It is wrong to stereotype Gulf Arabs. I have a lot of Gulf Arab friends who are as sophisticated in their taste for wine and French art as anyone else in the world.”

Box

Boutique Hotels under Development in Downtown Beirut:

Bank Al-Mawarid project, in the Wadi Abou Jamil neighborhood; close to the new Banque Audi headquarters; $85 million
Abchee Group project, through Serene Real Estate; next to Virgin Megastore; $70 million
Solidere-owned project; “Le Grand Theatre” building, opposite upper entry to Maarad Street; Solidere declined to divulge value
Project owned by Moussa Bakri; traditional, salmon-colored building abutting Riad el-Solh car-park; tens of millions of dollars spent refurbishing and compensating former shareholders
Unconfirmed: traditional building being refurbished on Uruguay Street; details unclear

November 1, 2004 0 comments

Money Matters

by Executive Contributor November 1, 2004

written by Executive Contributor

Capital Intelligence Raises UNB’s Long-Term Rating to A

Capital Intelligence (CI) rating agency has raised Abu Dhabi’s UNB’s (United National Bank) long-term foreign currency rating from A- to A. The bank’s short-term foreign currency and financial strength ratings were kept at A2 and A- respectively whereas a stable outlook was assigned to all the ratings. The agency noted that this upgrade is attributable to the bank’s high quality ownership (50% shareholding by the government of Abu Dhabi), good management and sustained improvement in its financials. In parallel, CI’s ratings were also affected by the balance sheet’s high proportion of liquid assets and bank placements in addition to the increase in the capitalization level.

Emaar Third-Quarter Profits Jump 107%

Dubai-based property developer Emaar reported a 107% yearly growth in third-quarter profits to $283 million resulting in a $0.14 annualized earnings per share. The company’s revenues exceeded $1 billion, up 59% year-on-year while gross profits surged by 82% to $374 million. Emaar, a joint-stock company listed on the Dubai Financial Market, is currently undergoing ten major real estate projects including Dubai Marina, Emirates Hills in addition to the world’s tallest residential building Burj Dubai which was officially launched last month.

Country Profile: Egypt

The Egyptian Cabinet’s economic and social reforms were praised by the head of the World Bank, James Wolfensohn, who announced upon his meeting with the Egyptian Prime Minister Ahmed Nazif, the World Bank’s readiness to finance infrastructure, banking reform and education projects in Egypt. In his statement, Wolfensohn explained that the Egyptian government is taking a series of actions to promote economic growth and encourage domestic consumption. These include reductions in custom tariffs and privatization of some public-private joint venture banks. The government is also aiming for tax cuts in addition to inducing a more competitive industry. Actually, Egypt’s growth rate has reached 4% in the first-half of 2004. However, such a figure is believed to be insufficient for the reduction of the high unemployment rate and the elevation of living standards. Finally, Wolfensohn stated that Egypt’s commitment to change was absolute, advising simultaneously the Arab Republic to follow through its promises.

November 1, 2004 0 comments

Special Section

Fayez Rasamny, Jr, and Abdo Sweidan

by Executive Contributor November 1, 2004

written by Executive Contributor

Vehicle dealers RYMCO (Rasamny Younes Motor Company) employ nearly 180 people and rank at the top of Lebanon’s automotive sector. Number one in units sold last year and number two in 2004 to date, they are also the only firm to represent the automotive sector on the Beirut Stock Exchange. In 2003, RYMCO opened a new main showroom and overhauled their communications infrastructure, installing a new corporate website. But more changes are around the corner. Inquiring about RYMCO’s new moves in products and management, Executive talked to sales general manager Fayez Rasamny Jr. and to chief operating officer, Abdo Sweidan.

To start with, please outline the range of your makes and the models you sell.

Fayez Rasamny Jr.: We represent three makes, Nissan, GMC, and Infiniti. For Nissan, we have the Sunny, Pathfinder, the new Murano, 350Z, Micra, and many models to come. For GMC, we have two trucks, Envoy and Yukon. For Infiniti, our main topic is the new showroom, which will open by late October or early November in downtown Beirut; that is in the new residential area of luxury buildings on the seafront strip.

Does it pay off to invest into big new showrooms in Lebanon?

FR: If we want to invest into Infiniti, we have to open a new showroom. This is the branding strategy and we have done our homework. It is profitable, perhaps not over two or three years but to launch a luxury make you have either to invest or not bring it to market.

Would you tell us how much you are investing into the showroom and how much it will cost you to develop the Infiniti brand in Lebanon?

FR: It is an investment of $400,000 in tangible assets and $300,000 in intangibles.

Does the manufacturer give you special incentives supporting that brand introduction?

FR: To be honest, no. We took the initiative to open a new showroom and differentiate Infiniti before Nissan told us to do it. In the future, they will contribute to advertising but this startup investment is 100% RYMCO.

Is the image of Nissan, your main selling make, changing in Lebanon?

FR: Before Carlos Ghosn, Nissan was really a volume seller, except for the SUVs, but now the brand is moving up segment. The brand Nissan is changing, absolutely.

Does the fact that Nissan CEO Carlos Ghosn is of Lebanese descent give you an added advantage in the local market?

FR: Yes, in the upper segment. Mr. Ghosn’s reputation doesn’t really affect the customer who wants to buy a Sunny for a company car. But individuals, who stay on top of the news, have heard many things about the new developments at Nissan that Mr. Ghosn has created over the years.

Can you tell us something about the composition of your sales by customer groups and price range?

FR: Of all sales, 40% are fleet sales and 60% individual customers. In terms of price, 60% is below $16,000. In fleet sales, the margins are really very low. SUVs and upper segment cars have better margins but of course less volume. It makes a balance.

Who are the fleet customers in Lebanon?

FR: Most of them are rental cars.

How does that impact the image of your brand?

FR: That is an important question. One of the reasons why we are not really concentrating on being number one is that we are trying to build a certain brand. That is why, with the new models, we will not sell all of them to rental car companies.

Do you think that this sets you apart from the rest of the industry?

FR: Of course, no one thinks now like we do. I am quite sure of that. Everyone wants to sell cars. We want to set the benchmark.

Do you consider yourself still as part family-driven or as fully institutional in terms of your corporate culture?

FR: As of this year, I consider our company to be fully institutional but we still have to see the results. The family used to have all the management positions in the company. Six months ago, the company hired a new COO [Sweidan] who was chosen for his capabilities and his experience. This COO can hire and fire according to the results and qualifications, even me, if I am not competitive enough and not doing my job. In any major decisions involved in contractual agreements for the company, he will refer to an executive committee or the board of directors. Our main focus is to see our shares appreciating and this company making more profits each year.

You are also the only automotive dealer in Lebanon to be a publicly traded company. Was this a good move?

FR: When you are a family business, you have a ceiling. Now, we don’t have a ceiling. We can grow much faster; we can take professional decisions, not taking into consideration the family. It is a big plus for this company.

Abdo Sweidan: The benefits of going public are immense, through first opening of capital; second appetite from our partners to participate in the buildup of the company as far as capital investment, audit and growth; and third, the ability of this company to be run by corporate interests. Taking all of these together, you find that the uniqueness of RYMCO in this position is its sustainable advantage today over other car dealers.

Aren’t some of these advantages, particularly in attracting capital, at this stage mostly theoretical?

AS: No, they are real. Going public is only a vehicle for us to prove that we can attract more capital and this year, we are attracting fresh capital not only in car trading but also in car financing and other related services.

Some car manufacturers make more money from financing than from manufacturing. Are you planning to introduce something new to the Lebanese market in this respect?

AS: I can tell you one thing: in three years, car dealers who are not financial dealers will not be able to cope. We have to become financial dealers that work with partners to develop products – finance, insurance – that we can add up to our cars for the rest of the dealers.

How many car dealers do you see as surviving in this market three or four years from now?

AS: Seven

FR: I was going to say eight

What will decide which dealers will survival?

AS: It is a matter of putting up the capital today. When I say seven, I have in mind only the seven dealers that are willing to inject capital into their businesses – but not too many dealers are willing to do that. Trading alone is not sustaining the branding requirements of the manufacturers. All dealers are today under corporate identity guidelines. This is an expense.

Are you on a tight leash from the manufacturers?

AS: We are today more like partners than anything else. We share processes.

But Lebanon, even as it is a trend market, is very marginal in size. How much of a chance do you have to influence things such as product policies, service policies, or image campaigns?

AS: Here, our [small] size kills us. We don’t belong to a region. In Lebanon, the only thing that we can build upon is being a trendsetter.

FR: We have models that are not imported to Europe and models that are not imported to the GCC; that’s why we have a lot of models.

But each model has its associated cost base; you need trained technicians and so forth. How much does this situation push your overheads and weigh on your profitability?

AS: That is the $1 million question. I wish we had the answer.

FR: For example, even though we know that we will not sell a lot of them in Lebanon, we have to import models such as the Micra and 350 Z, to prove that Nissan is not only about Sunnys and Pathfinders. It is a question of branding and we are not really looking at the overheads.

But in the long run, you expect to reap returns on these investments because you see yourself as one of the dealers surviving in the market?

AS: It is a basic question that we have to ask ourselves every day. Narrow product lineup, i.e. cash cow, i.e. proper unit separation, i.e. very small market share, or, basket of products, i.e. investment into spare parts, technicians, training, product launch expenses.

The funny thing about it is that there is no in-between solution. The most dangerous thing is to be dependent on one model. After long deliberations, we have started to invest in the future. The future is branding of RYMCO, branding of Nissan, spinning off of Infiniti as a separate brand.

Does the GMC make still figure in your future?

FR: We went to Dubai three months ago and sat with the GMC regional management there. We agreed on a target that is much more than 100% up on our sales from last year and we hired a new brand manager who is only responsible for the GMC sales. Also, like we did with Infiniti, we hired a new communications department only for GMC to study the market for the luxury SUV, which is not large. We are investing in GMC and think we can take a big portion of this segment, especially as we will target fleet sales with the GMC Envoy.

How much does dealership loyalty count versus brand loyalty?

AS: There is a major conflict on how to brand first. Car manufacturers would like to brand their product, of course, for mutual benefit. But we know that in underdeveloped countries the strength of the name of the dealer is what plays a role in the credibility. Especially when we are talking about capital goods, what matters is the continuity, reputation and the credibility of the dealer and his ability to service. And this is what we are trying to create.

How much did you invest in building RYMCO as a brand?

FR: We really invested a lot, in sweat and tears and dollar wise. Over the years, RYMCO was at times number one, then number two, then again number one. There are a lot of intruders. They lowered their prices, dumped cars in the market, then they become number one for a year or two, and then RYMCO comes again. We are going after steady growth.

How vulnerable are you to rumors such as regarding alleged disagreements among the members of the families that built RYMCO?

AS: We are vulnerable, yes, but the vulnerability is lessened because of the nature of shareholding. Had we been strictly family business, then we would have been as vulnerable as any family-owned business. But this company is owned by investors.

Is the distribution of shares today wide or narrow?

FR: It is not concentrated. We have many investors, including financial institutions. 48% of the shares are owned by investors, and out of the 48% more than 50% are held by people who own 1% or more, the rest are scattered.

Mr. Sweidan, do you see yourself as a troubleshooter, entering RYMCO in some parallel way to Carlos Ghosn coming to Nissan?

AS: It is the same analogy, of coming in to reform, restructure, and put the company on the right platform.

What are your expectations in terms of profits? Do you produce future earnings projections to provide to your shareholders?

AS: We have to submit quarterly results and we have a plan for 2004 and the next two years. This plan has three elements, one is margins, two is to reduce debt and three is to increase sales to cash customers.

FR: Our plan is 20-6-60: this means the company plans for 20% market share, 6% operating margin and 60% cash sales, meaning cash and banks.

November 1, 2004 0 comments

Special Section

Fake or real spare parts

by Peter Speetjens November 1, 2004

written by Peter Speetjens

Despite legal action taken against importers and dealers, the trade in fake spare parts is flourishing in Lebanon, eating into as much as 30% of official dealership businesses. It also represents a serious threat to driver safety.

“When fake car parts first hit the Lebanese market a few years ago, we could see they were fake from miles away,” said Camille Aoun, parts manager of T. Gargour & Fils, DaimlerChrysler’s exclusive agent for Mercedes car and car parts in Lebanon. “However, with every consecutive shipment the quality improved. Today, even we have difficulty spotting the difference between fake and genuine, so imagine how hard it is for the consumer.”

Aoun demonstrated by showing a box, complete with the Mercedes hologram, which once contained a fake water pump. “The only way we can tell that this box is fake,” Aoun explained, “is because the font of the letters Q and G is slightly different, while the color of the hologram and the pump itself are slightly darker. That’s it.”

Quality, as always, has its price. At first, the retail price of fake car parts in Lebanon was a mere 10% to 20% of the price of the genuine product. Today it’s about 40% to 50%. The vast majority of fakes stems from China, Turkey and Syria. Not surprisingly in that order, as China is the world’s undisputed king of counterfeit products. From the latest Italian designer clothes and Real Madrid football shirts to medication and Rolex watches: you name it, they fake it. There used to be two factories in Lebanon, which mainly produced oil filters, but both were closed earlier this year.

Though fake parts for other brands are produced, Mercedes and BMW are especially targeted. “It is a simple law of economics,” said one mechanic in Dora. “They are popular but expensive brands, so the importer makes a good profit. The parts of Japanese or French brands are much cheaper, while the market for say Porsche parts is just not big enough.”

“Last year, some 50 containers with fake BMW parts entered the market,” said George Assaf, BMW parts manager at Bassoul Heneine, official agent of BMW, Renault and Alfa Romeo. He was not able, however, to estimate the effect on annual turnover. “Most people, especially when the car is over four years old, buy second hand spare parts, which cost about 10% to 20% the price of new ones. Secondly, many people buy alternative brands like Bosch, which generally are up to 25% cheaper. Only people with a relatively new car buy new and real parts, which represent perhaps 10% of our annual turnover.”

According to Aoun, the trade in fake parts cost Gargour an estimated 20% to 40% in sales of genuine parts in 2003, a year in which Lebanon and the Middle East were flooded with fake parts. “That’s without the cost of legal procedures and lawyers,” he added. Mercedes spare parts dealer Khoury Ets, estimated a loss of 20% in sales over 2003.

According to Aoun, counterfeiters mainly produce Mercedes brake pads, oil filters, air filters, water pumps, windscreens, electronic devices, and even engine oil and brake fluid. “Fake engine oil can be very damaging for the engine,” Aoun said, “while fake brake pads are extremely dangerous. We tested them in one of our employees’ cars and within a month, parts of it were burnt.”

To reduce the risk of buying fake spare parts, one should be better off buying directly from Gargour or one of its 15 official dealers in Lebanon. Yet that’s easier said than done, as dealers, in turn, sell to many smaller shops and mechanics. Currently, there are hundreds of points of sale in Lebanon, many of which illegally advertise with a (fake) Mercedes logo, and so in the end, the consumer does not know who is a legitimate dealer. The situation for BMW is similar.

It should be noted however, that many of the smaller shops are perfectly reliable, while there have been instances of official dealers selling fake parts. In fact, two years ago, one of the Mercedes dealers was caught selling fake parts and Gargour immediately stripped him of his license.

“He was a big dealer,” Aoun said, “and came in crying like a child, saying he would never do it again. But for us, there was just too much at stake. In the end, he damaged our name and reputation. So, we appointed a new agent almost next to him.”

The characteristics of the parallel market in fake products are remarkably similar to the “official” one: an importer places an order at the Chinese factory for fake Mercedes electronic devices or BMW brake parts, which arrive eight weeks later at Beirut port. If all goes well at the port, the importer will collect his goods (with the help of a little gift here and there) and send a representative to approach dealers and mechanics to sell the products.

At the end of last 2003, Gargour started a campaign among dealers, custom agents and consumers to inform them about the problem of fake spare parts, which ended, according to Aoun, with success. “We haven’t been able to stop the practice yet,” he said, “but the problem is clearly much smaller now. Last month, customs seized some 600 to 800 boxes at the port and we know of another shipment arriving.”

Not everyone is convinced, however, that the trade in fake parts is declining. Compare it to the trade in counterfeit computer programs and games, which amounts in Lebanon to a whopping 70% of the overall market. Despite annual tough talk from importers and producers, the black market has remained at a steady 70% for years.

The market in fake spare parts is not fully comparable to the one in fake software – spare parts are more difficult to copy and, unlike the market for computer programs, Lebanon is not a main producer. On the other hand, Turkey and Syria are big manufacturers and they are very close by. What’s more, the market in fake products has the same bottom line as any other market: where there’s demand, there will be supply.

According to The Economist, in the 1960s it was Japan, in the 1970s Hong Kong, followed by Taiwan in the 1980s, and now it’s China. Each reproduced imitation goods until they had built up an industry that needed protection itself. Sooner or later, China will follow their example. Or will it? “The Chinese are very ingenious at imitation,” said 17^th century Spanish priest Domingo Navarette. “They have imitated to perfection whatsoever they have seen brought out of Europe.” BOX
It’s not just Lebanon that has to deal with the problem of fake parts: as early as 1997, Al Habtoor Motors emphasized the issue of fake parts and safety in the UAE. Last year, AC Delco, the auto maintenance and accessories subsidiary of General Motors, announced that the overall fake parts market in the Middle East is worth an estimated $200 million. In Saudi Arabia, AC Delco filed no less than 2,000 complaints against dealers in fake car parts. While the World Health Organization estimates some 5% to 7% of all pharmaceuticals may be fake, The Economist concluded that “as hazardous to public health, is the trade in counterfeit car parts, which may account for as much as 10% of the spare parts sold in Europe. Even more worrying is the thriving trade in reconditioned aircraft components, passed off as genuine along with fake certificates of authentication.” The Counterfeiting Intelligence Bureau (CIB), part of the International Chamber of Commerce, estimates that no less than 7% to 9% of all world trad

November 1, 2004 0 comments

Special Section

Bigger, better and more spectacular

by Marianne Mirabeau November 1, 2004

written by Marianne Mirabeau

The bi-annual multi-million dollar Motor Show is becoming a regular fixture on the Beirut exhibition calendar. Taking place from 12 to 22 November, it is gearing up to beat its previous attendance record of over 100,000 visitors with more brands and models exhibited over a longer period and a bigger space. In the face of a wintry economic climate and soaring fuel prices, organizers and car dealers appear confident in the show’s ability to sustain interest, boost sales and keep the Lebanese dreaming of newer, better cars.

The biggest show of all time

Held at Beirut International Exhibition and Leisure (BIEL) center for the second year in a row, the Lebanon Motor Show has grown to become the country’s biggest exhibition over the years. And the organizers want more. Expanding the exhibition space by over 60% from last year’s show, the 2004 salon will be a sprawling 25,000 square meter auto extravaganza, catering for every product tied to the industry, ranging from the cars themselves to accessories, insurances and bank credits.

“This year will be a really big show,” said Nabil Baz, the director of Promofair, who is organizing the event with the Lebanon Association of Car Importers (LACI) for the second time in a row. “The Lebanon Association of Car Importers announced that they wanted the show to be bigger, spread out over a larger area, so as to measure up to the major international car shows elsewhere in the world. We hesitated to increase the exhibition area by this much initially, especially taking into consideration the current economic situation, which is not one prone to investment, but in the end we chose to take that risk, because we really wanted to have a spectacular show.”

Encouraged by the high turnout of the 2002 exhibit, which was hailed by car dealers as providing a major boost to their sales, the organizers set their targets high: to bring in more car dealers and make the Lebanon Motor Show the biggest car show of the region.

“We have been alternating our show with the one held in Dubai, whilst doing our best to push for the participation of all the representatives of the major automobile producers, and I think we have succeeded,” saiad Georges Tabet, vice chairman of the Lebanese Motor Show Association and a member of the Motor Show 2004 committee. “We are becoming bigger than the Dubai show.”

You have to be there

Now regrouping all the car dealers in Lebanon, the Association was able to ensure the participation of each one of its 34 members, which together will exhibit 50 brands in total. The event has become a mandatory one for anyone involved in the Lebanese auto business. “Everybody is participating, without exception, which is a first in Lebanon,” boasted Baz. “Last year, 15 to 16 brands were missing.”

Thanks to the added exhibition area, all the agents were granted the space they requested. This year’s car show is set to display between 300 to 400 cars, ranging from sport cars, to SUVs, economy cars to luxury vehicles.

“We attend the motor show because everybody attends it,” said Nathalie Khalife, marketing manager at Bassoul-Hneine & Co, which represents BMW, Mini, Renault, Dacia and Alfa. “We have to attend it, whether we like it or not. A motor show that goes on for 11 days is an event in this country. Everyone wants to come and see what other brands are displaying. It’s also an opportunity to make people more aware of our product, what kind of models we have, our prices etc.”

A testimony to the growing importance of the car show in the eyes of the automobile industry is the attention paid to the stands themselves by the car dealers. State of the art equipment is brought in to make the display as esthetically pleasing and eye-grabbing as possible. “Some car dealers set up beautiful stands,” noted Baz. “Many of them bring in ready-made stands from abroad, which can be worth as much as $200,000 to $300,000. Among the most impressive stands at the 2002 motor show was that of Volkswagen, which was entirely made out of wood and had a mezzanine. They had a whole team of German engineers that came in to set it up. It was really impressive to watch.”

A multi-million dollar concern

In its quest for improvement, the Lebanon Motor Show has grown into a multi-million dollar enterprise, launching a massive promotion campaign, investing in a third hall of 6,500 square meters, and juggling a bigger team of workers to cope with the myriad of additional rules, regulations and organizational requirements that came along with its growth. Reluctant to reveal the magnitude of the show’s budget, deemed to be somewhat inappropriate at a time of economic recession, Tabet admits simply to a project worth “several hundreds of millions of dollars.”

“Just to give you an idea of the scale of the expenses,” added Baz, “I can tell you that the 6,500 square meters we added this year to the exhibition area cost us $1.5 million. The budget for this is enormous.”

Yet the organizers remain confident that it will be worthwhile, arguing that both the location and the timing of the event is set to maximize the number of visitors. “BIEL presents a whole number of advantages: it has spacious parking areas, it’s located right in downtown Beirut, thereby being easily accessible,” Baz explained. “Furthermore, this year, the show will last 11 days, seven or eight of which are holidays – two week-ends, Ramadan and the national independence day. As we’re neither overlapping with the beach season nor the ski season, these additional days of holiday ought to bring in a lot of extra people.”

Set at a token LL5,000, the entry fee is intended to be low enough to enable anyone with an interest in cars to attend, whereas simultaneously deterring people to simply “stroll through on their Sunday walk,” as Baz put it.

Something old, something new

Bringing people to the show is merely winning half the battle, however. Ultimately, the name of the game is generating sales and building customer loyalty. Taking into consideration the economic depression, this is no small feat.

LACI is waging a battle against the growing tendency to purchase second-hand cars in the country and hopes that the show will help promote the benefits of buying new automobiles. For some dealers, this poses less of a challenge than to others. Khalife remains relatively unconcerned by the effect of the economic recession on the sales of BMW. “In all honesty, 17% of the population of Lebanon has all the money and these people are our clients,” she said. “They don’t care whether the fuel prices are going up or down, whether there is an economic recession or not. They just want to buy cars and be trendsetters.”

Others, however, are feeling the heat more, and are hoping the motor show will help boost sales. “The economic recession and the hike in fuel prices is affecting our company a lot because all our cars have big engines and this is a problem,” admitted Nada Sfeir, marketing manager for Faouzi Khoury and Sons Co. Sarl, which represents Chrysler, Dodge and Jeep. “So we are hoping the motor show will be an opportunity to increase sales.”

Tabet expects many dealers to be exhibiting more fuel efficient cars with smaller engines, in addition to safe and environmentally friendly vehicles. Yet conversely, a number of SUV’s are also expected to be on display, further promoting the global obsession with the gas guzzling vehicles. Not forgetting the Lebanese soft spot for all things luxurious, the exhibition will also include dream vehicles such as the Porsche Cayenne.

“There is a trend towards luxury SUVs,” said Fadi Kumbarji, purchasing manager of Rasamny Younes Motor Co sal. “Many are shifting, even Porsche now has an SUV – the Porsche Cayenne. They are all coming out with SUVs, and it is becoming very popular in Lebanon.”

With their taste for the new and the luxurious, the Lebanese do not seem ready to let the car industry down just yet. “The Lebanese dream of cars,” Tabet said. “The market for cars in Lebanon will keep on growing.”

November 1, 2004 0 comments