“A gun is a man’s jewelry.” So says an old Arabic proverb. Traditionally, a father would buy his son a gun when he is born in the same way a girl would receive a pair of gold earrings. In Lebanon, this tradition is all but dead, but the Lebanese still love their guns. In fact, the country is loaded with them. It is estimated that there are over 1 million weapons in private circulation. A significant percentage of them are sporting guns and rifles. Despite a nine-year-old ban on hunting some 30,000 rifles and shotguns – costing between $300 (for a mass produced Turkish 12-bore) to $100,000 for the top of the range Purdeys – are sold in Lebanon every year. There are over a dozen importers and some 50 medium to large distributors operating in a market with a worth of up to $2 million a year. With the right permits, importing and selling hunting weapons is legal. The import of handguns for private – as opposed to government use – is not. This black market is made up of discreet gun collectors, who have the money to pay over the odds for the world’s finest handguns. Then, there are the heavy caliber weapons, both those creaking relics of the civil war (mainly small arms such as the 7.62mm AK47s and M16s and the equally ubiquitous, shoulder-fired RPG launchers, which are coveted by thugs, bodyguards and nostalgics of every stamp) and the new hi-tech hardware destined for private armies and resistance groups, such as Hizbullah. Finally, while Lebanon is not an integral cog in the $30 billion global arms trade, some of its movers and shakers are Lebanese.

The law

Unless you have a permit, it is illegal to carry a non-hunting weapon about your person in Lebanon. This means anything from a Derringer to Stinger. A license can be obtained from the ministry of defense (although one issued by the Syrian ministry of defense gives the owner greater kudos) and, while there is no exact criteria laid down for who can get a permit under what circumstances, an applicant basically has to prove that the weapon is a matter of life and death for himself, his family or his business. Having the right connections can also work miracles.

Politicians often have a permit, as do diamond dealers, money runners, security personnel, bodyguards and, last but certainly not least, undercover law enforcement officers. To own a hunting rifle or shotgun a permit is required from the ministry of interior. To hunt however, requires a second permit, issued annually by the ministry of agriculture, even though hunting has been banned since 1995 after the UN laid down conditions for the donation of millions of dollars to establish a string of nature reserves in the country. Last January however, the law was changed, allowing hunting of certain species at certain times, although this law still has to be ratified. When it is, enforcement will be the responsibility of the ministry of environment.

Gun importers and agents need a permit from the ministry of interior to trade. Both importers and distributors need to satisfy the ministry of defense that they comply with all safety requirements concerning the storage of arms and ammunition, before the permit from the ministry of interior can be issued.

A-hunting we will go

The market for hunting guns is currently worth an estimated $1.5 to $2million. Business boomed just after the war, when peace allowed hunting enthusiasts to resume their old hobby. It was to be a short-lived reunion. The 1995 ban hit the sector hard, causing sales to drop by some 40% to 50% (one importer has sold 16,000 guns since 1993, half of which were sold before 1995).

There are 17 gun importers in Lebanon and some 260 shops selling hunting equipment, although most are quite small, located in the villages, and only offer a handful of guns and cartridges. This leaves around 50 medium to large outlets, which sell a wider range of hunting weapons (although many of these push the definition of “hunting” and would be equally suited to the streets of Fallujah than the mountains of Lebanon) as well as binoculars, camouflage jackets, tents, and boots. Prices of guns vary considerably. A quality shot gun, of say the Italian Beretta or Benelli, costs an average of $400 to $600, while you pay up to $6,000 for the top of the line models. As much as 90% of guns sold in Lebanon fall under the first category.

If you opt for a handmade, bespoke gun, expect to pay between $15,000 to $50,000. The Lebanese agent for Beretta recently sold a $16,000 gun to the Sultan of Bahrain, but this is small change when compared to those made by the British craftsmen of Holland & Holland and Purdey, whose antique models sell at auction for hundreds of thousands of dollars. On a recent trip to Iraq, however, one lucky Lebanese businessman picked up a pair of Holland & Holland rifles, worth around $40,000, for $7,000 from a cash strapped owner.

Handguns

Unlike the US, where a handgun – and even a machine gun – can be bought on nearly every block, the private sale of handguns in Lebanon is illegal. Supply is limited and demand among gun aficionados has pushed-up the price to roughly three times the normal market value. While in the US, an average Colt or Glock will cost you about $600, expect to pay around $2,000 in Lebanon. Silencers and other deeply desirable options – engraving etc. – come at an extra cost.

Lebanese collectors, unlike their counterparts in the Gulf, who like their guns plated with gold or encrusted with diamonds, generally opt for the original or “classic” models in mint condition. A small collection (say between 10 to 15 guns) can be worth as much as $30,000 to $40,000, but some local collectors have rooms with weapons worth nearly $1 million.

In the same way that a watch can be much more than just a timepiece, so too is a gun more than just a weapon to a collector. But like the man who wears a Casio digital, the gun enthusiast who wants a no-frills gun that will never let him down will buy a Browning. Developed originally in Belgium at the turn of the century, it has today become the standard issue for many armies and law enforcement agencies around the world. In Lebanon, a Browning 9mm can cost as little as $100.

Heavier items

During the Civil War, Lebanon was flooded with arms. The USA and Israel supplied the Christian militias. The Libyans, Saudis and other Arabs states armed the Palestinians and their leftist allies; Iraq came to aide of General Aoun, while Iran and Syria supplied Amal and Hizbullah. When the war ended, the Lebanese army impounded much of this huge stockpile, but a significant portion was sold on to other militias, especially in the Balkans, fighting their own civil wars.

Equally large numbers of small arms – M-16s and AK 47s – have been stashed away, part of the national paranoia that one day all hell would again break loose. Many found their way onto the open market. While an M-16 can cost up to $1,000 on the international market, in Lebanon it can be bought for as little as $400. AK47s, at $200, come even cheaper.

After the end of the Cold War, the market was flooded with surplus arms from both sides (it is these small arms – and the hugely unreliable but very spectacular RPGs – that are harassing the coalition forces in Iraq) but the really heavy stuff – tanks and artillery – came from the cash-strapped former communist countries of Eastern Europe. Today, you can buy a former East German tank for $40,000, while an RPG will not cost you more than $1,000. Hizbullah’s mortar and Katusha rocket systems have a price tag of several thousand of dollars.

Recently, a sizeable number of MP5K automatic machine guns have entered the Lebanese market from Iraq. This American-made weapon was used mainly by the Iraqi police and army and used to cost around $6,000 in Lebanon. Today, they can be picked up for $3,000. It is expected that many more weapons from the pre-war regime will flood the market in coming months and years, such are the huge stockpiles of conventional arms amassed by Saddam Hussein.

In any country the biggest spender on arms would normally be the army, and security services, but in Lebanon, most of the post-war budget goes on salaries and maintenance (the army’s 300 tanks are at least 30 years old) and no major investments have been made, although the US did sell the Lebanese government some old helicopters – the ones seen on parades and state visits – for bargain basement prices.

The international arms trade

According to Stockholm International Peace Institute, global military expenditure and arms trade form the largest spending in the world at over $950 billion annually, half of which is bankrolled by the US. By far the largest part is spent on operations, personnel and maintenance. The total value of global arms transfers between 1999 and 2002 was $139.8 billion, some 60% of which was paid by developing countries.

The bulk of the business is composed of highly expensive fighter jets, ships, submarines, tanks and other big items, which are sold mainly by and to governments. The world’s main producers are UN Security Council members, the USA, Russia, Britain, China and France, followed by Israel, South Africa and several smaller European countries. Private arms dealers generally supply the smaller arms, with which most wars are fought – rifles, machine guns, grenades, mortars and RPG launchers. There are an estimated 600 million small arms in circulation around the world, which cause an estimated 500,000 deaths every year.

Arms brokers come in handy when governments intend to sell weapons to clients that are considered too controversial – guerillas, revolutionaries and dictatorial regimes. One of the world’s most famous arms brokers is Lebanese: Sarkis Soghanalian (see box). According to London-based Jane’s Intelligence Review, the unofficial global trade is worth an estimated $2 billion to $10 billion depending on who is fighting whom. Arms dealers never work alone, so it is an open secret that despite the UN embargo, Germany supplied Croatia in the Balkan War, Russia armed Serbia, and Iran and the USA armed Bosnia.

The task of a private arms dealer is not only to guarantee that the weapons arrive and money is paid, but most of all, to ensure that the paper trail concerning the weapons’ origins cannot be traced back to the supplier. The deal is, therefore, executed by a string of shell companies and off-shore banks. Most essential, is that the broker knows how to obtain a so-called “end-user certificate,” which states that the arms will not be sold on to third parties. Bolivia is believed to be a major trade hub on the black market. Switzerland comes in handy on the financial side of deals and has traditionally regarded arms trade as just another business, while London, home to over 300 major dealers among whom several are Lebanese, is the trade capital of the world.

Sarkis Soghanalian

Born in 1939, this 150-kilo Lebanese of Armenian descent made his name and fortune during the Cold War, as the CIA’s main business partner. For two decades he was based in the USA, brokering all kinds of deals that broke official embargos. He started his trade by funneling weapons to Lebanon’s Christian militias, before supplying rebels in Ecuador, Nicaragua, and Argentina. He went on to arm Iraq under the reign of Saddam Hussein. He claims everything he did was with the knowledge of US government officials. He was briefly jailed after the Gulf War and is currently standing trial in absentia in Peru for supplying East German AK47s he had bought from Jordan to the Peruvian government, which eventually ended up in the hands of Columbian rebels.

Achievers are keen to benchmark their performance and remain unafraid of comparing their accomplishments to the best. To measure the commercial success of Lebanon’s Internet Service Providers – the companies where speed, competitiveness, technological competence and service quality are crucial not only for their viability but for the entire online economy – with the aim of identifying the best performer on a national level is a task requiring the patience of a hero. ISPs themselves say they don’t know the exact size of either the legal residential or the corporate market and are unable to declare their market shares. Against this background of opacity, it is important to ask where Lebanon stands today in internet access by international and regional standards. But the answers are not pretty. According to consensus among providers, internet penetration of households this year amounts to 80,000 or so legal subscribers and anywhere between 50,000 and 100,000 illegal connections supplied by unlicensed wireless operators. In 2001, the numbers of legal subscribers were actually higher. In terms of adaptation of successful business models and new technologies, ISPs here five years ago were able to point to the Lebanese market’s edge over other countries in the region, which moved slowly and were mostly hesitant to reluctant in opening to the internet, socially as well as technically. “Lebanon was the most advanced country in the area in telecommunications. It is a shame to see where we stand today,” said Bassam Jaber, general manager of ISP Cyberia. The downward trend was spawned by a combination of reasons, from the deterioration of consumer purchasing power to high governmental charges for bandwidth and illegal competition that so far could not be erased. Efforts by the government to introduce lower rates for consumers linking per dial-up phone lines to ISPs and cut off unlicensed operators of cable internet helped but were not enough to turn the tide, Jaber said, even as the Lebanese people are still looking for connections to the internet. But ISPs continue to pay the ministry of telecommunications about $20,000 per month for a standard E1 connection of two Mbps, which elsewhere costs a fraction of that. In his opinion, the ministry is not blocking developments but things are moving just too slowly. This has created a paradoxical and unhealthy situation where Lebanese internet providers are showing only abroad what they are really capable of. “We need to be leaders in Lebanon before we can be leaders outside,” Jaber said. “Today, the situation is the opposite. We are leaders outside.” Simplified, the Cyberia ISP brand operates profitably in Jordan and Saudi Arabia – but scrapes by in Lebanon.

To understand the real abysmal picture of Lebanon’s internet penetration, one need only try ranking it against South Korea, the world’s leading nation in broadband connectivity in 2004. The government in Seoul announced last month that the country had achieved more than 30 million internet users – 30.6 million, to be precise. That’s 68.2 % internet penetration in a country that recently surprised us mostly through its enthusiasm for football. The Korean government offered a breakdown of their national figures into detailed analyses of usage preferences, age structures and form of connectivity. According to its statistics, 95.5% of youth between the ages of six and 19, and even 58.3% of people in their 40s go online regularly. As the Korean government followed through on its decision to support a digital society with participation by all, digital subscriber line and cable modem broadband services were used by over 95% of internet users and the average Korean spent 11.5 hours per week surfing the web, with online shopping, gaming, chatting and information searches being key activities.

Compare that to Lebanon’s most optimistic estimates of 250,000 users and well below 10% internet penetration rate, without broadband links in households and no analytical dissection of usage structures whatsoever put forth by the government. Remember also that commercial internet started within the past ten years in both countries. In 1997, when Korea had a mere one million internet users, penetration rates in Korea and Lebanon were not so incredibly far apart. To name what can be known about the structure of the Lebanese market, it is served by five ISPs, two of which specialized in recent years on providing only corporate services. This provider segmentation settled basically into the current shape in 2002 when two early-hour ISPs, Inconet and Data Management merged into IDM, which claims a strong position in both corporate and dial-up consumer markets (the latter largely on account of providing the internet service to the market segment of Banque Audi internet account holders). Cyberia, also an early entrant to the access game, placed their opening bets on the consumer market where they attempted in 2000 to pioneer the provision of proprietary news and information content but aborted the costly project due to lacking commercial viability. Their strength today lies mainly in the dial-up market. Terranet, the third ISP active in consumer dial-up, came onto the market as towards the end of the 90s and could expand their position quite speedily based on technological advantages. Fiberlink Networks launched initially as a consumer-oriented service under the brand name Lynx but refocused soon on the corporate segment where it reached a strong position, working for a limited period under the identity of PSI, a US-based group with high-flying ambitions. Fiberlink is planning to re-introduce consumer services under the Lynx brand. The provider segment is completed by Sodetel, a company that set out as a management and maintenance firm for a 1960s undersea communications cable linking Beirut to Marseille. The firm, established in equal parts by the Lebanese government and France Telecom, is viewed as a smaller player in the corporate market. The players are familiar with each other and – after terminating an unsustainable price war in 1999 and 2000, during which retail customer numbers soared but ISPs sold access massively below cost – have in recent years moved with remarkable harmony on the dial-up price front. Nonetheless, the commercial ISPs today guard their client counts and market share information with such envy that the possibility of future new position fights appears difficult to exclude. As the providers conceal their numbers and the MOT neither commissions research firms to monitor internet penetration and online demographics nor publishes its own figures on the size and development of registered corporate networks, it is hard to precisely evaluate the evolution of the sector – hard for outside analysts and apparently even for the companies. What all providers do agree on is that business so far has not been easy. “It is always difficult. Even with our strong teams in tech and sales, 2004 hasn’t been easy,” said IDM commercial manager, Zakie Karam. According to Jaber, the dial-up consumer segment is characterized in high fluctuation rates among retail customers who jump from one provider to the other. By maintaining their e-mail accounts with any of the big global providers – yahoo!, hotmail, et al – a large portion of users need a local ISP solely for access services and switch readily between them. As the provision of dial-up services is only marginally profitable per account and economies of scales are unachievable under conditions of high costs and competition from gray operators, the companies for the moment seem content with maintaining this status quo and hardly have reasons to invest much in retail expansion or loyalty building among dial-up customers. “Cyberia is well known, so why advertise today when there is an illegal market,” Jaber argued.

The corporate segment, where client relationships are stable and an account generates from $400 to $500 per month upwards in revenue, has been more attractive to the ISPs and the sector achieved more growth here than in the consumer market, probably as much as 500% over the past five years. In the estimate of Fiberlink general manager Imad Tarabay, the corporate market nonetheless does not contain more than 800 active accounts, equivalent to 8% of the about 10,000 firms registered with the VAT system. Thus the players are plowing on, with moderate efforts in retail marketing, deployment of technologies and broadening of services. One such positive innovation was the launch of a public internet access system with wireless hotspots at Beirut Airport earlier this year. IDM, which won a tender to establish the airport network, experienced smooth sailing of the service and saw usage increases of 50% during the summer travel season. IDM is pressing forward this year with the establishment of hotspots. According to Karam, by the end of the year, 25 such wireless access zones are scheduled to be operational in places such as the coffee house outlets of Starbucks and Tribeca, the Roadster diners, and the Riviera and Mayflower hotels, letting 2004 see the first wave of wireless rollouts in public places. By experiences from the recent past and under existing circumstances, however, the corporate market is the main candidate for creation of meaningful new impulses in breaking the slump of the past few years and deploying new online capacities in Lebanon. Connectivity growth could start with the provision of more powerful corporate intranet services, and if things go as one player envisions, it is starting just about now. This would come through a new company under leadership of Fiberlink’s Tarabay. Called Cedarcom, it is geared to serve business organizations with the need for intranet communications between several locations as well as provide last mile services for ISPs and similar clients. Cedarcom is one of four firms (plus Ogero) licensed by the MOT for operation of legal wireless or cable networks within Lebanon, paying this privilege with an annual fee of $65,000 and the obligation to transfer 20% of revenue to the ministry. The seven-year-old Cedarcom had been acquired by Tarabay and his partners in the spring of 2003 and re-started commercial operations in May of this year. By end of September, the network will reach full coverage of Lebanon’s major population centers, including the Bekaa. Marketing activities are rolling from the beginning of this month, with a launch event at the Termium fair. What makes this firm remarkable is that its commercial launch marks the introduction of an important new technology in the Middle East – namely, the wireless Multi Protocol Labeled Switching (MPLS), which was developed by Cisco Systems. Creation of the network required investments of nearly $5 million, of which 70% was needed to achieve national coverage and will contribute less than 20% to revenue. But although expensive, national coverage is indispensable for Cedarcom’s ability to attract important clients who can budget something like $10,000 per month to interconnect 20 branches to their headquarters. In the existing market, Tarabay sees banks, with their mandatory intranet linkage of all branches, as the main clientele of Cedarcom, which will be able to offer more services for lower fees. While a multi-branch client per location typically pays $500 in Beirut to $700 outside of the metro area for a 64 Kbps capacity, Cedarcom rushes in with 512 Kbps lines at a charge starting slightly above $400. With this much power to offer, the company swept all contracts it bid for during the past three months, Tarabay claimed, even if competitors positioned their bids below their usual rates. But the existing market is not the real potential. At an estimated 1,500 client units (almost 900 of them bank branches), Tarabay estimates this corporate intranet business to be worth “$7 million or $8 million, not more.” This market could grow fourfold in size over the coming two years, he believes, if the government finally takes the two steps of establishing the Telecoms Regulatory Authority and lowering the connectivity charges. Costs of bandwidth for companies could be cut in half under those conditions, opening the market to a large number of midsized multi-office businesses. After many political delays, Tarabay sees the issuance of the laws and decrees that will make the 2002 telecommunications law fully applicable happening in the near future, probably after the presidential elections. After that, things would really take off. “We over dimensioned our network, because we will start feeling the growth,” he said.

Such a development of the corporate market is meaningful, because it could finally spell the beginning of affordable broadband provision to private homes, by which growth of data network and internet penetration in Lebanon would evolve hand in hand, enabling the country to eventually catch up and close the internet gap between, at least, other Middle Eastern countries. The providers, although few in number, certainly seem ready, eager and willing for a second birth of Lebanon’s digital society. The old vigor of the sector’s days as regional pioneers and service innovators has not vanished, it only rests beneath the tired faces of the small provider community, Jaber said. “When we started we did not have the same problems as we have today. But we still have the same spirit that we had then.”

The operators of the currently government-controlled Lebanese mobile phone networks are officially called MIC 1 and MIC 2, for Mobile Interim Company. MIC 2 is the Mobile Telecommunications Company (MTC) Group, the rapidly growing Kuwait-based Arab telecommunications firm with operations across the Middle East. EXECUTIVE talked to MTC general manager, Saad Al Barrak, on their management of the Libancell network and on how long MTC would like to play an “interim” role.

At this early stage, how are things going with the management of the Libancell network?

Everything is going all right. We have significant achievements and although we have just started, we have the operation totally under control, with increases in subscribers, revenue, everything – which is extremely encouraging.

How many employees do you have at this point?

Today, we have 305 and I think this is the level we are going to stay at. That is more than enough to handle the entire operation.

How many new people did you have to hire?

[Of previous staff] 140 stayed and we hired 160. This is a massive change and not easy. Doing it quickly and letting people pass through orientation and training and at the same time operate as normal and even better, with improvements on productivity, was a good achievement.

Were there any glitches in the takeover phase?

Yes, the glitch was mainly on the prepaid service. It is an old technology that is susceptible to attacks. We had two major virus attacks that brought the network down and caused us some problems, including interruption of service. However, this is a heritage of the past that we have to deal with. We have already made an agreement with the government to change to a newer technology platform.

And the government will finance this?

Definitely, the government finances all the capital expenditure. This is well under way and we hope that things will soon be much more robust and reliable. In the meantime we are enhancing and protecting the current installation, in order to overcome the period until the new technology is in place.

Are you foreseeing changes in the service portfolio, dropping or adding specific services?

We have to revamp a lot of the products. This is also subject to the government’s approval, especially with new packaging and pricing. We have many ideas in that regard, which should promote the overall wellbeing of the network and the services.

How is your relationship with the government at this point?

It is excellent. I think the ministry of telecommunications, presented by the minister and his assistants are all extremely helpful and fully understanding.

Is it correct that you will not only make changes in technology and services but also in identity and marketing?

Right. Libancell belongs to the old company. We can use it only to a maximum of six months. During this time, we are agreeing on a new name and a new brand with the government. They have to endorse it because they own the company.

Did you already present a proposal?

We have been engaged in presentations and discussions for the last month, and we are arriving at the conclusion of this stage.

But the operating company will be MTC?

It will be MTC Liban. It is a separate company and a subsidiary of MTC, registered as a Lebanese company.

Does it have any Lebanese shareholders?

No, not at all. It is 100% owned by MTC.

And management of the company and network will be handled from Beirut?

Totally from Beirut, yes. We sent a management team here, which is in place. They are operating as an independent team here and supported by the group.

Will there be any synergies from your presence in other countries across the region?

Yes, of course, that’s the beauty of contracting with a group and not an individual company. All the goodies of the group will be earned at a very low cost here.

Can you give examples for synergies?

They exist in terms of promotion, branding, training, availability of resources, funding, product development, technology development, also collective bargaining with suppliers, which will give the government much better prices for their cap[ital] ex[penditure] investment.

MTC entered management bids for both networks and was the second to achieve a contract. Did you get an equivalent deal by being awarded management of the Libancell network?

I don’t think that there is better or worse in this case. These are two companies that have been operating at similar size. Cellis definitely had better technology. We knew this and that’s why our price to manage Cellis was higher than our price to manage Libancell. Libancell’s technologies are also closer to our technologies. Our knowledge and expertise in Libancell was greater than in Cellis; that was the main differentiator.

Are you having plans for the presence of MTC in the Lebanese market beyond the management function at the network?

Our plan is wherever we go to own equity as well as manage. We will definitely be working on an ownership plan, along with everybody else who will present proposals to the government. We hope to be more convincing than others, with more benefits, and that’s the challenge to us.

Would you see a step into ownership already possible during the management period or only afterwards?

There is a clear decision and strategic direction of the Lebanese government on privatization of the telecoms sector. The management contract has been widely publicized and taken as an interim period until we arrive at full privatization. So everybody agrees that there must be full privatization. The speed and the approach are where the differences are. Once these things are resolved, it is definitely better to transform the stake of the state. There is much more advantage to it in selling its stake. I think they will take that step sooner rather than later.

Your bid for the management contract was substantially below what the government paid previously and also below expectations. What gave you the confidence to be able to make a profit at this level?

Number one, we are a highly experienced company. We have the economy of scales, so our cost structure will be lower than others who would only handle Libancell on its own. These are two major factors. We have been very aggressive. The Arab world market is the prime market for the MTC Group. We want to be recognized by countries that we can come, manage their strategic assets in telecommunications business and do very well so that will extend the goodwill and, hopefully, move to the full privatization stage. This was our objective and we are extremely happy about developments so far and don’t regret it.

To what degree of market penetration do you foresee growth of the mobile market in Lebanon?

I think Lebanon should have a minimum of 40% penetration in three to four years time, given the liberalization of the market that we are free to expand as much as we can.

This means you first need a numbering plan?

Definitely. A numbering plan is being discussed now and will be amended hopefully by the end of the year, which will give everybody a big range of numbers. Lebanon has already passed the telecommunications law, which is a very good and advanced law. They need to enact this law by setting up an independent regulator, the Telecommunications Regulatory Authority. That should be very helpful in instigating development and furthering the growth of the telecommunications industry in Lebanon.

You would not disagree if I say that telecommunications is too expensive now?

It is very expensive in Lebanon and we hope to contribute to making it much more cost effective with a lot more variety and much better service for the client.

But at this point you cannot give a target number for per minute rates and such?

I cannot. If I fully owned Libancell, I would give you a plan with dates and commitments and numbers, but since the decision is lying with the state and we know the complications of the political side of the story, then definitely I cannot make any comments.

People in the industry claim that authorities were already twice close to signing the enactment laws but didn’t because of political personality problems. Would that deter you in any way?

I think it is deterring the whole country. We hope that with the new elections on presidential and parliamentary levels within a year from this time, things will be much better, like all the Lebanese hope for a much better political environment, not to hinder the development of the country.

But are you confident that in any case, Lebanon will remain stable?

That, I have no doubt about. Lebanon is volatile and highly moving, but it is stable.

It sure looks as if in the world and region, all things ICT are returning to normal. Shares in e-companies are no longer an anathema. The big market move of the season from a tech perspective, the Google IPO, clawed its way beyond obstacles to achieve figures that appear, all in all, more respectable than some headlines suggested. Earnings at multinational corporations from Cisco Systems to Dell look good – so good that a 5% quarterly drop in performance of Hewlett Packard’s enterprise server and storage division led the company last month to immediately sack three top executives, even as HP’s overall profits were up 9% for the quarter. The big names are also hiring. IBM announced in August that it has 18,000 new jobs on offer to bring its worldwide headcount to 330,000 at the end of 2004 and Microsoft said they would hire 6,000 to 7,000 persons during the coming 12 months on top of their current staffing of 57,000. The latest news from the ICT employment market in Germany, Europe’s strongest economy, is that salaries for information and communications technology specialists have accomplished a full rebound to sector income levels of early 2001. Across the MENA region, ICT growth also is again in focus. From PC and software sales to continued surging numbers of mobile phone subscribers, market watchers make enthusiastic projections and global ICT companies court Arab markets for their promising potential, even as these markets are marginal in their annual reports. With many signs to the unmitigated importance of ICT for regional economies and new good days for people in the sector, it appears paramount for a country like Lebanon to do its utmost in preparing the best possible environment for ICT companies to thrive here. International and local experts and executives for firms of all sizes and specializations in the Lebanese ICT community agree not only (despite their differences on many other things) that the country still has a good shot at being an ICT location, but are also in total unison on where crucial changes are needed first. “ICT in the Arab world is a high priority and opportunity for economic development and inclusion in the digital information age,” Microsoft’s regional manager, Charbel Fakhoury, told EXECUTIVE, and enthused, “Lebanon’s ICT potential is still to be fully realized and we are witnessing a strong momentum and support from executive leadership to expedite Lebanon’s realization of the ICT opportunity.” The right size for the Lebanese ICT industry’s production would be around $2 billion, or 10% contribution to GDP, suggested economist Louis Hobeika to EXECUTIVE, and underscored how the country has come a long way in ICT development but has lost ground within the region. “In absolute terms we are perhaps moving forward, but in relative terms we are falling behind,” he said. “One of the obstacles for companies to locate in Lebanon are the high costs in the telecommunications sector, which are three times higher than in the UAE. Our ICT sector today is of average value and average performance.” In Hobeika’s view, Lebanon has several models in the Arab world to look to as examples of who is getting things right: Dubai already, and soon probably also Bahrain, Oman, Kuwait and Qatar. For Lebanon to gain a new edge in ICT, experts and industry members agree that one urgently required improvement is the establishment of special technology parks. Co-locating numerous companies from one industry in shared environments has proven to lead to interconnections and mutually supporting industrial clusters, enabling stakeholders to advance together and become fit for international competition. Clustering boosts efficiency. Due to ICT companies’ pronounced needs for communications technology and highly trained staff, dedicated tech industry zones, as shown by multiple studies and practical examples, are especially helpful to ICT firms for optimization of their development potential.

The ICT community in Lebanon recognized these potentials earlier than their colleagues and public officials in many other Middle Eastern countries and entrepreneurs started drafting plans for ICT parks as far back as 1997. However, up until today, no large-scale plan has been implemented here. By contrast, tech zones in the UAE, Jordan and Egypt were designed after the first such Lebanese projects – and implemented years ago. Thankfully, however, Lebanon has one ICT technology park, which is demonstrating, albeit at a smaller size, how such an endeavor can be just as successful here as in the industry’s more conspicuous international locations.

The Berytech technological pole incorporates three essentials of a cluster for a growing ICT sector: hosting services, communication facilities, and an incubator where startup businesses can take their first corporate steps. The pole, a $4.5 million project established under strong involvement of Universite Saint Joseph (USJ), opened its doors in November 2002 on a site adjacent to the USJ Mar Roukos campus overlooking Beirut. Not even in its third year, Berytech is already home to some 40 enterprises and is currently researching where it can build additional facilities. “Our plan is to expand every year by 15 to 20 companies between startup and hosted companies,” Berytech president Maroun Chammas told EXECUTIVE. This growth target foresees significant incremental increases in the size of the facility, and the master plan calls for building each year 3,000 to 4,000 square meters in facilities until 50,000 square meters are added to its current 8,000 square meters in built-up area. As this expansion cannot be undertaken on Berytech’s current 3,000 square meter plot, the institution is trying to get land nearby on properties owned by a monastic order or, alternatively, seek buildings in Beirut. The latter option would also suit some resident companies, who told the Berytech management that they would like to be closer to the city, but the business incubator for startup enterprises would in any case remain at the Mar Roukos location. According to Chammas, thus far, all companies located at Berytech have been successful in their business ventures. The pole is open to companies from seven sectors, with information technology and multimedia/communications most developed in their presence. Although the shareholder base of Berytech consists of the USJ, 10 banks and seven industrial enterprises, it is one of the challenges for startups at the pole to acquire financing. “The fact that people are at Berytech makes access easier but Lebanese banks have not developed the business of lending to startups,” Chammas said, “it is one of our responsibilities to ensure that the incubator inspires banks with confidence.”

Startup entrepreneurs receive special support in the pole’s business incubator for a limited period of time. Hosted companies pay charges of $13/m2 per month in rent and $15 per month and computer terminal in connectivity fees. Although these charges may appear substantial by local standards, they have a great advantage in being fully transparent and calculable, said Ralph Bitar, manager of Soft Mind, a developer of corporate software solutions. “Here, a flat fee covers everything. Costs are not higher than in other buildings but benefits are much larger,” he said, and after trying out several locations in Beirut, his firm had found locating at Berytech a great improvement. Habib Maaz, CEO of another software firm, Unilog, concurred, saying his firm had been at Berytech since January 2003, and it had proven a good choice and location, which also impressed foreign visitors.

With Berytech’s good reception in the market, Chammas said he saw potential for having many more poles of its type all throughout the country. “I believe there is room for expansion everywhere in Lebanon.”

Enter the Beirut Emerging Technology Zone. With a projected size based on a one million square meter site, the BETZ project is of a different dimension to Berytech and incorporates a scale that would make it perform in the same league as the Dubai Internet City, the Middle East’s showcase ICT zone. But whenever the BETZ topic comes to discussion these days, opinions among the Lebanese ICT community are divided. Initially put on the table in 1997 through a grant for a feasibility study by USAID, the BETZ concept actually dates back to the bubble days of the new economy. This in itself would not be a problem as the need for a substantial ICT industry zone is as great now as it was then. The problem arises from the project’s enormously sluggish evolution. For the first few years after the proposal’s creation, the BETZ feasibility grants were stuck in various government drawers, with government experts in favor of the project having to produce contrived explanations every time they were asked why the study was experiencing yet another delay in implementation. When the study finally came to see execution around 2002, it was carried out by an American consulting company – somewhat understandably, knowing that US funding in international assistance likes to work that way. Less clear was perhaps, why research for something called BEIRUT Emerging Technology Zone would spend much time evaluating sites in far corners of the nation. As several communities were examined, ICT and development enthusiasts in some of them invested themselves considerably to present their community as location of choice for the project. Relief should have set in when in spring of 2003, IDAL chairman Samih Barbir could make a jubilant announcement that BETZ would be built in Damour in a partnership between IDAL and the municipality. For many in the ICT community, this announcement came so late that they were inclined to question the government’s intentions and validity of the project in numerous respects or were simply in disbelief that BETZ could now be put on the promised fast track of construction and welcome its first tenants by autumn 2006. As if to prove them right, the municipal elections followed and with them a change of elected officials in Damour. Since then, the situation of the project has been obfuscated by disagreements and lagging negotiations, the latest results of which apparently were that the municipality no longer wants to be a partner in owning the project but merely wants to lease the land to BETZ and receive annual rent to the tune of $4 million. Rumours circulating about the municipality’s position moreover talk of local fears to see inflows of outsiders and a tossup of the town’s sectarian balance, instead of welcoming the project’s manifold opportunities for developing the community. For supporters of growth in the Lebanese ICT industry, this is worrying news, because they are convinced that missing out on BETZ now would mean missing out on a crucial chance.

“Microsoft has been a strong supporter of BETZ,” Fakhoury confirmed to EXECUTIVE, describing the zone as “a milestone ICT project that will show Lebanon’s commitment to encourage ICT.” His company was dedicated to continue discussions with stakeholders on how local and multinational IT companies would be able to contribute and benefit from BETZ but warned, “If the project does not get real support, a real boost, it will move slowly.”