After much back-and-forth in the media, in mid-July an agreement was finally hammered out between the Syndicate of Hospitals and the various government entities and public employee groups that collectively owe almost LL500 billion in unpaid hospital bills. The terms of the deal stipulate that the hospitals’ primary public debtors – including the ministry of health, the labor ministry, the army, and the National Social Security Fund (NSSF) – would each pay the entire amount they owed from 2003 by the end of August.
Although the president of the NSSF’s administrative board, Maurice Abu Nadher, had previously argued in published reports that the Fund’s outstanding bill was the result of incomplete applications on the part of hospitals, as well as a lack of government funding for the Fund itself, he told Executive there now was “no problem, we have the money … I think we will be able to make our payments by August.”
Saleem Haroun, the Syndicate of Hospital’s president, is not entirely convinced. “They have made agreements before and then broken them. Either way, we are still owed for the last seven months of 2004 and still face serious problems as long as there are delays in payment.”
Abu Nadher, for his part, isn’t entirely convinced of the hospitals’ woes: “I don’t think they are facing a dire situation. After many years, they are making too much money.”
For Antoine Abi Akl, a hospital payment’s manager at Berytus, a health insurance provider, private insurers will most likely continue to be caught in the middle. He said: “Hospitals try to compensate by putting more pressure on the private sector to pay their bills,” since private insurers customarily pay their bills within two to three months.
Lebanon’s AIDS problem?
According to the UN’s latest annual report on the global HIV/AIDS epidemic, the number of individuals in Lebanon living with the disease jumped 40% between 2001 and 2003, from an estimated 2,000 cases to 2,800 cases.
The increase seemed to buttress the stark warning issued earlier this year by the National Aids Control Program (NACP), a joint effort by the ministry of health and the World Health Organization, that “HIV/AIDS could emerge in a few years as a primary threat in Lebanon, which will affect major sectors including health, social affairs, tourism, and labor. It will be an additional burden on a slowed down economy, increasing the costs of the health care, and on a social structure barely developed after years of civil troubles.”
Although one NACP official stressed that the UN’s number was only an estimate – there are currently 756 people in Lebanon known to be living with HIV/AIDS – the globally respected report may just provide some much needed fire for the government to move even more quickly on key elements of its recently issued five-year strategic plan.
Key among the goals envisioned by policymakers in the plan is a greater involvement on the part of the private sector – especially in so far as private hospitals and the media are concerned. As the plan noted, “the private sector’s involvement in the fight against AIDS is imbalanced.” What’s more, there have been “few links” established between the government and private hospitals, which treat 90% of HIV/AIDS cases.
The plan also looks toward the creation of a “legal and policy environment which protects the rights of all persons” infected with HIV/AIDS – an effort that would invariably affect private companies in Lebanon, since few have formal policies regarding employees living with HIV/AIDS.
Indeed, according to a recent World Economic Forum report, fewer than 6% of firms say they have such policies in place. “Companies are not particularly active in tackling AIDS, even when they expect the epidemic to cause serious problems for their business,” the report said.
Bad medicine
The Lebanese Pharmaceutical Importers Association (LPIA) claims the import of counterfeit pharmaceuticals and the illegal import of registered products have increased over the last few months. “We have no estimation of the volume,” said LPIA president Armand Phares, “but several of our members have witnessed more incidents of illegal imports and-or counterfeit products on the market.”
It’s estimated that about 6% of the $230 billion pharmaceutical market worldwide includes counterfeit medicines. Generally, the percentage is higher in developing countries, yet surprisingly a recent documentary on France’s TV5 showed that in the USA an estimated 15% is counterfeit. In Lebanon, according to Phares, “it’s definitely far below the world average.” Still he called upon importers and pharmacists to remain vigilant and to inform authorities and the public whenever they come across smuggled or bogus products.
Preventing the import of such products is the duty of the customs authorities. But at the same time it is the task of the inspection department at the ministry of health, as well as the Order of Pharmacists, to conduct “heavy controls,” so that products are located and people dealing with them arrested and judged.
Meanwhile, to make illegal imports more difficult, the LPIA has decided to introduce a special hologram, which will be added to import forms. By law, a pharmaceuticals importer must put two stickers on the outer pack of a medicine, one indicating the registration number at the ministry of health, the other indicating the price in Lebanese pounds.
“Having noticed that this system can be easily falsified,” Phares said, “the LPIA has decided to introduce a 3D hologram showing both the LPIA and the importer’s name, which is very difficult, if not impossible to falsify. This will take a few months to implement, but will give very strong protection to patients.’
Happy hotels
With Lebanon perhaps heading for an all-time record in terms of the number of visitors entering the country, hotel occupancy rates are soaring this summer. In the first six months of 2004, 506,367 foreigners entered Lebanon, up from 348,542 during the same period last year. In July and August the number is expected to almost double. Last year some 300,000 Arab visitors came during summer alone.
The ministry of tourism this year expects a total of some 1.5 million tourists to enter Lebanon, which would break the 1974 record of 1.4 million. And so it is a perfect summer for Lebanon’s hotel sector. Beirut’s luxury hotels claimed an occupancy rate of 75% in June, which is expected to increase by some 10% in July and August. Nizar Alouf, general manager of the Riviera, claimed an occupancy rate of 73.3% in June, which he expected would increase to 80% July and August.
The Phoenicia InterContinental, Beirut’s largest hotel, saw 77.4% of its 13,800 beds occupied in June, while Rotana, one of the smaller hotels with a maximum capacity of 3,840 beds, boasted the highest June occupancy rate with 91%.
But it is not just Beirut that is reportedly doing well. The Sheraton in Bhamdoun is “nearly full” the whole summer, according to the reservations desk. A smaller hotel in the Bhamdoun-Aley area, the Carlton, saw a third of its 70 rooms occupied in June, yet is fully booked during July and August. The medium size Sheikh Hotel in Bhamdoun reported similar rates. Though Bhamdoun is picking up rapidly, Broummana, in the Metn, is still doing well, as it did last year. The Grand Ville Hotel, with its 118 rooms and 52 apartments, had an occupancy rate of 50% to 60% in June and September, and of almost 85% in July and August, according to its reservations manager. The Belle Vue Palace, a small family hotel of 65 rooms, has been fully booked for the whole summer. Nearly all hotels reported that some 80% to 90% of their summer clientele originates from Saudi Arabia and the Gulf.
The Arabs are landed
The latest report issued by Ramco Real Estate Advisers last July concluded that Gulf investors buying Lebanese land have poured some $680 million into the Lebanese economy between 2000 and March 31, 2004. The report added that “taking into account the additional investment on project development the amount could easily more than double.”
RAMCO noted some interesting buying trends. While last year saw the highest activity in land buying by Arabs, when no less than 800,000 square meters were bought in 56 separate deals, the first months of this year saw a slowdown in the number of purchases: only 122,000 square meters were bought, mostly by Saudi investors. RAMCO estimates that having bought large chunks of land last year, Arab developers “need some time to digest the flurry of buying.”
Also, while Kuwaitis were known to be the most active buyers in recent years, Emiratis concluded nine out of the 20 largest deals over the last 32 months, followed by four Saudi and four Kuwaiti deals, and one Qatari and one Syrian.
A total of no less than 2.03 million square meters of Lebanese land were sold between 2000 and March 31 2004 in 109 large deals. “All these deals,” RAMCO reports, “involved lands larger than 3,000 square meters, the maximum holding allowed for non-Lebanese.” The two largest purchases of land – of 368,723 square meters and 123,492 square meters – were concluded by Kuwaiti investment groups in the region of Qornayel.
The Arabs’ most preferred purchase targets are in the mountains, yet not too far from Beirut. So, 38% was bought in Baabda, 27% in the Metn and 18% in Aley. Only 1% of all land deals took place Beirut, which still represented the largest value for the Lebanese economy.
Kill those lines
The first consumer boycott of the Lebanese cellular network was endorsed by a wide coalition of syndicates and professional organizations. The main organizers of the boycott were the consumer rights non-governmental organization, Consumers Lebanon, which had urged the country’s nearly 800,000 mobile phone users to press for a cut in basic rates and per-minute charges by shutting down their mobile phones for 24 hours on July 15.
Initial estimates of participation in the boycott varied wildly, from more than 60% by the organizers to little over 10% by the ministry of telecommunications, which is in charge of setting mobile phone rates for the two network operators LibanCell and Cellis. Notably however, the telecommunications minister, Jean-Louis Qordahi, responded to the boycott’s substantial public attention by saying the ministry would shortly be submitting a revised cell phone pricing structure to the Cabinet.
A few days later, representatives of Consumers Lebanon modified their high estimates of the boycott. Business users could not be expected to switch off their mobiles for a full day, the executive director of Consumers Lebanon, Abdelrahman Berro, told Executive while making a rhetorical claim to the protest’s general support: “For us, 95% of users are with the boycott,” he said. “Who is against a reduction in costs?” The target of the boycott was the government, not the mobile phone operators. Berro attributed to government manipulation the fact that excessive cellular rates were blamed on the networks’ operators.
If no change in prices comes about, Consumers Lebanon plans to repeat the boycott in mid-August. The organization has set its mind on creating a permanent framework for staging civil disobedience against numerous government-mandated costs. “We will make many boycotts,” Berro said.
Corruption as thick as oil
While Lebanon bakes in the summer heat and people bend under the weight of high gasoline prices and seasonal energy shortages, the judiciary recently launched investigations into high-profile corruption and squandering of funds at the national power utility, Electricité du Liban, (EDL) and the ministry for energy and water resources. Two advisors to the ministry, Rudy Baroudy and Majed Qostantine, were taken into custody and questioned over their alleged involvement in fraudulent trade with oil derivatives and with illegally enriching themselves.
From late June, investigative authorities issued a flurry of summons for questioning against the two advisors, employees at EDL and businessmen working in the import of oil derivatives. The cases of fraud and graft in the oil sector partly date back to 1999, when the former oil minister, Shahe Barsoumian, was arrested for supposedly skimming funds in the magnitude of $800 million from illicit oil deals. At the time, observers considered Barsoumian to be a possible scapegoat for other figures implicated in the oil scandal, and until today the file of suspicious affairs in the energy sector remains multi-faceted: Alleged wrongdoings also include charges relating to shady contracting and consulting agreements as well as to opaque procedures in awarding operator contracts for the nation’s power plants.
While results of the current investigations have yet to be made public, it is curious that the problems in the energy sector attracted such intense official scrutiny just after high energy costs played a big role in the severe unrest during the May 28 demonstrations. Did new evidence surface or could politics and election-time machinations have been involved in the investigation? “We are researching why these investigations have come to the fore right now,” said Charles Adwan, anti-corruption campaigner for the Lebanese chapter of watchdog organization Transparency International.
New winery in Kefraya
The Saadeh Group, which already has wine interests in Syria, is building a new winery, Terres & Vignobles, in Kefraya in the Western Bekaa. Yussef Kamel, the Saadeh Group’s vice-president for investment, refused to reveal any details of the venture, but admitted that “planting would begin very soon,” an indication that the new winery will grow its own grapes rather than buy from local growers. If this is the case, it will be at least three years before Terres & Vignobles will produce it first harvest and also means that further planting will take place in an area where wine grape growers have seen prices fall by as much as 40% over the past three years.
Still, Kamel was upbeat. “We believe that wine is a business Lebanon should leverage, given the obvious qualities of the country’s soil and weather, adding, “If there were a danger of saturation, we wouldn’t be in the business.”
The new venture comes at a time, when Lebanon’s $25 million wine industry is at a crossroads in its development. UVL (Union Vinicole du Liban) President Serge Hochar has said that the long awaited national wine institute, must, like in France, control the level of planting according to demand.
Unchecked expansion would, according to one local producer, affect the price and quality of grapes and threaten the quality of future vintages. For a country, whose only hope of competing in a fiercely competitive international market, is to create a boutique identity, this would be a disaster.
“There is a danger that such uncontrolled development – not necessarily by the Saadeh Group I must add – could damage the reputation of Lebanese wine,” he said. “The sector is now in such peril of being overwhelmed, and damaged, by unrestrained investment and unethical practices that the government and associated legislative bodies must step in to protect us.”
Taking a Spin
Local supermarket Spinneys is giving away 10 new cars as part of its 100-day promotion and advertising drive from May to early August. Lebanon’s expansive supermarket chain describes as “by far the largest ever” for such a campaign in retail here.
Putting out prizes worth “just short of $300,000” and investing into advertising and below-the-line product promotions, the three-tiered campaign carries a value of $600,000, Spinneys’ Middle East retail director Michael Wright told Executive. Results have been in line with expectations and have brought the company month-on-month sales growth of 15% to 20%.
The campaign’s unprecedented size is based on both sales volumes and increased geographical presence of Spinneys markets in Lebanon. “Our advertising budget is directly related to our top-line sales,” Wright said. When the company operated at single branch level, even nationwide campaigns had been of limited effect, because customers would not find their way to the store, he added.
While some of the chain’s previous promotion efforts, such as introduction of coupons in 2003, seemed over-complicated for local habits and were not carried further, the current high visibility campaign apparently strikes a strong chord with Lebanese consumers. Under the rules of the campaign, a customer receives one ticket participating in the draw for the car prizes per each $34 in purchases.
The mechanics of the car giveaway follows the rules for lotteries under Lebanese law, by which prizes must amount to at least 3% of the accumulated value of participating tickets. Thus the campaign is geared towards achieving $10 million worth of tickets. For those who have a penchant for a gamble, this places the odds for winning an extra four wheels with your LL50,000 purchase at one in 30,000.
