When two separate shipments of spoiled Indian meat were detected by inspectors at Beirut Port in June, the government was quick to claim that the successful police intervention proved the meat safety “system” in Lebanon worked well.

“Everything is under control. There is no bad meat in the country,” said Ali Hassan Khalil, the agriculture minister, in a statement to the press.

Critics, however, including fed-up members of the meat industry itself, were not as confident. For some, the 250 tons of spoiled meat that rotted away at the Port for several weeks before being shipped back to India was just one indication of a much larger problem. Lebanon, the critics said, still had a long way to go in meeting rigorous, international health and safety standards when it comes to meat.

By mid July, the government seemed to agree. After an intense press conference by the Cattle and Butchers Syndicate, and public scorn from the nascent public watchdog group Consumers Lebanon, both of which pointed to previous shipments of spoiled meat from India, the government issued a ban on all imports of Indian meat – which is to go into effect in mid September since some shipments from India were already en route when the decision was made.

In taking such sweeping action, the government grudgingly fell, at least partly, into line with the EU, which has for years banned meat imports from India because of health and safety concerns. Although the Lebanese government had long argued that the UN deemed Indian meat safe – claiming that the EU’s actions were more about protecting their own domestic meat industry – the twin incidents of spoiled meat seemed to raise enough concern about the costs of continuing to do business with the country, considering that Lebanon imported 75% of all frozen meat consumed last year (6,841 tons out of 9,124 tons in all).

Of course, the decision was not easy – frozen meat from India costs about $1.5 per kilogram, less than chilled meat from Brazil or Paraguay, which costs $3 per kilogram, and substantially less than fresh meat from live European cattle, which costs $5 per kilogram.

Since Lebanese SHAWARMA, as but one example, is primarily made from frozen Indian buffalo meat (cows are sacred in most Indian states), the inescapable political reality is that it’s only a matter of time before the Lebanese consumer feels the pinch. As one industry source explained, “The demand for cheaper and cheaper meat, like from India, has grown steadily, just as the old sources of meat have become more expensive.” Indeed, faced with growing price differentials, the composition of the Lebanese meat diet has changed considerably over the last decade. In fact, some observers now estimate that 15% of all meat consumed in Lebanon is frozen, 25% chilled, and about 50% fresh. Rewind to ten years ago and about 75% of all meat at the dinner table was fresh, derived from live cattle slaughtered locally. Frozen meat represented only a small part of the market.

Live cattle is still Lebanon’s number one commodity import, ahead of cigarettes, at a total value of $135 million last year, but imports of frozen meat from India have risen by 27% and 57% in 2002 and 2003, respectively. Added to this is the fact that nearly 95% of all meat needs are now being met by overseas sources. Gone are the days when Lebanon had a thriving domestic livestock system.

For some critics, the government’s decision to halt the increasing stream of Indian meat imports appeared to offer tacit acknowledgement that, even though inspectors ostensibly discovered the spoiled meat, some risk was present that the meat might have entered the marketplace – health and safety controls, these critics said, were not as strong as the government claimed.

According to one industry source, who, like most wished to remain anonymous for fear of reprisal, the spoiled Indian meat caught at the Port had actually been turned away from Jordan the previous week. When it arrived in Beirut, it was actually a competitor who tipped off ministry of agriculture inspectors that the meat was bad. A top official close to the issue disputed this notion though, saying that international sampling procedures were used on all meat imports, which includes taking a piece from the front, middle and back of each 22 ton container of frozen or chilled meat that arrives in Lebanon and testing it for bacteriological and viral contaminants. The government official was confident that the three inspectors assigned to test meat and monitor livestock at the Syrian borders, the airport and the Port would have caught the spoiled meat. However, according to the industry source, the government does not have enough inspectors to check the multitude of shipments that arrive each day in Lebanon, some of which, the Cattle Syndicate argued publicly, bear false or misleading certificates of origin, validity, and composition, further complicating the process. As the industry source put it tersely, “I don’t let my children eat meat unless I have seen the cow myself.”

Indeed, according to several industry sources as well as top government officials and at least one international expert, the government’s action against Indian meat really should be seen as a kind of surface maneuver, one that deferred, or anticipates (depending on how you look at it), the more difficult kinds of systematic reforms that are needed throughout the meat sector in order to ensure that Lebanese consumers are adequately protected. The reason for this sentiment is threefold: first, Lebanon currently has no food safety law protecting consumers, nor does it have an integrated system for measuring outbreaks of food borne illnesses or problems that occur at meat facilities. One can only wonder if this lack of statistics is why even critics of government food safety practices are also usually quick to assert that the Lebanese don’t really get sick from meat. (Of course, the 60 people recently sickened by a meat borne E-Coli outbreak at two separate wedding banquets in Lebanon would probably disagree.)

Second, the central government has little control over the 40 or so slaughterhouses and meat processing facilities in the country – nearly half of which are essentially unlicensed, despite handling nearly half of the 40,000 tons of meat consumed in Lebanon each year. Since municipalities control and monitor the slaughterhouses that lie within their own jurisdictions, a patchwork of irregular standards and procedures has emerged that inhibits industry wide surveillance and early warning measures. This chaotic situation has even led the Cattle and Butchers Syndicate to call for the closing of the main slaughterhouse serving Beirut, the Quarantine, saying that only a completely new facility could meet modern health and safety standards. As one top official closely involved with the issue put it bluntly, “The slaughterhouses present a serious problem.”

Such a conclusion is not altogether surprising, especially when considering that, as one representative from the ministry of economy and trade – the agency charged with inspecting slaughterhouses, processing plants and meat products – acknowledged, “We do not have enough inspectors.” Add to this the fact that the agency acts primarily as a “complaint driven” institution and what you have is a situation where the Lebanese consumer is left to trust an industry with little in the way of uniform, transparent standards and practices, not to mention vigorous oversight separate from local interests. Third, in banning meat imports from India, the government avoided dealing with the issue of Paraguayan meat, which the EU bans on similar grounds as Indian meat (10% of all chilled meat imports are from Paraguay, with the other 90% from Brazil). This concern may not be a factor for much longer though, as several sources closely involved in the issue predicted that it would only be a matter of weeks before meat from Paraguay was also banned. Despite the problems and late-inning measures, it appears that Lebanon is finally moving ahead with reforms in the meat sector. Both the ministries of agriculture and economy, in addition to the United Nations Industrial Development Organization, are pushing forward a food safety law that will help Lebanon gain World Trade Organization membership, as well as better protection for consumers. Significantly, the draft law, which is expected to be taken up by parliament during the next session, aims to centralize authority over the various elements in the meat industry through a Lebanese Food Safety Agency. That body will, hopefully, put in place the law’s new standards and guidelines as well as serve as a proactive monitoring and enforcement regime for all levels of the meat industry. While stressing that the proposal was “excellent” and met the highest international standards, one non-governmental expert involved in the effort acknowledged that centralizing authority over what is now a sprawling web of interests involving butchers, supermarkets, slaughterhouses, ports and processing plants would be a “big challenge.” Either way, it’s a challenge that has clearly been made less daunting in the wake of the spoiled meat flap. According to Zuheir Berro, Consumers Lebanon’s executive director, the momentum couldn’t have come any sooner. In mid July, barely one month after the Indian meat seizures, the ministry of agriculture announced that 25 tons of spoiled fish had been detected and seized at Beirut Port. In one published report, a ministry source said that the importer of the fish was the same one who had tried to bring the spoiled Indian meat into the country in June. “There is an international mafia with connections inside Lebanon” facilitating the entry of spoiled meat, said Berro. “And we have no food safety law. Enough is enough. We need reform now.”

In the wake of criticism from a wide array of religious and political leaders, threats of an outright ban, and the very public defacement of certain controversial images from Tyre to Tripoli, the outdoor advertising industry appears ready to engage in a bit of belated self-regulation. To understand exactly what this will mean, EXECUTIVE sat down with Antonio Vincenti, CEO of the billboard giant Pikasso, who has been at the forefront of efforts to repair the industry’s own image.

Q: Describe Pikasso’s current role in the regional advertising marketplace.

A: We are in Lebanon, Jordan and Iraq – Iraq since January. We have forty competitors, more or less, in Lebanon and forty in Jordan and we are the largest company in Lebanon. What we do is rent locations from municipalities or from landlords, we install the boarding and then we rent it by creating networks.

Q: What is at the center of the controversy over outdoor advertising in Lebanon?

A: In a country where you have 17 communities living together, I think we must, if we want to preserve civil peace, respect the beliefs of all of the 17 communities. Now, where does the border stand between what is permitted and what is not permitted? Thank God, general security has a very open minded attitude. Since the beginning of the year (when they became the official censor), we have never had any problem with general security. And I can tell you that they are very liberal in their way of guarding permits. What does this mean? It means we should be very responsible toward this open-minded attitude of the censor. If we say, yes we have had a problem with religious authorities, but we have the permit from general security, then the attitude of general security the next day is to refuse all visuals or half of them, whenever they feel as though they will have the smallest problem – which is a pity. That is why we need to have self-censorship, self regulation – a logical attitude. You know you have visuals you should not accept and you should not accept them nor you should post them.

Q: What will self-regulation entail exactly?

A: After the Association for the Defense of Moral Values in Lebanon asked the justice minister to [crack down] on certain billboards. I advised my colleagues and competitors to take care and be very cautious. We also attempted to create a dialogue among companies. We are all working in the same sector but each one has different values and ethics. So, we suggested, and we will create, groups composed of the president of a municipality, three or four billboard companies, the local association of traders, a representative from the ad agencies and a representative of the ministry for the interior. Our industry objective now is to reduce the number of billboards by 25% in crowded areas. We will start this with the municipality of Antelias. The president there said he would like to be the first one to try this.

Q: Where, from within the industry, have most of the problems with visuals come from?

A: The problem comes from a lot of small agencies – they don’t care, they [produce] vulgar creations and post it everywhere. This is what disturbed and created this problem from all the religious authorities. Now, I would defend to hell pure creativity and the body of a woman on a billboard, if it is done with class, with creativity by a big agency, for a big brand with class. I do not want to be associated with a cheap product, cheap creativity and a vulgar thing.

Q: Some tiles have been taken out of less vulgar billboard visuals though, like one example along the highway to Sidon where Haifa Wehbe’s shoulders were removed.

A: This I am not aware of. A shoulder would never be a problem. Look billboard posters have abused the usage of their billboards, putting images that hurt the feelings of certain people. But if I have a big brand like Aïshti, who wants to put a half naked woman or L’Oreal, I will do it, but I won’t put it in a sensitive area. I would put it in Jounieh for example.

Q: Pikasso has never had a problem with its 3,000 plus billboards?

A: No, thank God. I just had two unipoles for a brand of underwear. I asked them to change the visual and they refused so I stopped the contract. It is not worth it. We want to be responsible. We don’t want to be used by some product or agency in order to sell some products with those provocative visuals.

Q: Has Pikasso ever had to bend the rules in order to compete in the market?

A: We respect the law as much as we can and we only stop respecting the law when our survival is at stake in a city or town. What does this mean? That we would exclude ourselves if we tell a president of a certain municipality, look we don’t install here because it does not respect the law [regarding the spacing of billboards]? Sometimes, I have no choice, or I would exclude the company from the market. If I am in a city where I have installed some billboards and then the council decides to give a competitor space at 50 meters away from me, what should I do? Dismount the billboard and exclude Pikasso from the city?

Q: Since the main advertising law stipulates that billboards should be kept 100 meters apart in all public areas, considering that 60% of the country’s 10,000 billboards are concentrated between Khaldeh and Jounieh, a stretch that only accounts for 10% of the country’s total area, won’t a 25% reduction significantly hurt revenues in these overcrowded, but profitable locations?

A: With the clutter prices are going down. Now, after the industry changes, it will be even better. It will make billboards more attractive and the sector more organized.

Q: Does Pikasso hold any of the billboards where the visual is repeated over and over again ad naseum?

A: No. I think this is not very smart, although there is a saying in Arabic: “Repetition is a good lesson for donkeys.” They believe that, but it is totally wrong.

Q: What’s to say that your 40 or so competitors will do a better job of self-regulating their visuals and, on top of this, agree to voluntarily reduce the number of billboards, especially if some are already apparently willing to push the borders of the industry.

A: Now, I think that general security will be much more rigorous on the permits they will grant and, therefore, you will see that we have less and less of those problematic visuals. I think that our competitors understand that we are all seriously under threat and that we are playing with fire.

Q: According to one published report, Jounieh recently estimated that it should be generating as much as $666,000 per year from taxes on billboards. But, last year, it only saw $26,000 (LL39 million). What accounts for this discrepancy?

A: I will tell you that the figure is wrong in Jounieh. We alone pay the amount of LL40 million annually. I have a colleague who pays LL40 million. I said to myself maybe this is for political reasons, they are attacking the old municipal council. What I have heard though is that a lot of companies have not paid their taxes elsewhere and what I think we should do is haul them in front of the courts and not let them get away with that. We at Pikasso pay rigorously all of our municipal taxes, even during the war, and this is a point of honor for me because it is an obligation.

Q: Although general security has censorship power over billboards, why have you opposed the formation of a specialized body, such as a bureau for the verification of advertising, such as has been recently proposed?

A: In Lebanon, when you create a new authority or council, you will put people together that will argue and fight with each other. We know the people now, and we know that they are good people. We think that one control from general security is more than enough. We have the law, we have to respect the law – we have to be responsible and mature. I think that maneuvering smartly among all those things will be enough.

While, economists tend to measure tourism in visitor numbers, employment and/or contribution to GDP, an equally important gauge is the level of infrastructure development and the intensity of tourism “hotspots” (full of enthusiastic tour guides corralling tours through the nation’s must see sites). Theses abound at the pyramids, the Acropolis, St. Mark’s Square, the Louvre and the Eiffel Tower, but apart from a few weary public servants pointing to Roman columns at Baalbek, this level of tourist development has yet to be seen in Lebanon.

The BCD may be crowded night after night, but the continued total administrative indifference to emergency access needs and non-implementation of regulatory codes (which the ministry of tourism proclaimed only a few months ago would “absolutely be enforced before the summer”) in itself tells a story about the current art of managing tourism development.

But even the BCD still doesn’t radiate the air of a conventional tourism hotspot. Neither do Lebanon’s shores bear the mark of highly developed tourism displayed around the Mediterranean by sun-and-fun coastal villages, which rival their countries’ world-famous tourism landmarks as crowd magnets.

In this light, Lebanon’s tourism development is entering virgin territory. While the role of Beirut as Jet Set playground and entertainment attraction in the 60s has been touted ad nauseam, one local expert believes Lebanon never was a tourism destination, at least in the sense it would have us believe.

“Lebanon doesn’t belong to the classic scheme of tourism development of the type you find in catalogues, with hotels by the seaside, buffets, one tennis court per each 15 or 18 hotel rooms, and so forth,” said Guy Gay-Para, holder of a doctorate in tourism and owner of a café at Byblos Port. “This kind of tourism has been developed years ago in countries with dozens of kilometers of undeveloped seashores, such as Morocco, Tunisia, the Spain of Franco, the Portugal of Salazar. Recent history has shown that there never was Lebanese tourism in the classic sense. Lebanon was merely a convenient and convivial location that fused business and pleasure.”

However historical reflection is, it can be argued, irrelevant. The world of leisure travels today is very different from what it was 30 years ago and it is not enough to simply reproduce the past. Consumer behavior is diversifying and maturing. Providers and destinations have to increasingly deliver tourism products and services that are not only price competitive and high in quality but also satisfy social and environmental criteria.

This has not escaped the ministry of tourism (which, incidentally still has to demonstrate that it has a firm grasp of what is expected of it). “Our goal is really sustainable tourism,” said the ministry’s director general, Nada Sardouk. “We are working to develop the ‘Hidden Lebanon’, the many beautiful areas of the country that are not yet on the map. What we want for tourism is to achieve is social and economic development.”

What the ministry still has to demonstrate is a full grasp of what is expected of it. In a measure under its authority, it is currently completing the country-wide installation of sign posts and plans to issue comprehensive visitor maps. Although tourism conservation and development issues are spread over numerous institutions other than the ministry, and budget restraints hamper its operation, Sardouk said the shortage of funds did not present an insurmountable problem for the ministry’s role in tourism promotion, thanks (rather surprisingly) to inter-ministerial collaboration and (not surprisingly) barter deals with the private sector.

A good tourism infrastructure relies to a great portion on general infrastructure, road and transportation networks, water and electricity supply, waste collection and waste treatment. According to Sardouk, major highways and access roads to key tourist areas are in a good working order, but she agreed that general infrastructure needs more work. “The council of ministers has taken the decision to review roads and electricity supply to all mountain villages during the summer,” she said, and optimistically, “We still need a two to three year action plan for infrastructure development on water and electricity.”

While most of its aspects are public sector, a significant portion of tourism infrastructure is created by the private sector, from hotels and car rental companies to tour operators and visitor attractions. Here, the Lebanese state has instituted some support mechanism for the creation of this tourism infrastructure under the stipulations of the IDAL investment law 360, which since 2002 has benefited several large projects.

Although many operators say that they nonetheless do not see enough effective government support for development and usually rely on their own devices to plan and execute tourism ventures in absence of clear-cut communal or national strategy framework, the private sector does credit the ministry of tourism with making efforts in favor of their development.

Sardouk on her part described the partnership between private sector and ministry as “very good.” She added that the ministry is quietly “cleaning the house” of the tourism sector from defunct operators and that the quality of tour guide services is being upgraded under a new law, which, (rather bizarrely) mandates new guides to graduate from a specialized four-year university course. As far as being able to accommodate growing visitor numbers over the coming five years, she said she did not expect any bottlenecks in the supply of hotel rooms and facilities, tour buses, or any other aspect of the sector.

An essential operative aspect for securing functional tourism infrastructure, where private and public sector may find difficulties, is in understanding demand and matching it to what the country can supply or is willing to develop. Here Lebanon is facing an interesting challenge, because even at today’s relatively low inflows, the “typical” Lebanon tourist cannot be easily defined.

The guest from the Gulf region, whether he arrives by private jet, in economy class, or by car, is commonly viewed as a long-term guest, seeking a summer base, shopping and entertainment. Around Beirut and in the traditional mountain resort communities, ample evidence shows that many providers made a priority of developing facilities that appeal to this category of tourist.

Visitors from the Levant countries represent a different category, yet, with Syrian and Jordanian guests ranking third and fourth (after Saudi and Lebanese clients) for total hotel nights booked last year, this group represents a market potential that one hears little about. Tourists from outside the region comprise two distinct major groups: Lebanese expatriates and non-Arab (largely cultural and religious travelers with no discernable ancestral ties to the Eastern Mediterranean).

For the time being, data of arrivals and hotel stays (of over 160 nationalities by number of persons, total nights and average length of stay) by the ministry of tourism are quantitative. Because research hasn’t been more specific, the ministry for instance broadly assumes that holders of foreign passports are genuinely foreign as many expatriates enter the country using Lebanese identification. However, in case of second and third generation foreign-born Lebanese, this may not be the case (the number of Brazilian, Mexican and Argentinean hotel clients in 2003, all countries where persons of Lebanese descent make a good share of the population, were comparatively high).

The composition of anticipated future visitor streams, thought to include more and younger individual travelers from out of region, complicates the picture further. Behavior patterns in some of the main origin countries of international tourists digress seriously from public moral standards that apply in the Middle East and many western tourists today expect to be able to openly pursue activities that are not accepted under local behavior codes.

Under maturing trends in interests of European and other international travelers on the other hand, Lebanese tourism can expect to encounter strong and increasing demand for tourism products that they cannot readily supply. Beirut, for instance, lacks a museum that would guide visitors through the country’s cultural and communal diversity or explain the aspects of Lebanese history that people from around the world associate with the country – its exposure to the Middle East conflict. Health, eco- and agro-tourism are vacation growth areas that public and private sector have only recently awakened to and where soft and hard infrastructures need yet to be defined.

With tourism acting as the globalization force in culture, intensification of visitor arrivals would oblige operators and authorities here to embark on a steep learning and action curve in avoiding mistakes made elsewhere during the rise of mass tourism, evolve the tourism infrastructure in a multitude of features, and secure development that can enrich the national existence frame on environmental, cultural, social, and economic terms. In all that, the human element is the combining factor at the core of all tourism infrastructures. “The tourist will know if you lie to him,” said experienced tour guide Francoise Hobeika. “You have to make the tourists see the country through your eyes, let them feel the place and sense the beauty of the land so that they enjoy their visit.”

Besides nine main historic and natural attractions that could all be real tourism hotspots, Lebanon according to Sardouk holds about 190 sites of archeological and cultural interest, many of which are not yet incorporated into the tourism infrastructure. Add to that the country’s human capital and you maximize the power of the destination that might even open up even more untapped niche sectors.

“Among European cultural tourists, many are old and lonely,” said Hobeika. “I have seen seniors who left Lebanon with tears in their eyes and said they would never forget us. They didn’t feel lonely here.” Surely that is incentive enough.
 

This summer, Lebanon is riding on a wave of inbound tourism that is, by local standards, monumental. For the first time in recent memory, the month of June saw more than 100,000 arriving visitors. In relation to June 2003, the upward jump amounted to 37.43 % from 97,273 to 133,678 visitors, translating into a 26.4% share of the total 506,367 arrivals recorded for the first half of 2004. And while this increase was by far the largest year-on-year tourism growth for the month of June in a long time, the even better news is that growth rates in other months of this year were more flabbergasting still. In the first half-year of 2004, three out of six months recorded higher percentage wise increases than June: April (106.81%), March (77.16%), May (46.35%), plus January (35.34%) following not far behind.

For the industry, this means a double positive evolution of increasing and more balanced business as the summertime bulge in inbound tourism is becoming less extreme. “The figures for 2004 show a flattening of the curve between high and low seasons. The rise in tourism figures is consistent and very good for the country,” Nada Sardouk, general director at the ministry of tourism, told EXECUTIVE. In line with the good performance of the first six months, she confirmed that the ministry anticipates a total visitor count topping 1.3 million for this year.

The ministry’s optimism reverberates on the ground. From Bhamdoun to Broumana, the summer resort towns above Beirut saw business shift from zero to vibrant several weeks earlier than last year. The up market hotels that are the usual suspects for doing top business in Beirut confirm that occupancy has approached 100% since the beginning of July. And while Saudi Arabia’s new ambassador to Lebanon estimated in a welcomed message that more than 200,000 of the kingdom’s citizens (and coveted spenders) would vacation in Lebanon this year, arrivals of holidaymakers coming from outside the region also show new promise.

According to industry insiders, regional arrivals improved during the phase of changed travel patterns triggered by September 11 but many European tourists stayed away in 2002 and 2003. From this spring, however, the numbers of cultural tourists from Europe increased healthily and also started to include more people of younger age, where in previous years the “junior” in a tour group would often be 65.

Compared to previous years, while visitor numbers of one million per year marked a 2003 watershed and a 1974 visitor count of 1.48 million has again and again been quoted as the benchmark and the number to beat, the summer of 04 thus looks great. It seems a very fitting moment to pause and take stock of the larger potential, the up- and downsides of tourism for Lebanon, through an assessment of its macro-economic role and relevant public and private sector strategies.

On a worldwide scale, tourism is the fastest growing economic sector in two crucial respects: job creation and foreign exchange earnings, according to the World Tourism Organization (WTO), an agency of the United Nations. But although journeying has been called a human compulsion and universal drive since the first members of the human race embarked on migrations across deserts, oceans and mountain ranges, the career of tourism as a significant component in national economies has been more recent than the ascendancy of activities such as manufacturing, trade, finance, and transportation.

Tourism as a modern activity (in its definition as ‘travel for leisure,’ the term has been used officially for less than 80 years) has changed greatly from its beginnings as an elite pastime of wealthy young Britons who from the 18th century onward roamed Mediterranean destinations to escape their dreadful native climate and cuisine, and who greatly enlarged their cultural knowledge and art collections in the process. This elite phenomenon was the prototype of today’s cultural and leisure tourism and also soon came to include health tourism.

Tourism became less the preserve of the elite in the mid to late 19th century through organized mass travel but it really invigorated the economic equation of tourism in the second half of the 20th century. It brought the expansion of leisure journeys into a service used heavily by average income earners in industrial countries.

From a Lebanese perspective, it must appear sadly ironic that the year 1975 – when visitor numbers here came crashing down – is used as the international reference point for the sector’s rise to a new level and the unfolding of massive growth as worldwide tourist numbers broke the barrier of 200 million persons. From 1975 until 2000, this number of tourists tripled and for the coming 15 years, the WTO (which held its first general assembly as an UNDP agency in 1975) estimates another increase to 1.56 billion international tourist arrivals worldwide in 2020. Published in a report titled, Tourism2020 Vision, just before the turn of the millennium, the WTO prognoses calculated global tourism growth at 4.1% annually between 1995 and 2020 based on input from national tourism authorities and global industry leaders. The WTO’s regional forecast for the Middle East presents an even substantially higher outlook of 7.1% annual growth to reach 68.5 million tourist arrivals in 2020. Under this prediction, the Middle East’s share of international tourist arrivals would double over the study’s 25-year period from 2.2% in 1995 to 4.4% of the world total in 2020. However, a new WTO series of short-term assessments of sector developments, called the World Tourism Barometer, showed in its latest edition published in June that the Middle East achieved 30.4 million international tourist arrivals in 2003 (an increase of 10.3% from 2002), already representing a 4.4% share of the world’s 694 million tourist travels. According the findings of the report, Lebanon’s recent tourism boom is fully congruent with developments in the region and beyond. And assuming a 7.1% annual growth rate for the Middle East from this base figure, the region’s intake in tourism by 2020 could even be significantly higher than forecast in Tourism2020 Vision

The importance of tourism in global economic development in general, and the Middle East in particular, is clearly not in question. What requires examination in the macro-economic context, are the potential and strategies for Lebanese tourism relative to competing destinations and global trends on the one hand and the requirements to optimally manage tourism growth on the other hand.

Under the theme of managing tourism in global development, countries and international institutions are increasingly reviewing the link of tourism to economic, social and environmental development. A study undertaken for the World Bank concluded last year that the organization should cover the “operating environment of tourism” more strongly in its projects and country assistance strategies while carefully assessing the benefits of tourism for sustainable development. In all three respects of economic, social and environmental development, tourism growth has been shown to offer substantive benefits to national economies, but also brings with it risks and potential disadvantages.

In economic development, employment growth, increased foreign exchange earnings and heightened Foreign Direct Investment attractiveness are juxtaposed with increased infrastructure costs, inflationary pressures and the possibility of substantial outflows, or leakage, of tourism-related revenue from the economy. In its social and environmental impacts, badly managed tourism can also harm a nation’s living quality by factors such as limiting parts of the population in their access to water and energy, pushing real incomes lower, over-exploiting nature and degrading historic cultural assets.

For middle and low-income countries in the developing world, the contribution of tourism to GDP often assumes an over-proportional importance. Extreme dependency on tourism is a risk especially for small nations with marginal productivity, examples being exotic vacation islands such as the Maldives, Antigua or the Seychelles.

Whilst the country is still in the process of formulating its sustainability agenda for tourism development, Lebanon’s ministry of tourism today assumes an outlook of rapid growth in tourism of 20% and more per annum for at least the next six years. As director general Sardouk confirmed, the ministry’s best-case expectation is for 4 million tourist arrivals in 2010. This is much higher than the paltry 1.71 million tourists, which the WTO projected Lebanon to attract in that year.

Such a performance would also propel the contribution of tourism to the GDP – estimated to range at present between 8% and 10% – to levels for which the ministry today has no projections. Considering that Lebanon is part not only of the Middle East but also located in the world’s number one tourism region, the Mediterranean – which represents an expected slice of 345 million tourists in the global 2020 leisure travel cake – such an aspiration seems entirely reasonable. This is if it also makes responsible tourism development a crucial item on every private and public sector to-do-list.

Tour operators report a 50% improvement in bookings over 2003; the streets of Bhamdoun are rocking; guides are having the best summer in three years and their busy season increased to six months…. But Lebanon wants more tourism. EXECUTIVE details how the country can get more by taking a look at tourism niches and sub-niches that have development potential or even untapped capacities.

Healing the body

Health-related travel is an international tourism market niche to which local experts attribute enormous inbound potential. A broad coalition from the public and private sectors has begun efforts to unleash this potential by cultivating a sub-specialization of health tourism, called medical tourism, and the first results are coming in.

In June, Lebanon’s National Council for Health Tourism (NCHT) counted 40 to 50 patient arrivals here from regional countries, marking the beginning of what is hoped to become a huge activity for Lebanese hospitals, doctors and hospitality providers. “Every year, Arabs spend over $3 billion on health treatment. We have a stock of excellent doctors who studied in 58 countries. That is why we can claim to be an alternative source to developed countries in provision of health services. We have accreditation of a standard that no other Arab country comes even close to,” boasted Khalil Malaeb, general manager of K&M International Health Tourism.

His company received a commission by the NCHT – an entity formed under participation of five government ministries and five private sector syndicates – to organize and market Lebanon’s health tourism project worldwide. Work on the project started one-and-a-half years ago with measures to set up the infrastructure of local networks and international agreements, Malaeb said, and once the system is rolling, local providers should expect clients to come “by the thousands.”

The elements that make Lebanon an attractive destination for medical tourism in the region and possibly beyond are a superb price-cost ratio offered by clinics and practitioners here and 140 years of excellence in the field, Malaeb claimed. In developing the potential NCHT does not rely on approaching individual patients but tries to establish a systemic supply through agreements with governments and insurance companies in partner countries and through alliances between hospitals.

According to Malaeb, first operational accords were established earlier this year with Kuwait and Dubai, and government-to-government agreements with three countries in the Gulf and North Africa are currently in the process of being completed.

By NCHT expectations, most patients coming to Lebanon, often accompanied by family members, would stay anywhere between several days and a few weeks to undergo operations for a range of internal ailments of heart, liver and other organs. However, first arrivals already also included patients seeking longer treatment for cancer and degenerative diseases.

A second very significant client group presenting strong revenue potential for local surgeons are persons signing up for plastic surgery. With costs starting around $1,500 and the duration of the procedure taking a maximum of one week, including all medical follow-up, plastic surgery has become a preoccupation for vastly growing numbers of women and men from around the region, and Lebanon has already gained a reputation as a center for such treatment.

If the formula for medical tourism becomes as successful as expected and hospitals fill up with patients whose treatment costs are paid (upfront) by their foreign healthcare providers, it would constitute a healthy inflow of revenue – for which no projections are available – and also lead to a follow-up creation of rehabilitation clinics, convalescence homes, and purpose-built accommodations for family members in the vicinity of major hospitals. For the moment, the network employs existing hotel facilities to serve clients, offering numerous options on cost and class of treatment and hotel stay.

The beach

In core qualities, the new prime-grade Lebanese beaches should have no trouble competing with many of the top destinations. Whether at an undeveloped beach in the south, or at any of the leading new resorts in Rmeileh, Jiyeh, Damour, and Byblos, one sees a different and distinct beauty confirming the country’s age-old spell as a land of splendor.

Cleanliness has been a problem on Lebanon’s coast, both due to absence of wastewater treatment facilities and because of prevalent picnickers and beach revelers who don’t remove their own trash. But with the emergence of carefully managed new seaside fun spots over the past four years, private sector operators have shaped stretches of noticeably clean resort environments. As the beach resort business is expanding, it hopefully will bring continued impetus in the creation of environmentally responsible recreation sites and push municipalities and national authorities towards more effective action in remedying the deplorable state of handling liquid and solid wastes.

Competition pressures among resorts seem to have thus far stood against the establishment of a dedicated association or syndicate and defining of joint standards by operators. But one only needs to compare the diverse features of, for instance, Oceana in Damour and the Edde Sands Resort in Byblos to be immediately convinced that the offerings of classy places complement one another, and the more originality and variety in style they provide, the better.

The establishment of sophisticated and affordable beach resorts that are able to comfortably accommodate capacity crowds is still a relatively young development. Thus, the new leisure attractions operate under challenges to achieve returns on their investments ranging from $1.5 to $10 million, satisfy their mainstay local customers and raise the image of a Lebanese beach vacation among European holidaymakers, who account for the vast majority of international tourists on Mediterranean beaches.

All is not eco

In the worldwide growth sector of eco tourism, Lebanon recently claimed to have many chances, reaching from participation in reforestation and environmental projects to adventure travel and agritourism. However, the sector is not really in gear. “I am afraid to have to say that the sector is very weak. We don’t have a profile of eco tourists coming to Lebanon from abroad,” said Pascal Abdallah, general manager of Cyclamen, one of seven local companies specialized in the sector.

What these companies currently can produce, accounts for far below 5% of the entire tourism turnover in Lebanon, he told EXECUTIVE, and companies cannot offer eco-tourism in the real sense, which relies on experiencing nature non-intrusively. “We do not yet have a national policy on eco-tourism. We are restrained to providing responsible nature tourism,” he said.

What are promoted mostly in the still very small sub-sector are sports and adventure tourism trips. Many of the recent providers of these programs are enterprises evolved from informal beginnings in hiking clubs and youth organizations. The issue of eco tourism is viewed as very important at the ministry of tourism. This notwithstanding, no formal department for eco tourism has been instituted and the issue of nurturing eco tourism is handled by members of the ministry “as a hobby.”

Agritourism projects have been proven viable by academic research but are still small or even merely conceptual, with wine tourism as the specialization seen as having the best potential to become a niche attraction for tourists. Lebanon did hope to claim a modest spot in this lucrative sector (Australia wine tourism brings in $500 million to rural Australia annually, with a near 100% increase in the number of tourists since 1991). However, this initiative has stuttered in recent years. In 2001 UVL put together a formal itinerary for wine tasting tours called Le Route du Vin, but the post 9/11 drought of Western tourists virtually stymied the plan at birth.

Globally, the typical wine tourist falls into three categories: aged 40 to 60, childless couples or those with a higher than average education and income. This is a growing demographic group and one that would appreciate Lebanon’s other cultural attractions. Apart from the vacationing expatriates, the wine growers had counted on these enlightened 40-somethings, mainly from the UK and Germany, to make the journey to the Bekaa wineries.

Currently, only Kefraya, Ksara (which receives 40,000 visitors a year) Massaya, Clos St. Thomas and Clos De Qana offer genuine hospitality services. Cave Koroum is putting the finishing touches to a not insignificant wine resort in the village of Kefraya. The winery is arguably the biggest in the Middle East and has a restaurant, tasting room and hotel to match.

Massaya, a younger but forward thinking winery, has introduced weekend buffet lunches and last year held blues and jazz concerts in the vineyards. This summer, the winery expects to receive nearly 10,000 visitors and has added more concert dates. Others have taken the lead: Clos St Thomas in Qab Elias holds regular lunches and star watching evenings.

Gaming, shopping, and festivals

Lebanon is always a good place to leave money, and there’s nowhere easier to do that than the Casino du Liban. From 1959 until deep into the civil war, it achieved a legendary career as place where the rich, famous and reckless gambled their fortunes. Show designers from Las Vegas are said to have come to Maamaltain in the casino’s heydays to pick up entertainment ideas.

Today, the casino again is a fixture of the region’s entertainment scene as the Middle East’s largest gaming establishment. Night after night, its silhouette outlined with brightly flashing stroboscopic lights dominates Jounieh Bay and the pulling power of its gaming rooms and the new risqué “Lipstick” show often turns the shoulder of the Byblos-Beirut freeway into a parking lot.

According to a Casino du Liban spokesperson, the establishment has been increasing its advertising and promotion activities in Arab countries in recent years, and regional visitor flows are growing steadily. How big is this niche exactly? Until comprehensive surveys of visitor behavior are conducted in Lebanon, it will remain unclear just how many of our 438,203 Arab visitors from 2003 found their way into the gaming areas and how many of the roughly 130,000 hotel guests from the Gulf region flew to Beirut specifically and solely for a casino vacation.

What is certain is that the casino patrons are esteemed spenders. The casino’s auditors have held back on releasing the establishment’s books over the last three years, due to unresolved tax disputes. But with pre-tax dividends of $50 on each $145 share (OTC) for 2003 and fiscal participation of 30% in the casino’s annual turnover of an estimated $88 million, investors and fiscal coffers, and to a smaller degree the national economy, clearly enjoy a profitable inbound tourism niche here. Retail shopping was historically embedded in Lebanon’s function as the Middle East’s trading post, back when people from the entire region came to Beirut to shop for goods ranging from abayas to household furnishings.

However, attempts in the mid 90s to run month-long Lebanon Shopping Festivals failed to re-establish Beirut as a retail tourism destination in direct competition to Saudi Arabia’s shopping mall culture and Dubai’s mega sales spectacles. Today, summer sales periods in Lebanon have become successful in attracting regional guests, and for visitors from Levant countries, the wide choices in retail commerce continue to make Beirut a real shopping destination.

Tourist preferences in retail purchases and the share of these expenditures in their overall spending can only be estimated, demonstrating the need for more detailed research into consumer groups and behavior. “They spend a lot on food, a lot on clothing and ladies leave much money at the beauty salons,” said the PR manager of a major Beirut resort hotel with many Gulf customers. However, her colleague at another top house with a large GCC clientele responded that the city is not seen as a major shopping destination by guests in the hotel.

Statistics on Value-Added-Tax refunds still provide the best indicators that are available on the role of retail in inbound tourism. After the program was instituted in 2002, VAT-refunds were reimbursed to visitors to the tune of over $1 million over 12 months. Respective purchases by tourists in the range of $10 million to $20 million in one year would hardly make for a national retail salvation. However, concentration of refunds in certain item categories – 62% of refunds were on clothes and 12% on jewelry/watches – and large shares of foreign-bound sales at some retail outlets suggest that Lebanon’s retail sector has destination potential in a few micro-niches.

While they may not qualify as a destination that people travel 2,000 kilometers to visit, specialized up market clothing retailers Aïshti are an example of an enterprise that attributes a massive share of its sales to non-residents. With the incentive of VAT tax refunds, the retail streets of Beirut’s Hamra and Verdun districts could in the past two years again count on tourism as income boosters during the summer and religious holiday seasons. Large retail projects under development around the capital also count on Arab visitors in their feasibility predictions, and the ABC shopping mall in Ashrafieh in its first summer season is visibly successful in drawing in Arab visitors who otherwise seldom found their way to the quarter’s retail scene.

Like gaming and shopping, music festivals have long been well-known fixtures of Lebanon’s tourism infrastructure. The Baalbeck Festival contributed to establishing the country’s international profile since its renewal in the late 90s, thanks to coverage of festival events by foreign media, festival committee member Leila Bissat told EXECUTIVE, but she agreed that “the Lebanese and expatriates” traditionally comprised the main clientele.

This could change. Numbers of cultural festivals are mushrooming, with locations from Aanjar to Zouk Mikhael adding their profiles to the list of summer entertainment. The majority of these festivals are seen as value-added to the community and perhaps domestic attractions, but some virginal events, such as the Beirut Jazz Festival held last month for the first time, are aiming to make it onto international event calendars.

With the impressive portfolio of cultural backgrounds and settings of Lebanon, festivals have the potential to reach more international fans. At Baalbeck, special performances by world famous artists such as Placido Domingo this summer proved suitable to attract tourists from Jordan, Syria and other Arab countries, Bissat said. And like other festivals, the Baalbeck planners are looking at cruise ships stopping over at Beirut Port for opportunities to organize excursions to festival events.

Some events even aspire to stardom. “This is our first year, in which we want to build the legend of the festival,” said Roland Barbar, the conceptual director of the Byblos Festival. After the festival changed its format into a composition of ticketed performances and a series of free concerts in the consecutive off-Byblos event, he is confident that the annual spectacle will make it to the world agenda within the next three years. The festival, with 24,000 sold tickets in 2003, is certainly on course to achieve financial feasibility.

It would be stretching things to assume that the Byblos Festival and its peers in the assembly of Lebanese summer events could aggregate into a cultural and fun profile that let the country acquire stature akin to the model of global leaders, like the Edinburgh Festival. But by the quality of settings and the enthusiasm of the growing fan base, good music and great moods, festival packages here seem disposed well enough to become the region’s hub and the bridge of cultures between Europe and the Arab world.

The city of Byblos is one of five UNESCO world heritage sites in Lebanon. Its tourism potential is tremendous but much of it has lain dormant. Roger Edde, business tycoon and developer with international experience in Europe and the United States, is a member of an old influential family here. After establishing a beach resort near Byblos in 2003, he has the ambition to turn city and area into a magnificent tourism destination with plenty of new features. To EXECUTIVE, Edde revealed details of his plans.

You are stepping forward with a new and highly ambitious plan for a real estate development in the Byblos area. Why are you proposing such a large project today?

I feel the tourism industry and tourism related real estate in Lebanon are two years ahead of a moving curve, which will move up substantially in the 15 years that follow. I also applied the principle of supply side economics in real estate. Dubai has proven that supply side economics in the construction of real estate in the worst of conditions can be successful. In Lebanon, we are not in the worst of conditions. We may be in one of the most interesting conditions.

What do you intend to develop in the Byblos area?

I was responding to a demand showing on the map of the growth of tourism. By aiming at creating a destination in Byblos I want to emphasize the cultural aspect because I believe in cultural tourism. I want to enrich that concept with what is already trendy worldwide: green villages, where people can feel that they have the quality of life that they dream to have during the years living in hard times in the big cities. I wanted to address also another growing business by developing an area with a large port that will be a port for leisure boats, plus a terminal for cruise liners.

How much land did you own prior to starting things and how much did you acquire additionally?

I had the vision already before, which meant I acquired a lot of land. We are talking about more than three million square meters and I have acquired a third of that recently.

Are the three million square meters continuous or distributed over the entire area?

We are talking about a stretch from the Byblos seaside to the Byblos snow side, the area of Laqlouq, the cedars of Tannourine, the cedars of Jaj and above. I already own 1.6 million square meters in Laqlouq, including a river. That will be the cornerstone for the Laqlouq, Tannourine, Aaqoura, and cedars of Jaj development where we could even promote religious tourism and pilgrimages. I won’t go and invest right now, before the road is done, because I know what not to do.

What do you want to establish on the seaside?

My tendency is to rely on private enterprise and I am not scared of dreaming of the impossible because I don‘t think there is anything impossible. Before starting anything, we had a top urban planner conceive a development for seven kilometers around Edde Sands. We centered the space on the port of Byblos and the volumes that go from the port.

Are you talking about expanding the old port?

No, the old port is small and medieval and cannot be touched. The city of Byblos and the Lebanese government and the UNESCO have already approved the idea of a port in a place called Ras Edde. I have already large amounts of land there. If we wait for the government, we can forget about it.

Building a port would cost how much?

It would be $270 to $350 million, minimum, for the pure port facilities not counting real estate. The cruise line terminal needs more than that because I would also like Byblos to become a place of support facilities and maintenance for the cruise liners.

How much will the entire development cost?

My calculation is now that we will rapidly reach a $2 billion investment, not only land buying but real investment, because we are talking a city development around a very large port facility. At a certain point I will start to accept investors. I have already demand from international pension funds, Arab and Lebanese investors to join in.

So your final vision is an investment volume of $2 billion in developing three million square meters of land?

No, I am talking about Byblos taking the $2 billion, in a triangle between Edde Sands, Amcheet and [the village of] Edde. That would be all connected with tennis camps, sports theme park centers, and a wellness area with clinics offering exams of the quality you can get in the Mayo Clinic.

Then you are focusing on health tourism?

Health tourism and sports tourism, but all in a leisure environment. In some places, you want to be quiet, discreet, in a wooded area out of sight, receive your spiritual treatment. We are already starting an experience of that in Edde Sands with spiritual treatment, for which we have been waiting a lot. At this stage, what we are doing is creating the brand and reputation and testing the ground. We will move when we have enough evaluation of demand.

So going to a next stage would depend on profitability?

It is not profitability. Next stages are planned and would go immediately. I don’t think we would have a problem to fill a large port. In fact, when I would do the port I would probably already have sold most of the space of the port.

How much did you invest in Edde Sands if we take this resort as the seed of the vision?

I am over the $10 million mark, not talking about the real estate but what has been invested into the real estate.

And you have calculated $100 million for a hotel in the next expansion phase?

This is correct for the first stage of the hotel. I think we may go up to $150 million, especially if we are doing a project consisting to a part of a hotel and to a part of a serviced hotel.

How much did land value of your properties increase since you started investing into this dream?

From a real estate point of view, not from a return point of view, every penny I have spent on that land has increased three to five times in value. Plus, I can price anything built on the land today at the same pricing in Solidere or any prime location in Beirut. That is also very important. You are 33km from Beirut but you did something of a real quality in a very unique spot, you can price absolutely at the same level as any prime location in Beirut.

Is it true that you have recently also undertaken other investments?

We have moved into the old city of Byblos. We are buying boutiques in the old souk and in fact collected more than 20 boutiques in the old souk. Prices have already multiplied three to five times; but when I have an offer, I take it. We are defining the market. Only two weeks ago, we hired two high-quality persons and asked them to establish their high quality fresh cuisine into the souks of Byblos. It is a sudden success.

How long until you fill the triangle with $2 billion worth of investment?

I think it will take at least seven years.

How do you respond to people who say that Mr. Edde only developed this project because he owns a lot of land and wanted to increase its value?

That is my right but it is not my reason. In fact, wherever I am starting a project I am buying land at a higher price. I am not a seller of land. Others say Roger Edde is doing politics the other way. That’s true. I cannot afford under the present political conditions to do politics. I don’t like to do politics under the Lebanese conditions as they are today. It is my way to do politics and have people understand that doing things for yourself and for others can be profitable for yourself and for others.

You are engaged in development of the Byblos area to a scale that seems to amount to private town planning. Isn’t there a contradiction?

No, it is not a contradiction. I am doing it privately and at the same time, this is putting a lot of pressure on the public authorities to respect what I am doing and emulate it.

Lebanon has a tradition of feudalism. Is this past of the ZAIM being carried over into the role of private public developer?

I have been born into a family, which has been the ZUAMA of the area historically. I made a real effort not to deal with the area as a fiefdom. I want my area and Lebanon to move out of this mentality. It is an ideological thing for me. I have written about this and I went from village to village to sell my ideas of democratic liberty, political liberty and economic liberty.

What if the public sector might someday say we don’t like this private man to be that powerful?

Then I will go back and run for president.

The less state there is the more responsibility rests on the shoulders of the developer. But could you as developer not take the view that your role is just to build and sell and afterwards pursue other projects?

I can’t do that, for the very simple reason that I chose to live here to give a chance to a place outside of Beirut, which is close to my heart where our name has been associated with historically. The choice of Byblos as a destination for me is a responsibility and also a sentimental choice. There is nothing wrong with that. To worry about the quality of architecture, worry about the quality of the green space, of the sand and the water, investing heavily into a place which honestly was a dump and turn it into a place that many people call heaven, this is a challenge that is part of a responsibility. The project is not a commercial one to me; I would never sell it.

Lebanon’s $530 million retail jewelry sector has been putting in a strong performance over the last decade, with a reputation as one of the leading markets in jewelry manufacturing in the region. However, less optimistic observers will point to the fact that Lebanon has lost ground to other countries, notably in the Gulf, and, despite the potential for further growth, more could be done to promote the sector.

According to a report by the World Gold Council (WGC), before the outbreak of the civil war, Lebanon was the leading jewelry hub of the Middle East with a reputation equal to that of South Africa, London, Russia and Zurich. It had an emphasis on craftsmanship and creativity as well as an ability to combine the Middle East culture with modern methods. But the sector lost its luster during the war as most of Lebanon’s homegrown talent fled the country. Those who remained struggled to keep the industry afloat as Dubai, Kuwait and Saudi Arabia grew in stature. Ironically, the people who drove the development of the sector in these countries were mainly Lebanese.

“Although Lebanon continues to suffer from severe economic strains, we enjoy the fact that jewelry is still a major tourist attraction, especially to visitors from Arab countries, the US, Europe and Cyprus,” said Carole Hakim, marketing manager for Antoine Hakim Jewelers. “We have a worldwide reputation for our know-how in jewelry.” Leading jeweler George Mouzannar concurs: “There is no doubt that, as Lebanese, we are more into the creative side of jewelry making. Our designs can be found among the top international brands. This makes us proud, but of course there’s always room for improvement in any kind of business, and the jewelry industry is no exception.”

Exporting

According to ministry of trade and economy statistics, jewelry is Lebanon’s number one export industry, constituting 30% of the overall industrial sector in Lebanon. The latest data shows that jewelry export figures have increased by 9% since 2002 to around $465 million in 2003 – over 75% of which constitutes exports to Switzerland. First quarter of 2004 exports have reached $147.5 million.

But according to Vasken Hadidian, president of the Lebanese Jewelry Syndicate, the official figures hide the true story. “The government doesn’t differentiate between raw materials and finished products,” he explained. “Seventy percent of the figures constitute raw materials and not finished goods. The reason why Switzerland is seen as a major importer is because we sell them scrap gold, which is a form of money transfer rather than a commodity.” He added that Lebanon imports around 25 to 30 tons of jewelry yearly, only 30% of which remains in the country. The rest is designed, worked on, and then re-exported to Gulf areas, mainly Dubai and Kuwait. In fact, according to Hadidian, the majority of local jewelry is actually exported to the Gulf, with Switzerland mostly importing watches made specifically for the Swiss market. “We export to Switzerland under our international brand name, Romulus and Remus, with small quantities re-branded,” he added. There is room for improvement to make the sector more self-sufficient. Although Lebanon exports high-end jewelry (unlike the lower quality products exported by the Far East markets), it still lacks what it takes to make a genuine manufacturing sector. “We import finished products like chains, when most countries, like Italy, have all the equipment required to create everything they need,” said Mouzannar. “It is a pity that we still have not yet reached that level.”

Who’s buying?

According to Hadidian, local consumption is worth around $50 to $70 million. Statistics provided by the ministry of economy and trade reveal that jewelry imports to Lebanon reached around $302 million in 2003. “Subtract from that amount what we consume locally and the rest is reproduced and exported,” explained Hadidian.

“Only 2% to 5% of the local population, namely the upper class, spends on high-end jewelry,” he added, “the rest prefer to invest in gold in its cheapest form.” Hadidian admitted that local sales had been hit by the frosty economic climate. “Our biggest customers were middle class consumers. We are loosing them. Even the upper class is not spending as much as they used to in the past. Instead of buying an item for $10,000 they now go for something that’s around a $1,000,” said Hakim.

Competition

Jewelry, as a luxury product, is much more sensitive to the economic cycle. Naturally, jewelers also have a tougher time keeping their heads above water when the downswing comes, as they need continuous capital to continue and grow. Although their profit margin is around 20% to 30%, unlike other industries, the largest share of revenue goes to labor.

The competition is growing in the world and in the region, and Lebanon is feeling the squeeze. Today, Dubai offers the Dubai Metals and Commodities Center, a hub for gold, diamonds and commodities trade, which aims at attracting key players throughout the industry sectors – including relevant support industries such as finance, logistics and insurance – by offering free zone services. This has not escaped the attention of Lebanese jewelry makers. “They are offering great incentives, so why wouldn’t Lebanese jewelers focus their expansion on these countries? It’s enough that they are offering 100% business ownership and no taxes for up to 50 years. How can we even dream of such a perfect deal in Lebanon?” asked Mouzannar.

For the record, the local industry employs around 20,000, including business retailers and manufacturers. “No one can really know how many people actually work in this sector, because some have factories others have smaller workshops, and others work on a freelance basis. Labor is expensive compared to other countries like India and the East Asia,” explained Hadidian. Mouzannar added, like most industries in Lebanon, social security remains a big problem. “The government is not motivating people to invest in expanding their businesses in order to employ more people and spread out. It’s better for us to outsource finished products, as it’s less expensive. Having three employees is like paying for four and there are no facilities or incentives encouraging enough for us to develop our business,” said Mouzannar. Hadidian hopes the government is aware of regional developments and reacts appropriately. “So far, no one is showing interest in this matter. We are supposed to be the hub for the Middle East, but while we’re doing nothing, others in the region are doing a great job,” he said.

“We are still far behind in terms of international movements that will hinder our advancement and development,” he said, adding that Lebanon has yet sign the Kimberly process agreement. The agreement, which involves 48 governments and the diamond industry, is in an attempt to create a certification system that would label legitimate stones, thereby blocking the sale of conflict diamonds and protecting the integrity of the $7.8 billion annual trade. Statistics show that about 4% of that trade is in conflict diamonds, the profits of which are said to finance terrorism.

Hadidian admitted that since Lebanon hasn’t signed the agreement yet, “we are jeopardizing our reputation and hindering exports to other countries, as well as local development – like licenses for setting up diamond refineries and so forth. All of these should be taken into consideration before making any further decisions.”

Solutions

“We definitely stand out in quality and availability; yet our position needs to be enforced by building stronger strategies with the help of the Lebanese government,” said Chafic Idriss, marketing manager at Nsouli Jewelry. “We need an institution that can teach jewel manufacturing as well as a gem and metallurgy lab.”

At the international level, steps have been taken to help revive the sector. A few years ago, as part of their move towards liberating the international jewelry market, the WGC approached the Lebanese government with a proposal to reduce customs duties to 4%, a rate similar to that of the UAE. They also recommended the establishment of an alternative jewelry hub in the Middle East, more specifically for the Levant and Egypt. Key jewelers from Egypt and the Gulf have urged Lebanese officials to encourage the jewelry sector. As a result, Lebanon has halved customs duties on imported finished gold jewelry to 5% in November 2000. At the same time, customs duties on all consumables and chemicals used in jewelry manufacturing were abolished. The government also stopped tariffs on precious stones. “Thanks to the government and the Jewelry Syndicate, VAT was decreased from 10% to just 1.2%,” said Mouzannar. This may have been the only positive step taken by the government thus far to keep jewelers from losing their businesses, said Hadidian, but he was quick to point out that many in the sector don’t feel that they have benefited from any changes in real terms. “The real problems that the industry faces lies in the hands of government officials. We are suffering while others are booming. One thing is for sure we cannot sit and wait for the government to do anything – one has to take matters in his own hands,” said Hadidian. “Industry professionals, who would like to go seek their future in Dubai, for example, should do so, as they will see no growth in Lebanon. They are providing so much for people in our business there, so why not?”

According to Hadidian, the only thing that could give Lebanon a genuine competitive edge is turning the country into a free zone market for jewelers, abolishing all taxes. “That is the only chance I see for us to compete.”

Fashion

While the Lebanese haute couture business has reached international catwalks and made it onto the backs of Hollywood’s most glamorous stars, Lebanon’s $150 million ready-to-wear garment sector, once a regional power, is decidedly threadbare. In 2003, Lebanon imported $247 million worth of garments but exported only $43 million worth. For the record, according to the Lebanese Industrialists Association, in 2003, Lebanon produced 25 million items of clothing; but the country actually has the capacity to triple this amount and, given the right initiative, create jobs for 30,000 workers, five times the current workforce. Still, Fouad Hodroj, president of the Lebanese garment manufacturers, is nonetheless upbeat and believes that Lebanon is going through a transitional phase, one that will see a brighter future. “International business trends change over time, the same way fashion changes seasonally,” he explained. “We must follow the trend now and Lebanese manufacturers should be working towards revamping their business strategies, investing in other creative aspects.” In the past, Lebanese designers have been known in the region for the quality and accuracy of their sewing, while a new generation of designers, including Elie Saab, Robert Abi Nader, Zuhair Mrad and Abed Mahfouz took a giant step into the world of glamorous clothing, selling to other Arab countries and achieving international recognition. “We are good at designing and creating beautiful clothes,” said Hodroj. “This is what we should invest in. Ten years from now, I see us designing and creating while sending sketches to the Far East or Egypt for manufacturing. This is what most Europeans do. It’s the way people are doing business abroad, and it’s time we follow that model,” Hodroj said. “Today, we are in no position to compete against ready-made garments imported from the Far East, as their prices are far less than ours. We can compete against European imports however, as our prices are almost the same. Therefore, we should be investing in quality rather than mass quantities, and more so, on the creative aspect. This is how international clothes industries are working – we should be doing the same.”

According to Daniel Tchakedjian, store manager of the ABC mall in Ashrafieh, it’s all in the quality. “The Lebanese fashion collections we have in our stores don’t sell as well as their Chinese and other counterparts,” he said. “I disagree when people say that it’s a matter of mentality and that people prefer to buy international products. They’d rather buy quality for the money they are paying and, unfortunately, the quality of local products is very low, especially when compared to its price tag.”

Maria Mansour, a local shopper, says that she prefers paying around LL100,000 on a shirt for her husband from Massimo Dutti, rather than from a local manufacturer. “I think [locally made clothing] is too expensive for what it is,” she explained.

Tchakedjian said that Lebanese are very sophisticated and are very smart shoppers. They will not buy anything that has no quality. Those looking for cheaper brands go for imported goods from the Far East. So what went wrong? Hodroj explained that the history behind the industry is important as it shows why the sector is in its current condition. The ready-to-wear garment sector began in Lebanon after the country’s independence in 1948. “This industry was booming in Lebanon. We found ourselves in this line of work more than others in the region, since Lebanese were naturally more open to other cultures, especially western ones.”

During that period, according to Hodroj, ready-to-wear garments accounted for 40% of the total industrial sector, and the garment industry enjoyed a long period of success that lasted until the outbreak of the civil war. “Before the war, there were no laws, no customs fees, no high electricity bills and no social securities to be paid, among other things,” said Hodroj. “But as production costs increased dramatically over the years, profit margins also had to increase, as producers had a great deal of expenses to pay. So, many in the industry suffered.”

To make matters worse, the industry lost nearly half its 25% market share after the government’s trade deals facilitated the import of Syrian and Egyptian products. “The government has not done enough to protect the local industry. What’s more, we cannot export our products to Egypt and Syria – does that make sense?” he asked.

Until the early 90’s, there were around 1,240 factories in Lebanon. That number has more than halved to 500 factories of varying size, employing 11,000 workers today. Those left are the ones who have invested in modernizing their factories with the latest equipment, and directed their business towards designing and producing quality products that have a chance to compete against European goods.

“Lebanese haute couture has been displayed along side Yves Saint Laurent, Armani and Christian Dior, among others. Hopefully, our ready-made clothes could do equally well in the future,” said Hodroj.

Lebanon’s new boom is tourism-related real estate. Significant developments – worth in excess of $4 billion – in this field have begun roughly four years ago and accelerated massively by this year. The Middle East’s largest resort project, Sannine Zenith, topped the list of headline-making projects by size. But other projects are also highly noteworthy, from the Metropolitan Park development in the Jamhour area above Beirut, which will be the Eastern Mediterranean’s first theme park, to a wave of new beach resorts with names such as Oceana, Bamboo Bay, La Voile Bleu, Edde Sands and, the latest addition, La Guava.

Ironically, as much as beach life has long been associated with the Lebanese scene, the development of good beach resorts is a recent phenomenon. As short ago as 2002, an economic guidebook on Lebanon could undisputedly label the nation’s publicly owned coast as having “little more to offer than uncontrolled industrial development and mountains of garbage.” Whereas beach facilities previously existed in some numbers, they did so either in form of elite islands for a most narrow clientele of Lebanon’s upper 10,000 or would meet only the lowest possible denominators of cheap fun, the new resorts are seeking to provide both class and relative affordability in an ecologically compatible setting.

The importance of resort development for the future of Lebanon can hardly be overestimated. These new trump cards in the Lebanese development game score on two crucial economic fronts – tourism and real estate. While sales of apartments and vacation homes on the high end of the market entered a boom phase over the past two years, economists, sector analysts and major real estate players cautioned that this flare of mostly foreign direct investments was restricted in its economic benefits. By contrast, resort properties are productive. As tourism destinations they attract visitors, offer jobs and operator profits. As real estate they boost values at the site and the surrounding area. Operators and developers of the new resorts reported sotto voce that their presence, whether on mountain or seashore, send land prices soaring in the immediate area by at least 50% and up to three times. In parallel, the developers uniformly agreed that the mere act of constructing a resort or setting up a building somewhere on unused land does not add any value. This value is created through sound commercial leisure activities that are up to 21st century standards on infrastructure, business concept, marketing, and environment.

Sannine Zenith

Beyond its image as behemoth and mother of all mountain resorts, much mystery still shrouds Sannine Zenith, the largest commercial real estate adventure ever attempted in Lebanon. The initial political hype over its ownership structure has settled and the land purchases have been registered to the As Salam company, which is now wholly Lebanese owned by Jean Abou Rached, according to public relations manager Firaz Amine. “This project is a golden egg. It is so beneficial to all of Lebanon that nobody can question it,” he enthused.

Burnt somewhat by controversies over an alleged sell-out of 1% of the nation’s surface, the developers prefer to liken Sannine Zenith’s current property tally of 75 million square meters to covering an area “four times the size of Beirut.” As the detailed final master plan and feasibility studies for the project are still being worked on, the use concept and ultimate scope of the mammoth site still has some vagueness to it. But the people of the company will gladly present feel-good videos that virtually glow with promise and reveal that in the end, after further intended land acquisitions, the project size will most probably amount to 95 million square meters of “virgin land.”

Of the land already bought for more than $200 million, about 30 % are earmarked for potential construction comprising of infrastructure and hotels (not less than 8), houses, and commercial buildings. Ski slopes (double the area of the Faraya ski slopes) and three, 18-hole golf courses will consume a substantial portion of the territory, for which the developers push the slogan “in the heart of Lebanon and above the clouds.”

A green spine with one million (yet to be planted) fast-growing Nordic pine trees, an artificial lake, a heliport and three residential villages – themed eco, sports and lakeside – are key characteristics of the design. Also important, areas above 1,600 meters elevation will not see any building of houses and other structures and the peaks zone above 2,200 meters will be turned into a nature preserve, Amine said.

As Salam, whose concept includes financing of the development by issuing $1.25 billion in Global Depository Receipts to willing investors, foresees a construction phase of 12 years, during which the project will provide thousands of jobs. A project of this magnitude cannot prey on only the rich as their clientele, and Sannine Zenith confesses to have a family-oriented approach that targets normal earners as well.

Asking prices for land in the area rose to $8 to $10 per square meter since the project was announced this spring, from $3/sqm, which As Salam paid in acquisitions last year, Amine said, marveling himself at the fact that the company could keep their intentions a secret during the purchase phase.

When work is underway full steam, the company “will be happy to sell a square meter at $100,” he gave as an approximation of anticipated future prices. If all goes according to plan, As Salam might even attempt to take their mountain identity to the sea and launch a new big seaside resort venture in North Lebanon, under the name Sannine-sur-Mer.

If successful, Sannine Zenith, with a population projection of 45,000, would provide a case study for what appreciation a large, desolate chunk of land, that no one knew what to do with, can achieve in a grand development scheme. “Once it is developed, it most definitely will be a project to lift the Lebanese GDP,” Amine said.

Oceana

Widely credited with having broken the ground for more stylish beach resort ambiences on the Lebanese coast, the Oceana resort is reopening this summer at a new site in the coastal plane of Damour, to where the resort relocated this year from their previous address in Rmeileh several kilometers further south. The all-new Oceana resort will be a double feature with a landside pool face for the day and a seaside promenade face at night.

The natural Mediterranean beach in Damour is narrower than in Rmeileh and the old railroad tracks cut right through the property, so Oceana operators Cimes focused their creativity on turning these two limitations of the site into advantages, Cimes CEO Gilbert Khoury told EXECUTIVE. To do so, the developers aligned a boardwalk on the railroad right-of-way to create a 310-meter promenade along which they strung a lineup of restaurants designed to serve the resort patrons as well as a hoped-for dinner crowd. Since Lebanese beach goers mostly won’t seek direct exposure to the ocean waves and prefer to frolic between swimming pool and picnic tables, Khoury expects that the narrowness of the natural beach will not hurt the resort which is laid out to accommodate these customer desires during the day with the recreation facilities on its 30,000 square meter site and the restaurants facing it along the boardwalk.

Come evening, however, the promenade should rise to a second life as destination for people who fancy a walk and a meal or a party on the seafront. Then the restaurants will shift their attention to their west-looking terraces. Under this concept, “the short distance to the water is an attraction instead of a handicap,” Khoury said. The big pulling point that led Cimes to establish the new Oceana at Damour are the green surroundings. With the nearest building 500 meters away, the beach resort aims to entice Beirut dwellers to its Utopian setting only 15 kilometers from the capital. “It might be pretentious but we think we can create a wholesome destination for people to come there,” Khoury said.

This determination includes a commitment to preserve the integrity of the Damour plane, which represents a unique alveolus holding fresh air in the country’s coastal zone. Being to close to the sea for their purposes, farmers could not find much use for the land. For several years, the area had been under study for development as eco-tourism realm, and Oceana wants to be an anchor for environmentally sound recreation there. According to Khoury, all soil dug out during Oceana’s construction was reused in landscaping and above ground structures are built with wood.

With time, the resort intends to promote bicycle and horseback riding, and jogging as alternative to morning walks in the polluted city. With such features, the Damour plane fits the profile of new tourism-related real estate projects that can create new leisure values, property appreciation, and economic opportunities.

Apart from the location’s great overall potential, one reason for moving Oceana to the new site, so Khoury, was that Cimes didn’t want to operate the resort on conditions of a short-term lease. When first venturing into developing beach resorts four years ago, the company wanted to reduce its risks and rented the land for its first two beaches, Oceana and Bamboo Bay. The new Oceana, which involved a $2 million investment, is still set up on leased land but the terms are longer, seven years in Damour versus three years in Rmeileh. In Jiyeh, where the company is working on improving and expanding the Bamboo Bay resort by adding hotel facilities, the contract is for 10 years with extension option.

Ultimately however, the drawbacks of leasing arrangements can outweigh the advantages as the market for beach resorts is heating up, Khoury discovered with a laughing and a crying eye. “Now we are established in the market, but most of the added value is going to the landlord instead of us,” he said. In the case of the Damour property, the cost of the lease is still slightly better for Cimes than the cost of finance in purchasing the land, partly because owners in the area revised their prices for selling substantially upwards within the relatively short time from when Cimes signed their lease agreement until today.

In the longer term, however, Khoury wants to achieve gains from both operating beach resorts and from the real estate appreciation a resort creates. His aim for future projects is to have a two-pronged structure of a real estate investment firm and an operator company – but with separate shareholding bases, to avoid conflicts of interest between the resort operation side and the real estate aspect of the business.

Faqra and Mechref

The ancestral tree of the new Lebanese resorts family includes a number of projects that were important in evolving this particular real estate culture over the past thirty years. On the mountainside, the Faqra gated community was established in 1974 as a winter sports resort and pioneer of such developments. After the war years presented it with the challenge of serving different needs from the original design – customer demand for plots and construction was driven by Faqra’s security and insulation from the conflict zone – the project could re-emphasize its original focus over the last 12 years and today continues to grow, marketed now as an all-year, high-altitude resort community.

At a size of two million square meters, the Faqra Club group of companies, whose original investment has been estimated to translate into approximately $73 million in today’s dollars, saw a substantial recent increase in sales prices for their properties, from an average of $200 per square meter two years ago to at least $300 today, according to company managers. Plots are also tending to be larger. While the company designed its plots originally to measure from 700 to 1,000 square meters, a new 100,000 square meter segment under development today offers land ranging up to 4,000 square meters per plot.

While its presence pulled nearby land values up, the remoteness of Faqra granted the project an existence largely undisturbed by problems with individuals developing land outside of the community’s boundaries, although Faqra’s strict building codes were not implemented there. The value-added that the company provides to its residents comes from the infrastructure it established and from communal services – water, electricity and such – which the project owners in fact subsidize.

Industry observers regard Faqra as a successful development, which however remains by necessity restrained in scope to a comparatively narrow profile of a second or third-residence community for a small target group of affluent Lebanese, Lebanese expatriates and regional buyers. Within these limits, the project’s standing is strong and if the prospect of a belt of ski slopes interlinking the entire Faraya-Sannine area under the Sannine Zenith concept is realized, the good new neighbors could give Faqra yet another boost.

A further landmark in the history of private developments in Lebanon was established when the Mechref community saw the light in 1996. While earlier upscale suburban developments, such as the Rabieh subdivision to the north of the capital, had to face the handicaps caused by the conflict years and the social environment of the time, Mechref opened the gates for a wholly privately planned and structured community angling into the market as new one-site answer to the residential and recreational needs of the well-heeled.

The Mechref community covers a land surface of 3.3 million square meters at 30 to 350 meters above sea level overlooking the Damour coastal plane. Since the developers acquired the land in the mid nineties for an average $17 per square meter, value appreciation of both land and built-up real estate has been substantial. According to general manger Fouad Salha, cost per square meter to the company stands today at $85 and selling prices average $250 to $300, with upward outliers. Calculating that 300 villas have been completed, at average size of 600 square meters per dwelling and $750 cost for land and construction per square meter, the real estate worth of the Mechref community easily reached more than $130 million over eight years.

About 30% of the total area comprises developable land, 40% of which are still available in the market, Salha said. The company today tries to discourage the buying of plots by persons who speculate on increases in their value and do not intend to establish residences there. He described the increase of land prices in the developed as 35 to 40% since 1996, which he claimed was juxtaposed by a contraction of real estate values in much of the overall Lebanese real estate market by a similar percentage, thus further underscoring the Mechref value proposition.

In Salha’s expectation, the community will gain further from clustering of attractive tourism projects nearby, such as the Oceana beach resort in Damour. The awakening of tourism in the area would allow taking a new look at a hotel project in Mechref, which the developers had shelved after earlier feasibility studies had not projected satisfactory returns.

The visions do not end here. The developer of the Edde Sands resort in Byblos, Roger Edde, has a full plan up his sleeve to capitalize on the cultural and natural wealth of this ancient Phoenician city kingdom to amplify its tourism power into a leisure land embracing tennis camps, wellness hotels, green villages and its own port for yachts and even cruise liners – a $2 billion dream for the Byblos-Amcheet stretch alone, and that is without counting in Edde’s ambitions for a snow-side resort development in the Tannourine-Jaj cedars region. “I am fully bullish on the Byblos destination,” Edde told EXECUTIVE. “I feel the tourism industry and tourism related real estate in Lebanon are two years ahead of a moving curve, which will move up substantially in the 15 years that follow.”

Solidere has launched a new program thought to bring many changes to your business. What is the program’s core offering?

The program is based on settling part of the price of real estate transactions through shares at a time when we have noticed a major pickup in interest in developing downtown projects.

What motivated you to create this program?

What started us thinking about this program was the realization that the share price cannot stay where it is, because it is significantly undervalued. We have to do something to try to make people and shareholders realize that there is much more value in the company stock.

In launching the program, you mentioned that the Solidere share price is undervalued. Where do you see the fair value?

We estimate that the land bank that we own is worth $ 4.5 billion. That is excluding the properties that have been developed, which we value at $300 million. This will increase immediately when the Souks are completed, bringing the value of the buildings that the company owns to about $800 million. So I think if you do the numbers, the shares are definitely undervalued.

Seven years ago, the most optimistic estimates by international finance houses saw Solidere shares going up to $18 or $20. Now we are happy to be at $7 per share. We are not happy to be at seven.

What number would make you happy?

I will not comment, but as the value of this land bank appreciates the share price appreciates. The other element is payment of dividends. This is a key component of our program, that we will request the cancellation of the shares, which we will acquire. Then whoever is left as shareholder in the company will own a bigger portion.

How long ago did you begin preparation for this program?

It has taken us some time but I think what is important is that this program is coming at a time when there is significant interest in development in the BCD.

Are you saying timing is everything?

Timing and the circumstances. The other beautiful part of this program is that it doesn’t have a drain on our cash situation. It is basically a buy-back program. We are buying back shares but without having to shell out cash and instead giving land.

Did you develop this all in-house or did you use outside consultants?

We consulted with different individuals but in the end these ideas really came from within.

Do you have grounds outside of the new program on which to base your optimism?

Beirut is a city that definitely is in fashion. I talked to international retailers who see that point very well and are able to gauge that through their global activities. They see that Arabs are now looking inwards and Beirut is a spot where they want to be. The Lebanese diaspora is also looking to invest in Lebanon.

Two years ago, you started on an upward curve. Is it correct that the company had a good year in 2003 but showed lower results because it did not want to record sales on its books before they were fully registered?

No, we had cancellations related to shareholders in Bank Al Madina. These were the transactions that had this negative impact on our income statement. Otherwise we would have had probably as good a year as the previous year.

Is the new program and special offer valid at this moment?

Yes, from the day that we declared it and it is already being practiced. But it has yet to result in sales. That is not the case. We have several contracts in different phases of execution. Some were prior to this offer. There are stages of signature, final stages of fine-tuning the contract, but as far as I am concerned, these are sales that are behind us. We are negotiating with a major investor on a huge lot, but this story is at a stage where we cannot yet make an announcement.

Are you in effect reducing the price of land that you sell in Solidere?

To make this program work, we offer a discount of 15% from the list price. We review our prices every six months, and have been moving them up all the time, and this will continue. Pricing the land is another mechanism that has to do with many other factors. We will not change that. What we have always done when we price land is that we stick to it to make sure that people who have invested are somehow protected.

How much did prices go up since Solidere started to market properties?

We started selling initially at $950 [per square meter of built-up area/BUA] and we had a transaction for a hotel that was at slightly less than $950. But since then we have gone up to $1,550. This was the price for a superb piece of land that sits right on the edge of the Marina. I will not be surprised when we are selling some similar properties with commanding views at $1700 or $1800 in two years’ time.

But is it a fact that with the current offer, prices for the buyer have gone down for the first time since the company was established?

No. We have made deals on a cash basis where we applied discounts. While this is not a cash deal, mind you, we are getting 40% payment in shares upfront. We were always getting 25%. This is already a plus. We are getting more money upfront. And we are getting the rest of our money more quickly, three years instead of five years. So this discount is not a giveaway. It has economic bases.

Thus, the 15 % discount would be compensated by a decrease in exposure of the debt over two years and at the same time by the price of shares?

Not by the price of shares. We are acquiring a larger down payment at 40%, which could be 40% in shares or 30% in shares and 10% in cash, instead of 25%. But I tell you something that nobody has noticed yet. This program will have a positive impact on our retained earnings, up to a certain point. As long as we acquire the shares at less than [the nominal issue value of] $10 and we are canceling them at $10, there is another positive impact for the shareholder but not for the real estate investor.

How much could an investor gain in a best-case scenario if he bought shares when they stood at $4 or $5 and used them now for the offer?

This depends on several factors, at what price you bought your shares, how long you have held them, what is your borrowing cost. But if you buy shares today and your borrowing cost is very low and you wait on these shares and then execute the program, these shares will probably be at a higher price a year from now and you will even get another benefit. You get a bonus of 10% on the price of your shares and you get a 15% discount on the land. The program is also telling you as a shareholder that your shares are dearer to you now. You should hold your shares and not accept to sell them at these lower levels.

Is the offer open ended?

We have no time limit on it today but it is an offer that we will have to keep assessing as time goes by.

Is the offer giving a certain edge to large investors and large shareholders over small ones?

No, not at all. It is probably giving more edge to the small shareholders. Large shareholders have held on to their shares. The small shareholders have been panicking when their share prices have been going down. I think today they have no reason to panic. They are in a position to feel that the company is backing their shares.

Can you ensure that no information on your new program was leaked, to people who had already been negotiating with the company over buying a property?

We have our internal procedures to make sure that this is the case and I hope they work.

How would you respond to concerns that this city is a place where insider trading and conflicts of interest between ownership and management are common?

I believe our internal procedures are working as far as confidentiality and as far as transparency. We have shareholders all over the world. We have to ensure that we are not only playing by the rules in this country but by global standards.

What about allegations reported by some Beirut media about controversies in your general assembly on June 21?

We answered that. The auditors obviously never said anything [of the sort which was reported]. No shareholders, including those who stood up and screamed for other reasons, said such things in the assembly. Where did this reporter come up with those allegations? We have no idea. In fact the owner of the newspaper also doesn’t know where these allegations came from.

Can you comment on expressions of discontent at your general assembly?

You have to evaluate this discontent. If it is coming from a shareholder who is concerned about the interest of the company, I definitely take it seriously, but if it is criticism coming from troublemakers or people who have disputes with the company, this is negative for the other shareholders who have real concerns and [who risk] not having these concerns heard.

Could you give examples for real concerns?

There are many concerns that shareholders can voice and they do voice them. One of the concerns is why we aren’t paying dividends. This is a catch-22 situation; if we pay dividends we will not have enough cash to move ahead with the development process. If we pay dividends, some shareholders will be happy because it is an immediate benefit but in a way it will be taken away from future potential benefits.

In the long term, where do you see Solidere obtaining revenues?

From property management. Key to that are the Souks. Are local retailers getting twitchy over the delays and planting their flags elsewhere?

I am not concerned that this will happen. In fact, we have every indication that retailers understand the importance of this location very well. I would have liked to have completed this project by now, but we are about to start now, within the next couple of weeks. So within the next 18 months, we will have it up.

What do you say to developers who say the price of land makes it almost impossible for them to make money?

I tell them there are others who do and continue to come and buy land. This is what is happening. I am sure that also in Saifi and other non-waterfront residential areas, projects are making money.

And developers who are buying land at $1200 BUA and have to sell at roughly $3,000, can achieve that now?

Absolutely.