Gada Sardouk is trotting out the government line. “Beirut’s downtown is the success story of the entire region. People are visiting in huge numbers,” said the director general of the tourism ministry. “Yes, it is sometimes crowded but the area has no problems. If there were anything to harm the tourist, it would be empty.”

Warped logic aside, if the growth of the area’s restaurants and cafés is a measure of its vitality (numbers rose from around 40 in late 2001 to over 70 in the summer 2002, 99 in autumn of 2003, and more than 110 this spring), the same activity offers equally negative indicators, such as the district’s high rate of restaurant closures and re-openings, affecting one in every five establishments over the last two years and with some properties on Maarad street housing more than three outlets during the same period. But the real problem is highlighted by the teams of municipal officers that swarmed through the area in February and March, instructing tenants to remove outdoor plant decorations, abide by sidewalk seating limits and meet hygiene standards. Those, though not all who were in breach were fined. A token gesture, say many; the problem has not gone away.

The two largest stakeholders in the area, the municipality of Beirut and Solidere, the company tasked with its redevelopment, say they are engaged in a major clean-up campaign to improve the area’s image by purging the downtown hospitality sector from various style aberrations and regulatory infractions. Both have been compelled to act. City hall does want to see the downtown become ‘sin city’ and Solidere does not want its shareholders repulsed by a deteriorating ambience. “Merchants and operators approached us to discuss how to organize the management of the area,” explained Georges Nour, property administration division manager at Solidere. “Nobody was respecting the rules.”

“Presently, the Beirut Central District (BCD) works in a very narrow and ill-directed way,” said one of Lebanon’s highest ranking public figures who refused to be identified. “It is an attraction for the bad side of tourism,“ he fumed. “Ours is a country that is 7,000 years old. We should have much more important poles of attraction for tourists. The downtown is over saturated with nightclubs and pubs that are so expensive that only a few rich people can enjoy it. This is not the vision of a downtown where people meet to exchange views on topics of culture, politics, or religion. When you sit in one of these cafes today, you hear anything but.”

Prime hospitality stakeholders in the area also raised grave concerns. “Investments are risky if regulations are not enforced. Can the authorities not see what is going on?” asked an angry Michel Fernein, owner of La Posta.

“For the time being, the situation is not as we expected,” said Dory Daccache, head of the Crepaway restaurant group and who holds stakes in four budget and mid-level eateries in the district. “That the area has been going down is not really a sufficient term to describe it.” According to Ferneine, both the luxury and mid-market restaurant niches have seen revenue shrink in the last year. “The average spend per ticket in 2003 was lower than in 2002, especially in the evenings,” he said. “Patrons who would order an upscale dinner and an important bottle of wine now stay away. They are no doubt put off by the congestion, noise, and harassment.”

The downtown appears to have a problem of clashing restaurant cultures. Restaurateurs are at odds over loud music and ‘un-neighborly’ practices and fight over precious outdoor seating areas. The situation has seen three distinct sub-groups emerge: those that actively disregard rules and live by fly-by-night mentality; those that want to see rules enforced and espouse a long-term strategy of doing business; and a buffer group, probably the largest of the three, comprising entrepreneurs that fundamentally accept the need for regulations and positive conduct, but do not actively seek to improve things and instead go with the flow. Plaintiffs from the second group insist that it is neither a matter of price competition nor a complaint against the riff raff. It is, they claim, all about Lebanon’s image. “Any downturn in revenue is our problem,” said Fernein, “but the reputation of the country is at stake here. The downtown is the most important project in Lebanon. How can something this important have so many things that obviously don’t work?”

Surprisingly, many of these complaints have been echoed by operators whose establishments in the past year have been less than scrupulous in maintaining their own standards in terms of rampant outdoor seating, lack of customer bathrooms and harassment of pedestrians.

“If it is not regulated, the city center is going to be a jungle,” said the owner of an eatery serving what he called “affordable food in big portions,” out of a kitchen installed in what was clearly designated to be a retail store. On condition of anonymity, the entrepreneur admitted that he had hired a hostess for the specific purpose of approaching potential customers. “We are a new place,” he said. “People wouldn’t notice us if we didn’t send the hostesses to explain our menu.” When asked about restroom facilities for the 40 or so seats in front of his establishment, he said a new portable toilet would be installed that night. He had a simple explanation for the area’s hospitality problems. “They didn’t expect the boom,” he said. “More restaurants than they ever expected opened in this area.” There is some truth to this. According to Nour, the success of Maarad began as an “urban management accident.” The Solidere master plan had earmarked the street for vehicular traffic and not as pedestrian zone. The plan had expected retail businesses to populate the street, and most buildings were not equipped for restaurant use, creating challenges in the adaptation of facilities, setting up generators, storing supplies (including cooking gas), and the collection of waste, that only a few investors rose to.

“You cannot believe how dirty it is behind the doors of some kitchens and service areas,” lamented one manager. “Some neighbors here have had an abominable lack of hygiene.” This situation is improving now, he added, since a system for collection of food waste and used cooking oil begun in February, as part of the initiative to better the area.

Many stakeholders agreed that implementation of hygiene standards should be more strongly enforced. “Lebanese regulations on restaurant hygiene are excellent,” said Daccache, “but some restaurants do not apply the regulations, and enforcement is weak.” The inspectors from the health department at the Beirut municipality, the supervisory authority for restaurant cleanliness, are reportedly meticulous in checking that employees working in restaurant kitchens wear hair covers and gloves and have clean fingernails. As a result of the unsanitary practices of some operators prior to the implementation of a new garbage collection scheme earlier this year, pest problems reportedly got so alarming that competitors in the same building had to hermetically seal off doors in order to ward off a despicable daily invasion of cockroaches from the garbage next door. Yet some restaurant owners wonder if all establishments are inspected with equal vigor. “The health inspectors are very tough on me,” said one manager who lambasted his neighbors for having no toilets and dirty kitchens. “If they are also being checked, how come they are still in business?”

Central to the whole issue is the legal status of restaurants, cafes, snack bars and nightclubs. Stakeholders and legal experts estimate that only a minuscule portion of downtown establishments operate with a full license, a legacy of Lebanon’s restaurant law, which was adopted by parliament in 1950 and has remained virtually unchanged since 1970. “In general, obtaining a restaurant permit from the ministry of tourism is extremely difficult,” said Paul Awad, a lawyer specialized in issues relating to the hospitality industry. “Not more than 5% to 7% of restaurants hold a permit.”

Getting a permit is a two-step process. Firstly, operators have to prove their basic compliance with regulations on kitchen facilities, bathrooms and exits, etc. If these are met, the restaurant, cafe or pub can launch its business but it still needs to complete the second step of the licensing in which the applicant must prove the existence of one parking space per 4m2 of restaurant floor space, on the same grounds as the restaurant location itself. Alternatively, the establishment can pay the municipality between $5,000 and $7,000 per non-realized parking space. “Nobody has these spaces, and nobody is willing to pay these amounts,” Awad said. “Therefore nobody gets a permit.”

Realistically, restaurants that have completed the first stage of licensing requirements face little trouble and can be reasonably certain that they will not be shut down. However, the second license is the basis for the classification of restaurants, the lawyer said, and one important consequence of the lack of full licenses is that eateries and pubs are not classified by the ministry, which in turn diminishes the ministry’s ability to monitor their compliance with price levels and service charges. On a day-to-day basis it works. The ministry does what it feels it has to, to maintain standards. “To be realistic, Lebanon is a tourism country. We deal with the private sector in form of a partnership,” said Sardouk. “We are very strict in responding to complaints but very flexible in communicating with the private sector. We are not a police state.” Sardouk added that in the whole of 2003, the ministry of tourism had received 10 serious complaints from tourists and acted upon them, only one of which involved a downtown restaurant. Hospitality establishments in the area display stickers with tourist police telephone numbers, should they have a complaint. When Executive tried to contact the tourist police, it was connected to an Ogero recording that said the number was “not yet in service.”

However, weaknesses in the legal framework clearly contribute to the current malaise. Operators who disregard rules tend to use what they see as absence of a clear legal environment as an all-purpose excuse for ignoring standards and regulations, but for those who wish to instigate improvements or challenge infringements, the legal ambiguity can be a major impediment because an “unlicensed” restaurateur with a complaint does not enjoy full legal status and is immediately at risk of becoming a target. In their plan for improving downtown, the municipality intends to enforce compliance with all standards before this summer. This will involve making operators abide by the areas of public space they rent from the municipality for outdoor seating and respect those regulations that insist that emergency pathways be kept clear and enforce all other municipal codes. For its part, Solidere has retained a consultant to style the area with a range of official materials, colors and designs for awnings, tables and chairs. “We are proposing to the municipality all ideas that we want to implement,” said Nour. “The organization of the public open space is the mandate of the public sector administration. We are offering only value-added. Urban management needs dialogue between the city and the people.” Reassuringly, in this context at least, both the municipality and Solidere claim that relations between them have never been better.

Restaurant owners who want to see standards improve say they are prepared to contribute to enticing back a better class of customer. In the long run, they also expect that the overall growth of the city center towards the seafront and the hotel district will alleviate some of the problems the area has experienced in the last two years. Finally, on the legal front, a revised restaurant licensing law with more practical regulations is under review in parliamentary committees, with hopes that it will be pushed through soon. But in a country where the law is frequently overlooked when it becomes a hindrance, it remains to be seen whether this will be enough.

Overcrowded mess

With seating boundaries constantly in violation, Maarad is becoming an accident waiting to happen

The restaurants and cafés on Maarad and Al Omari Streets are demarcated by round, metal studs embedded into the pavement, which represent the limit that a restaurant can place an umbrella, awning or gas heater. If they exceed the boundary, restaurant owners are, in theory, in violation of municipal seating regulations, designed to ensure there is enough space for pedestrians and emergency vehicles to pass. Most of the restaurants regularly violate these laws and Maarad Street, with its gas heaters and plastic awnings, is an accident waiting to happen.

An example of this blatant violation could be found at Al Sa’a, located across from the clock tower. On the last Sunday of March, the café increased its sales area from its usual 100 to some 168 chairs. The restaurant not only set up extra rows of tables in front of an empty storefront adjacent to their location, it also added two tables per row to an area that passersby should freely walk through according to the law.

The manager of Petit Café, one of the places on Maarad with the highest number of outdoor seats, admitted to Executive that in the high season (when the lion’s share comes from outdoor guests), he makes an average of “including cover charge, $25 per customer.” This is too much to resist for landlords who say they are struggling with the BCD’s exorbitant rents. For Layali al Balad, for instance, the owners pay a reported $260,000 a year to sublet the tiny premises. By bending the rules during one day in the busy summer season, 24 “extra” outdoor chairs can add another $1,440 to the day’s takings; that’s in excess of $44,000 each month. When some landlords are paying up to four times the market rate, this extra revenue can make all the difference.

On March 30, Executive, posing as a potential customer, spoke to restaurant owners and managers in the area to see how many outdoor diners they could accommodate at full capacity. Al Sa’a said it could accommodate a staggering 500 diners. La Cita offered to seat 120 diners, Kiub’z 150, while Petit Café and Layali Al Balad said they could seat 450 between them. Even with the most generous calculations these seating arrangements would easily put them in violation of municipal laws. Only Hani Osman, manager of TGI Friday’s, said that if he wished to exceed his legal quota, he would have to check with the municipality.

That the rules are being broken at will is obvious, but what is inexplicable is that the municipality is unable to exert its influence. In the property management offices of Solidere, a large map, dated December 2002, is pinned on the wall. It delineates in perfect detail areas where hospitality enterprises are allowed to set up tables and where they are not. The map is equally well known in the halls of the Beirut municipality, where officials admit that the regulations are not enforceable and that patience is required in the almost daily fights with some BCD tenants. According to the municipality, rent per square meter of its territory is 3% of the annual rent per square meter of a restaurant’s indoor area. The municipality would like to increase this to 15% or 20%, but for the time being income from the downtown business, either in rent (of public space) or fines is not a money-spinner. (Some outlets have been “fined” – in some cases as much as $30,000. This constituted rental dues and fines for operating outdoor seating for two years without a license.) It may simply be that many of the owners are politically backed and, therefore, immune to the rules and regulations that mere mortals have to abide by. The Bendakji brothers –who own Kiub’z, Petit Café and Layali al Balad as well as Al Sa’a, Grand Café, and VIP (the latter two are in the area of Abdel Malak Street) – are allegedly stoutly backed by top political individuals and appear to flout regulations with impunity. In the short term, a new walkway over the downtown ruins could offer visitors and restaurateurs on that side of Maarad a solution. The walkway will be inaugurated in the summer, but the municipal board has not yet reached a decision on allowing outdoor tables. Permanent barriers are also planned but fears remain that there will always be those whose connections will encourage them to ignore the law.

A CIA job advertisement currently posted on the agency’s web site is offering up to $55,000 a year for “qualified and motivated Language Instructors of Arabic, Chinese, Dari/Pashto,” to work in the Washington, DC metropolitan area.

And for “qualified individuals who are able to read and translate Arabic, Dari and/or Pashto into English to serve the CIA as Middle Eastern Language Specialists in the Washington, DC metropolitan area, with limited opportunities in other areas,” the pay is even more interesting; up to $70,000 a year. For those Lebanese who fancy quadrupling their salary, there are basic qualification criteria: for a start you must be a US citizen. Furthermore, the vetting process is strict. Candidates must pass background security checks, a polygraph (lie detector) test, and so on. Even though in 2002, the FBI, reportedly had only 25 Arabic speakers, of the 73,000 resumes received by the NSA since 9/11, only a few have been selected.

Yes indeed. Despite the anti-Arab, anti-Muslim bias that may have surfaced in the United States after 9/11, demand for Arabic speakers in various levels of government – from the US military, to the FBI and the CIA – are at an all-time high (even the British MI5 have put out the call for Arabists). It would seem that the Bush administration is heeding the advice of Chairman Mao Zedung, who wrote in his little Red Book that “the first step towards defeating your enemy is to get to know him.”

But it wasn’t always thus. When George W Bush first came to the White House in January 2000, he tried, by and large, to ignore the Arabs, Islam, the Middle East and all its confusing troubles. In fact, his critics would accuse him of turning away from most anything that was related to international affairs. The new president wanted to diverge from his predecessor’s policies and disengage the United States from foreign interference. His aim was to focus on domestic policies, first and foremost. Ironically, today it’s the domestic economic situation in the United States that is Bush’s weakest link and the one that could lose him the 2004 election.

But as we know, the September 11 attacks forever altered the way Bush, America and Americans look at foreign policy, and particularly, at the Middle East. Since then, hardly a day has gone by without some Middle East-related news item hitting the pages of the American press or airing on national television. For the most part these reports are negative, portraying the majority of Muslims and Arabs as tainted by terrorism or hating America. But every so often, there will be one item that sheds a more positive light on the issue.

As the presidential electoral storm begins to gather momentum in Washington and the rest of the country, the Muslim/Arab vote – estimated to hover around the three million mark – is beginning to emerge as something both Democrats and Republicans would like to court. Particularly in light of how close these next election results are predicted to be. Understandably, the Muslim/Arab community is starting to realize its full potential as an electoral block and one that should be reckoned with.

Some US Muslims groups have undertaken a campaign to try and register up to 85% of the estimated three million potential Muslim voters in an effort to get them to vote in the upcoming November elections. And in the process, of course, let the political landscape in America become aware of the influence this group may hold. There are an estimated seven million Muslims in the US, of which some are expected to play an increasingly effective role in electoral politics.

Some Muslim organizations put the number of currently registered Muslim voters in the US at 1.8 million. There are predictions that those numbers will significantly increase as a new generation of young Muslim Americans comes of voting age.

But the Muslims in the US are far from voting as a unified block; they are divided between Democrats and Republicans. Traditionally, being more conservative in nature, Muslims tend to vote more Republican. “Many Muslims also voted for the Republican Party because they felt more comfortable with the party’s family-oriented, conservative values and with their stand on issues like gay marriages. Like the Republicans, many Muslims have a very conservative approach to these issues,” said Naushaba Ali, a Virginia resident and female activist who voted against Bush in the 2000 elections.

Afraid of losing its solid Jewish base, the Democratic Party has avoided flirting with the Muslim-Arab constituency. The Democrats’ historic alliance with Israel and the tendency of American Jews to vote Democrat has, in the past, made the Republican Party more appealing to Arab Americans. But that was until September 11 and the drastic changes that overtook the course of events and Arab-American relations.

The clampdown by John Ashcroft, the Attorney General, on Arab and Muslim groups that followed the September terrorist attacks; the arrests and detention of hundreds of Arabs and Muslims in the US, often without warrant or viable reason; additional harsh restrictions imposed at American points of entry, and the war in Iraq, has greatly stressed relations between Bush’s Republicans and the Arab-American community.

Many Arabs and Muslims in the US feel they have become unfairly targeted and unjustly discriminated against. They like to point out that the extremist fringe in Islam represents a very small percentage of the world’s more than 1.4 billion Muslims.

That feeling is not reserved exclusively to Arabs living in the US and is even echoed by a number of Americans. “US policy [in the Middle East] is viewed as anti-Muslim, a crusade against the ‘axis of evil’ and unfair, due to practices that favor Israel over the Arabs.” Those words come from a February 2003 study by the Institute for National Security Studies of the US Air Force Academy in Colorado titled, “View from the East: Arab Perception of United States Presence and Policy.”

The study states, in part, that Arab populations have become alienated from their governments and therefore tend to turn to Islam as their only solution. Usually, the study finds, that it is radical Islam that these populations usually turn to. This explains, in part, Bush’s incentive to impose rapid change on the Middle East. But the changes, needed as they may well be, can only come with the participation of the people involved. Many Arab leaders are beginning to realize, and admit, that the area is indeed in dire need of radical change. But as is often repeated by the Arab world’s leadership and outside observers familiar with the area, these changes must come in concordance with the people of the region. This change cannot be unilaterally imposed, as the Bush administration seems to believe it can.

In a March 12, Washington Post column, David Ignatius quoted Sheikh Mohammed Hussein Fadlallah, Hizbullah’s spiritual leader as admitting that Arab leaders were delaying their move towards democracy, largely using the “excuse” that Israel stands in their way. In other words, as long as the standing Palestinian-Israeli conflict would not be resolved, neither would the issue of Arab lack of democracy.

Every Arab official one talks to will reiterate that fact; solve the underlying problem troubling the Middle East first. Otherwise, addressing other Middle East issues ahead of the Palestinian question, such as introducing democracy in the area, becomes similar to trying to scratch your left ear with your right hand by placing it over your head. Why make life more difficult?

Al-Qaeda’s pet grievance – whether accurate or not – is the Palestinian issue. The same holds true in other non-Arab Islamic countries. Yet, the issue President Bush had promised to address head-on following the Iraq war (via the Middle East Road Map) remains on the back burners of US foreign policy makers.

Realistically however, while solving the Palestinian issue is by no means going to be equivalent to waving a magic wand over the Middle East and making all its problems disappear overnight, it will, nevertheless, accomplish two very important things. First, it will remove the primary reason of discontent and source of animosity currently existing between the Arab-Islamic street and the West, (primarily the US). Second, it will remove the “excuse” mentioned by Sheikh Fadlallah from the Arab/Islamic leaders to keep stepping on the brakes of the region’s natural march towards greater democracy.

In June, Bush will present his New Middle East Initiative, when he convenes with other world leaders in Europe. The details of the plan are still unknown, but already the proposal has become the target of harsh criticism from people and leaders in the concerned area, the reason being that they were not consulted. Maybe what the president needs to better understand the Middle East is more than a handful of linguistic experts?

Claude Salhani is a foreign editor and political analyst at United Press International in Washington, DC.

Food plays only a minor role on the national balance sheet, where agriculture is said to contribute about 8% to GDP, and it certainly doesn’t figure with any prominence in the budget. With subsidizing sugar beets and tobacco, the only somewhat significant government funding support for agriculture goes to crops that in the opinion of numerous experts have no future. The agriculture sector suffers most from insufficient public sector guidance and support, said Ragy Darwish, agricultural resource economist at AUB. “The unclear policies at the ministry of agriculture are the main problem,” he said. A second main reason for the sector’s shortfalls were the long years of civil war, he said, adding, “infrastructure and institutions have been degraded.”

But does that really matter, in context of the dwindling role of agriculture in the Lebanese economy? From a utilitarian perspective in the globalized age, food autarky is no longer the worthy policy it once was. But food security remains an issue of national economic and political importance also under conditions of globalization. “Few countries have succeeded in their economic takeoff without reinforcing their agricultural production and processing capacities,” stated the director of France‘s national agricultural research institute (INRA), Bertrand Hervieu, in a 2003 lecture. “No country can be developed or reconstructed without a minimum of agricultural economy and without being somewhat self-sufficient as regards food.” If this sector warrants strategic deliberation, it is for reasons of the unique attributes of food being at once essential livelihood, cultural identity and valuable commodity – which makes agriculture a multiple theme of food security, societal character and an economic factor. “I see agriculture as having a very important role because it is part of the basic foundation of a country, distinguishing it from its surroundings. Therefore, it is a potential source of comparative advantage and for building value-added,” said Khater Abi Habib, economist, anthropologist, and current chairman of Lebanon’s National Institution for Guarantee of Deposits and the Kafalat loan guarantee corporation. In his opinion, public and private sectors will under all economic scenarios need to invest heavily into agriculture. This doesn’t mean, however, that it would be realistic to aim for agriculture to regain an increased share of economic output. In a new positive development cycle, the basic production of commodity foodstuff would be outpaced by faster growing sectors of the economy. Whether the current contribution of agriculture to GDP reaches 8% or not, “the country remains on such a level because GDP has not risen as we had hoped,” Abi Habib said. “If our per capita income goes up significantly, we would have to invest heavily into agriculture to keep its share of GDP at 3% to 4%.”

Another consideration crucial in assessing the macroeconomic role of agriculture is the agro sector‘s massive technical development. While the high-tech revolution of the late 20th century is widely known for its immense rate of progress, the productivity increases of agriculture have been no less impressive in the larger picture of human sustainability. Over the past half century, agro productivity has grown faster than the world population, and agro industry rose to defining the sector’s viability.

The impact of the reversal of dominion by which food processing became economically more important than food growing has made farmers as dependent on agro industry demand as they are on weather and soil. Mismatches between production and demand thus count among the main problems of local agriculture. According to Darwish, some farmers who are situated just 200 meters away from agro industry companies dump their products, while the industrialists import food for processing from the region and even Eastern Europe. The remedy generally prescribed for alleviating the problem of underdeveloped collaboration in the sector is the formation of communication mechanisms. Based on the saying that it is better to light a candle than curse the darkness, Darwish and his colleagues proposed the creation of a Consortium du Agriculture National du Liban, or CANDL, as an instrument to bring all stakeholders in agriculture – farmers, agro industrialists, research institutions, statisticians and public policy makers – together, “to establish communication and work jointly for increased efficiency.” Private sector enterprises have invested considerable amounts into building agro processing capacities. However, many of these industrialists found that what is true for Lebanese industry in general, just as much applies to their situation: the domestic market is too small for justifying the capital outlays required for a modern agro industrial operation, and exports are the only viable proposition for sustainable agro processing. The Lebanese government has recently taken the first steps towards promoting agro industrial products abroad, through a pilot program for participation in food trade fairs, managed by the IDAL agency. Over the past three years, IDAL had also been entrusted with the promotion of Lebanese produce exports, which helped stabilizing production of farms but has yet to succeed in opening new markets. As things stand today, achieving marketability of Lebanese produce in Europe is a “long process” that will still require a considerable effort in educating agriculturalists, the chairman of IDAL, Samih Barbir, told EXECUTIVE (interview on page xx).

In popular local debates, excursions into the topic of Lebanese agricultural production almost invariably assume aspects of a historic comparison, measuring the national output of vegetables, fruits and cereals against the famed past when this fertile realm was the breadbasket of a much larger region than it is today. Lebanon still provides highly fertile ground. It needs to correlate its capacities for agricultural production and industrial agro processing to the role that this sector can play in a modern macroeconomic concert. According to Abi Habib, viewing agriculture under this perspective reveals development potentials not only for farming and agro industry but also for quality of life, attracting foreign companies, and tourism. Capitalizing on Lebanon‘s diversity in foodstuffs from production to culinary preparation could effect in a richer lifestyle on all levels and increase the country’s fundamental attractiveness. “It is an essential for giving us a tourism base that distinguishes us from countries around us. Sun bathing and shopping are limited and not thought nor culture enhancing,” he said. “When it is well sorted out, agriculture will provide jobs and opportunities, plus make the country richer and a more interesting place to go and look at.” A rich, successful and diverse agricultural setting thus would create a stage for highly developed tourism as well as establish the quality of life environment able to entice foreign companies to locate their regional offices here.

Agriculture could also fill a very direct function in providing parts of Lebanon with tourism revenue, added Darwish. Holidays on the farm are a fixture of tourism culture in many countries, and cultivating this segment in Lebanon could be lucrative. According to an AUB research study in two communities with agri-tourism potential, tourists would be willing to spend about $35 per day on an agricultural vacation with an arrangement of leisure options ranging from recreational fruit picking (for the guest’s own consumption or, in the case of grapes, for wine production) to hiking and eco excursions. Finally, protecting agriculture could translate into preserving the national social fabric and demographic balance between rural and urban populations, suggested Darwish. Whereas a lesser role of agriculture increases the migration pressure on cities and leads to marginalization of rural populations, the state could save considerable amounts by supporting agriculturalists, he said. “The government will be much better off in subsidizing farmers in any form rather than letting them migrate to the cities.”

Lebanon’s retail sector has finally shaken off the effects of the war as it moves towards a modern shopping culture. The good news is that a new generation of shopping malls is getting it right, offering a modern retail experience in an equally modern retail environment, catering to both local shoppers and tourists.

This modern culture has not had an easy birth, having emerged from the retail chaos of the immediate post war years. Then, the downtown, historically the capital’s retail core was still rubble and the ad hoc shopping districts that emerged during the conflict – Verdun, Zalka and Kaslik – still thrived in the absence of a genuine retail hub and modern malls. There were shopping centers of a sort, built with the money of returning exiles. This haphazard approach to retail was doomed to fail. The developments were badly run, ill-designed with small shops, fitted with low quality specifications and with little or no thought given to tenant mix. This and a once-thriving market of pirated goods (now happily on the wane) was not an auspicious start to a sector that has the potential to contribute to $3.6 billion or 20% of GDP.

However since 2000, the renaissance of the BCD, new malls –such as the ABC in Ashrafieh and Dunes – and the emergence of supermarket chains have all transformed the sector and the way we shop. This mini revolution has been helped by the fact that many Lebanese have lived and traveled abroad almost guaranteeing a target rich environment for the international brands. Today, as Lebanon continues to fall in line with international retailing trends it is witnessing larger developments, more car-borne shopping and longer opening hours. This is creating increased competition as retailers place greater emphasis on location, access, customer flow, tenant mix, climate control, service accessibility and parking. “The new malls will see a repositioning of the retail landscape, which is currently defined as the high-street,” explained Mark Morris-Jones of Cushman and Wakefield Healey and Baker’s associate office in Beirut. “Those malls that are properly conceived, managed and well-let will succeed.”

Beirut and its suburbs are dotted with promise. Six major retail developments in Dora, Dbayeh, Sin el Fil, the BCD and Verdun will add nearly 200,000m2 of net retail space. The five do not include the 100,000m2 Souks in the BCD, which has been delayed for four years and does not look like it will be built any time soon. However, local retailers believe that this increased supply will meet the demands of Lebanon’s retailers who insist on modern retail space. “The trouble is that today we just can’t find the right location for our premises,” said Admic chairman Michel Abchee. “The new projects are responding to this demand. If anyone is going to suffer it is the previous generation of retail developments.” It was a painful lesson to learn for those who poured their money into badly conceived projects. “We must remember that much of the retail space in the first phase was sold and, therefore, lack the management and direction of a modern mall where space is rented,” said Morris-Jones, who added that developers with the long-term view will be the eventual winner as they should see growth in sales, which will lead to rental growth and then capital growth.

One of the most adventurous new projects is the Metropolitan mall in Sin el Fil. While many analysts believe that the Habtoor Group is throwing good money after bad, but Morris-Jones believes its might just work. “It is a lot smaller than the other malls coming on stream. It has less than 14,000m2 with a lot of restaurants and coffee shops,” he said. Analysts believe that the new ADMIC mall at Dora will help Sin El Fil’s customer draw, as it will be the first genuine hypermarket in Lebanon and will change shopping patterns in Beirut’s northern suburbs.

Area’s that are expected to make a significant comeback include Hamra, a traditional retail area with a proper commercial street and a residential base woven into its fabric. Verdun should also survive as long as it responds to the new challenges presented by the malls. “We need to see retailers’ associations providing street furniture, parking and safety features that will enhance streets and allow them to compete,” said Morris-Jones.

The downtown’s retail dynamic, once so full of promise, has stuttered due to the delay of the Souks project. In 2001, the development was touted as the single most important development in the BCD and a catalyst for foreign direct investment. With roughly 52,000m2 of retail space – including a 15,000m2 dept store and a 7,000m2 supermarket – it was estimated at the time that the Souks could achieve revenues of $270 million in its first year. International retailers – including Les Galleries Lafayette, Harvey Nichols and Printemps – showed genuine interest in leasing the department store while Spinneys also showed an interest in the supermarket plot. Today, political squabbling has thrown Solidere’s original retail blueprint out the window. Allenby and Foch were designed for upmarket brands but have had to absorb those “high-street” labels originally earmarked for the Souks. When the Souks open for business, retail analysts believe that the high-end shops will head to the BCD. “The expectation is that the price point of products offered in the Souks will be some way above those elsewhere and will serve the higher end market segment,” said Morris-Jones. “This will be an extension of the current trend where we have already seen some of those high end retailers drifting in from a number of outside destinations. There will however be an impact on those retailers operating outside the BCD in that they will take with them a chunk of total sales and this will see a reduction in rental levels elsewhere.” But what is selling? Currently women’s wear and restaurants are the most popular retail outlets with home accessories, footwear, jewelry and men’s wear in close pursuit. “There are some outstanding homegrown retailers in Lebanon, such as GS, Patchi, Kababji, Crepaway, Red Shoe, Pointure, Aziz, Ghia Holdings, Maison du Café and any number of the jewelry retailers and some of the boutiques,” said Morris-Jones. “This includes branded franchises from overseas, as well as some home grown operators. Quality will always show through and as long as a full range of stock is carried, which the good retailers do.”

Of the branded concepts – most under franchises – there are the big regional operators such as Retail Group and Al Shaya. Virgin is also a good example of an operator going into and dominating a sector in a professional manner. Special mention must be made of the MaxiMa Group as they have taken brands to the region as a Lebanese company based in Lebanon.

The future is bright. Rental levels should come down and tighter contracts between tenants and mall owners should lead to a more professional performance by malls – including uniform opening hours etc. The Souks will eventually be the jewel in Lebanon’s retail crown and the final jigsaw in the BCD retail evolution, attracting tourists who will add shopping to their Lebanon agenda. Prices will drop, standards will rise and services will improve. Demand for leisure goods and fashion items will mean more international brands and bigger stores. Increased car borne shopping should lead to better facilities in malls in order to make the shopping experience more of a family day out and daycare and crèche facilities will become a must. There should be more specialist shops forcing out those who are unable to respond to the changes in the market and there will be a gradual move away from developing residential buildings with shops on the ground floor as retail hubs come into sharper focus. Finally, customer care service and better stock control will come about as a part of the sector’s natural evolutionary process. No longer will the Lebanese shopper be grateful for what is on offer. The shopper will have more of a choice and better redress.

Why did the original LibanPost fold at the end of 2001?

The investors were upset at the slowness with which the agreement signed with the ministry of telecommunications was being implemented.

What was the state of the company when you took over?

There wasn’t a clear sense of direction. There wasn’t a clear vision.

What have you done since then?

We have improved quality, separated customer service and sales from distribution, renovated post offices and introduced a wide array of retail products – prepaid phone and internet cards, fuel coupons, newspapers magazines and maps, screensavers, stamps. We have also introduced a number of services, to make people’s lives easier. These include fax and photocopy facilities, as well as passport and residency renewal, military service postponement, and university degree certification services. We are trying to make LibanPost a serious intermediary between citizens and the various government departments, while making money along the way – because we are not a charity. We are a ‘front office’ for the government. Finally, we have invested in our 600 employees and in technology. We have invested about $1 million in computerizing the post offices. And recently, I received a telephone call from Fadi Abboud, head of the Lebanese Industrialists’ Association, asking me what we can do for Lebanon’s industrialists.

How serious are you about quality?

We are very serious about it. We have quality controllers who do nothing else all day long but ensure that the mail is delivered on time and that we don’t have issues with customers. We have a 24-hour National Control Center and a daily 9:30am meeting, during which we deal with any ‘incidents’ over the previous 24 hours. Any necessary amendments are made. We don’t hesitate to take drastic measures against our employees, if necessary.

What are your future plans?

In the near future we will be offering over-the-counter insurance products at our post offices – for cars, personal accident, things that are not complicated to sell and do not require medical exams. We just signed an agreement with the ministry of interior relating to the annual roadworthiness check, the renewal of drivers’ licenses, car registration etc. In addition, we plan to introduce two or three other services which should be announced soon. A few days ago, we established a new department within the company. It is responsible for printing, folding, and inserting into envelopes any publications. These are then immediately distributed. It is part of our plan to offer ‘complete solutions.’ We have reached an agreement with the ministry of telecommunications and the telephone company Ogero, under which we will print and distribute telephone bills. We hope this will prompt other utility companies and financial institutions, including insurance companies, to follow suit.

How much has LibanPost invested in these initiatives?

The printing and distribution initiative alone is worth $1 million. Along with the $1 million for the computerization initiative, that already makes $2 million in a year. That is significant. And it doesn’t include other things like digital map systems, which we are going to invest in. That is another couple of hundred thousand dollars.

What problems do you face?

Firstly, is very difficult to operate in a country that doesn’t have a proper addressing system. Secondly, many buildings do not have separate mailboxes for separate tenants. For LibanPost, this is catastrophic. The time wasted because of this is phenomenal. Mailmen have to knock on doors to deliver letters. Sometimes, it takes them 45 minutes to complete delivery to one building alone. Thirdly, not everyone knows of our services, and even if they do, they have to be induced to try them. We have an issue with the way we are communicating with the public and are in the process of addressing it.We can do better. We are finalizing a marketing and media program worth 2.5% of our projected turnover this year. I would like our media costs to one day reach 3%.

What is your projected turnover?

That’s not public information – several million dollars.

What were revenues for 2003?

They were 15% higher than for 2002, and revenues for 2002 were 12% higher than for 2001. And 2004 is planned to be 16% higher than 2003.

How about profits?

Our plan was to break even in 2004. We almost did that in 2003, so we’re slightly ahead of schedule. We now envisage a profit for 2004 – about 2.5% of revenues.

What influence does the government have?

All pricing is controlled by the government. We have some concerns about this. I understand that given the current economic environment the government wants to keep mail prices as low as possible. But from a private business perspective we don’t share those concerns. Also, LibanPost was supposed to be working in a monopolistic environment. Unfortunately, there are local Lebanese courier companies operating without licenses. They are competing with LibanPost in the profitable areas. It’s unfair.

Is there any theft of the contents of parcels opened by the authorities?

None at all.

Chateau Ksara

Chateau Ksara, Lebanon’s biggest and oldest winery (it has been making wine in the Bekaa since 1857) boasts a 35% market share, producing nearly two million bottles each year with revenues of around $6.5 million.

Managing director, Charles Ghostine has just returned from Pro Wein, the premiere German wine fair held every year in Düsseldorf. Ksara is an energetic exhibitor on the international stage, regularly attending the major wine fairs in London, Bordeaux, and Verona as well as Düsseldorf. “We need to be there. If we don’t show up it might send the wrong message to the market,” said Ghostine. “We don’t go expecting to take big orders. We go show our face,” he explained.

Much has been said lately about the potential of Lebanese wine: that it can compete with the very best of the New World producers and that it should position itself as a boutique product. While other producers may be tempted to hit the volume market, Ksara will not skimp on the final product. The winery harvests nearly 2000 tons of grapes from its 300 hectares, an average of nearly seven tons of grapes per hectare (Chateau Ksara, the winery’s flagship wine, is made from the oldest vines, which yield just five tons per hectare). “Some wine regions will obtain yields of as much as 14 tons per hectare,” said Ghostine. “We will not do this.” Although Lebanon’s wine sector has enjoyed significant growth in recent years, until the mid-90s it was a market dominated by a triumvirate of Chateaux Musar, Ksara and Kefraya. Since then, old names – Nakad and Tourelles – are mounting a comeback, while a handful of newcomers, notably Massaya, Wardy, and Clos St Thomas, have made their presence felt with exciting and affordable new wines in eye catching bottles. This increased supply and variety coincided nicely with a change in tastes. The Lebanese have been drinking more wine and local consumption is increasing by around 10% each year. For the record, the Lebanese consumed three million bottles in 2003. Of that number, roughly 1.2 million were imported – 89% from France. This mini-revolution forced Ksara to defend its position in the local market. “The challenge for us was to maintain our market share,” said Ghostine. “In the early 90s, we were producing 1.2 million bottles now we are hitting 1.8 million.”

Brand loyalty among local drinkers has Ksara in good stead and, despite increased competition, it has been able to meet the increased demand and can claim a 35% market share. With Kefraya not far behind in second place, many new labels have been forced to penetrate overseas markets. Much of this success lies in the performance of one wine: the Reserve de Couvent, Ksara’s mid-priced red, which is still a massive performer among local drinkers. “In the restaurants, the Reserve is king,” said Ghostine. “It offers the best quality to price ratio. It is the backbone of the company and we are pushing it very hard both here and abroad, where we send 60% of the 530,000 bottles of Reserve we make each year.”

Ksara exports 49% of its wine, mainly to France, which takes around 250,000 bottles. (Lebanon exported 1.8 million bottles in 2003, roughly 30% of total production). In 2003, Ksara appointed Hallgarten, the specialist fine wine company, to be its UK agent and Verbruggen to distribute in Belgium.

Finally, the company has invested $200,000 to enhance its hospitality profile at its Bekaa winery. Ghostine explained that, despite being one of the early advocates of a structured wine tourism program, the Ksara board made a decision not to go for a full-out F&B operation like those at Massaya and Kefraya. “We receive around 40,000 guests a year, who visit our famous caves and tour the winery,” he explained. “Now we will be offering cheeses and other snacks with our wines, but we are first and foremost wine makers.”
 

K-Sun

Fruit juice and fresh-cut produce manufacturer K-Sun is an example of a firm that has restructured production and creation of new market segments. But even with adherence to innovative practices in agro-industry, the company is expecting real profitability out of its $2 million factory only from exports. “The Lebanese market is not big enough for such investments,” said general manager Mazen Kassem. “We couldn’t recoup our investments from the Lebanese market, and never thought we would.” The export revenue should begin to flow this year, as K-Sun recently reached an agreement to deliver packaged fruit juice to France beginning this month. K-Sun first brought their fresh juice to market in late 1996, seeking to dominate the domestic market’s premium segment with 65 juices and a mix of varieties. Turnover of the product line in its first month was precisely $83. A first challenge was changing consumer habits, as people in Lebanon thought fresh juice was something they squeezed at home. “It took time to educate consumers,” said Kassem. The project took off as a sideline of a larger business growing fruits and vegetables, which the Kassem family had been running for some 50 years. When they decided to launch K-Sun, the initial business plan entailed a nationwide retail network of 18 shops in a vertically integrated operation from grower to home consumer. A central aim was to eliminate middlemen from their trade in fruits and vegetables. The value-added products, juice and fresh-cuts, emerged as an afterthought. In terms of product lines, market realities led K-Sun onto a different path of making most their revenue from juices –mostly orange juice and lemonade – and supplying first and foremost hospitality enterprises. At more than $1 million annually, fresh juice accounts for 50% to 55% of K-Sun turnover, according to Kassem, and the firm is the leading supplier to restaurants, hotels and delivery food specialists. A company-owned store in Hamra is the base for K-Sun’s distribution network, which relies on a modest fleet of one truck and several delivery vehicles.

The evolution of K-Sun was not simple, mostly because of shrinking purchase power and growing competition. Some competitors introduced pasteurized juices roughly at the same time as K-Sun, which also had to contend with the increasing domestic manufacture of reconstituted juices as well as juice drinks and watery nectars. One (now defunct) competing product used K-Sun look-alike bottles and although they were trademark protected, seeking legal recourse would have been lengthy and costly. Additional hurdles included inflexible customs practices and nitpicking officials, not to mention the absence of government support. Despite the obstacles, K-Sun in 2001 obtained a new factory and a high-tech machine that allows non-thermal processing of fruit juices at a capacity of 15,000 liters per day. This equipment treats foodstuffs with ultra-high pressure, which is proven to eliminate pathogens and foliage organisms without the side effects of pasteurization. As a result, K-Sun juices increased their guaranteed shelf life from five to 21 days. The company also expanded into the manufacture of fresh-cut foods, marketing popular salads and vegetables in ready-to-eat portions.

Although K-Sun built their factory to European standards and with exports in mind, Kassem said entering Europe “hasn’t been easy.” The firm encountered difficulties ranging from acquiring a distributor to finding transportation. No air carrier offers refrigerated flights from Beirut to Paris, for instance, so K-Sun took to routing their first deliveries to France through Luxembourg. With a foot in the French market, K-Sun hopes for profitable times. At 80,000 liters per month, the target for the first year agreement means a tripling of current production, Kassem said. The company aims to reach further European countries, such as the United Kingdom and Germany. K-Sun is also in the process of implementing distribution of its juices to the Gulf, and the company eyes growth of its fresh-cut lines in the domestic market (including manufacture for private labels) and in exports to regional markets, such as Cyprus and Jordan.

Dairiday

Mohamad Gandour, president of Gandour’s The Dairy, established his company in the mid-nineties when he decided to revive an ancestral farm and make it the cornerstone of a dairy enterprise. He began in 1996 by transforming the farm into a dairy operation and acquiring over 200 high-yield Holstein milk cows. In 1997, Gandour established a modern, two-block long, dairy factory in the industrial area of Kfarchima. Networks for milk collection from the corporate farm and independent subcontractors, and distribution of fresh milk and cheese products were set up. By May 1998, Gandour dairy products – fresh milk, cheeses, and fermented products – poured into the market under the brand name Dairiday.

The company allocated $600,000 over the first two years to develop the Dairiday brand identity. All in all, investments amounted to over $7 million, which the company could finance to less than one third with a government-subsidized loan. The remainder was sourced from private equity and high-interest commercial loans, Gandour told EXECUTIVE.

Since its debut, the Dairiday brand has been fighting battles brought on by recession and insufficient regulations. In the milk market, consumer habits, lack of knowledge and above all, price barriers have kept the share of fresh milk down. “I thought that every family of four would consume at least one liter of milk per day,” Gandour said, “and perhaps they do, but it is powdered milk.” The powdered competition retails at a third to a quarter of the price of fresh milk. With all their production capacities, The Dairy’s fresh milk has thus been forced to compete for a sliver of the market “that is 5% to 8% of total consumption in liquid milk in Lebanon.” In cheeses and fermented products, the company has to hold their ground against unlicensed operators who, said Gandour, have “no overheads, no distribution costs, and no marketing costs.” From 1998, he was involved in persistent appeals to the ministry of economy and trade and its consumer protection unit, to oblige Lebanese producers of LABAN, LABNEH, cheeses and related goods to comply with standards on packaging and food safety. “Nothing has been done,” said the entrepreneur. The problem of unsanitary conditions in predominantly unlicensed bulk production of fermented dairy goods was brought to public attention last year by agricultural minister Ali Hassan Khalil. Instead of helping, the official outrage only pushed Dairiday sales down by 13% to 14% over two months, which forced The Dairy to run TV advertisements, reassuring their customers that their product is trustworthy. In spite of the verbal commotion, the unlicensed operators are populating the market as they did before, maintained Gandour, and enforcement of regulations never happened. The problems, which Gandour shares with his licensed competitors, have one common denominator: consumer education. Campaigns promoting the health benefits of fresh milk and the importance of food quality and food safety are amiss in Lebanon. If licensed milk producers would collaborate in their efforts, they could stage such campaigns to increase awareness. Another option would be public sector participation in such campaigns. However, Gandour is more optimistic about the possibility of achieving the former. Without strong prospects for short-term improvements, The Dairy has turned to a marketing partnership with the region’s largest dairy manufacturer, Saudi-based Almarai. Under their agreement, the Lebanese company has added Almarai UHT milk to its portfolio and will also begin distributing Almarai cheeses. In the longer term, The Dairy aims to also partner in production terms with the Saudi company, for local distribution under their brand.

With an upswing in sales, the struggling dairy company could be amortized within two to three years. But for now, Gandour is looking for viable markets outside Lebanon, with Syria being the only lucrative option. “We hope that one day, Syrian consumers will have access to Lebanese milk.”

Shuman

Horrific stories that often come out about Lebanon’s slaughterhouses do not usually give the meat and poultry industry in Lebanon a good name. Producers often have to work doubly hard convincing consumers their animals are fed healthy food and not just dried up carcasses. So far, three poultry companies have managed to carve their brands in the consumer consciousness: Hawa chicken, Tanmia and Shuman. Forty-nine-year-old Shuman chicken is no newcomer to the poultry market, which has flourished the past decade after the government slapped a near-ban on fresh poultry imports in the mid-1990s to protect the industry. “Poultry prices have been dropping ever since the government imposed the ban,” said Nabil Shuman, who has taken over the business of selling chicken from his deceased father. “This is a perfect study of how a government can protect an industry, that later develops, experiences a price decline and attracts investments.”

Today, Lebanon slaughters about 60 million chickens per year, the bulk of these are raised on farms owned by the three biggest chicken companies. “In the 1950’s, we were producing 20 chickens a day, now we are producing 5,000,” said Shuman. “Back then, there was only one supermarket and only one restaurant was buying packaged fresh chicken.”

Shuman also credits his company with pioneering the packaging of chickens. “We were the first company to process ready-to-cook chicken breasts. In 1995, we were the first to manufacture chicken nuggets and breaded products in Lebanon.”

In order to remain an effective player in the market, Shuman explained their use of a vertical integration strategy. “We control everything from A to Z: we own our farms and slaughterhouses, breed our own chickens, have our own distribution networks and own processing plants for chicken nuggets. This allows us to control quality of the end-product.”

For this reason, Shuman chickens are pricier than their rivals and quite less spread. But the company has been able to compete in the market following the entry of other big companies by maintaining its own niche. “We only have 5% of the $130 million poultry market in Lebanon,” said Shuman. “But we have 75% of the branded chicken in self-service sections in supermarkets.”

Unlike Tanmia and Hawa chicken, Shuman’s operations are not widespread. Tanmia’s processed products and Hawa chicken’s outlets dot nearly every main area in Beirut. “We have managed to remain profitable because we chose to take a niche and develop it,” said Shuman. “In normal periods, people may tend to buy any fresh chicken, but when there is a crisis in the poultry industry they head for brands like ours.”

Despite declining chicken prices, Shuman expects his company to sell 1.6 million chickens in 2004, raking in some $5.5 million in revenue, with sales increasing by 20% a year. The company is maintaining a bullish approach to the poultry industry, mostly because of Lebanon’s flourishing supermarket outlets and the sophistication of the Lebanese consumer’s brand consciousness. “The purchasing power is not going to stay like this and it will improve in three to five years. With the development of the supermarkets, consumer habits will change.”

For now, Shuman chicken will try to reach its sales goals by importing technology, which is needed to cut production costs and help raise capacity. “Production costs in Lebanon are high and the only way to cut them down is to continually upgrade our technology,” said Shuman. “The $150 million in investments that were spent over the past decade in this sector have mainly gone into lowering costs.”
 

The latest mall to emerge on the Beirut scene is V5, to be constructed in Verdun and completed in early 2007. The joint venture between United Real Estate Company of Kuwait and Horizon Development Company of Lebanon will cost about $180 million and consist of a total built-up area (BUA) of approximately 148,000 m2 on an 18,000m2 plot of land. As well as an international department store, retail outlets, and a supermarket, other features will include various eateries, a cinema complex, a parking lot for 2,000 cars and furnished apartments with an estimated BUA of 7,600 m2. Future hopes for the center are already optimistic: total retail sales are expected to reach around $200 million by 2010. EXECUTIVE spoke to Afeef Makkawi, Horizon