Business

Tourism’s dark side

by Peter Speetjens
written by Peter Speetjens

A proud tradition

Lebanon’s adult entertainment industry/sex trade is worth an estimated $140 million (although this figure could be much higher), and employs over 4,000 people. Lebanon has always worn a patina of sin, one that represents a not insignificant portion (7%) of the tourist industry, around even though the ministry might prefer to focus on Lebanon’s more family-oriented attractions. Though hardly transparent, the market can be characterized as highly diversified, as it encompasses everything from the Super Nightclubs of Maameltein, with their bevies of Eastern European hostesses, the new wave of massage parlors (or anti-stress clinics), and the red light bars for the less well-heeled customers. There is also a thriving local and regional market for Lebanese “escorts,” and models. And then there are, of course the freelancers, the women (and men) who work the hotels, cafés and sidewalks, practicing the oldest profession in the world.

The law

Contrary to what most people think, prostitution is not illegal in Lebanon, in the sense that it is not included in the penal code. Only the act to facilitate or encourage prostitution is penalized. Prostitution is regulated under a 1931 law related to the “preservation of public health,” which stipulates that prostitution must take place in a “public house” or “meeting house,” both of which must be run by women over 25-years-old in accordance with the rules of the particular neighborhood. Other regulations stipulate that prostitutes should be at least 21 years of age, be subject to a medical exam twice a week (the fees of which are to be paid by the municipality) and that policemen can make spot checks whenever necessary. In other words, most prostitution in Lebanon is illegal, simply because it’s not done by the book.

Super nightclubs also fall under the law, as they need permits to serve alcohol and (according to a 1947 ruling) stage “non-cinematic” shows, i.e., cabarets. Finally, a 1929 government ruling controls the daily comings and goings of foreign “artists” employed to dance in bars and nightclubs.

These so called artists need a permit issued by the Surete Generale. The text stipulates that the person in question needs to submit “a certificate of previous work or be a member of a known artistic organization.” In case the artist does not fulfill these conditions, the Surete Generale can still authorize her to work “if investigations show the artist is good and qualified.” It is also worth noting that “exciting” dancing and dancing in indecent clothes are also prohibited. The text also regulates entry and stay in Lebanon. Policy today is that “artists” who enter the country as dancers can only stay for six months.

Super Nightclubs

The biggest money-spinners in the adult entertainment sector are the Super Nightclubs, which account for nearly $100 million annually. (For a popular operation, business can be lucrative. Overheads – rent, electricity, salaries, permits, “unofficial payments” etc. – account for 40% of revenues and, given the nature of the business, the finance ministry will find it hard to get a clear picture of monies earned.) There are an estimated 80 genuine super nightclubs in Lebanon, some 40 of which, including the most upscale ones, are historically located in the Jounieh neighborhood of Maameltein. The rest are dotted around Hamra, Ain Mreisseh, Tabarja, Mansourieh, Hazmieh and the mountain resort of Aley. The number of girls employed per club varies from five to 30, but the top clubs such as the famous Excalibur, which can employ up to 40 hostesses, have more. In theory, all so-called super nightclubs offer cabarets, but in reality only in the bigger ones are shows performed, mainly by girls from Eastern Europe and the former Soviet Union.

Show or no show, the main business is about spending time with the girls. The deal generally is that if you spend $60 to $100 on drinks, the girl of your choice will keep you company for around 90 minutes. The easiest option is to buy her a bottle of Champagne, but Whiskey will suffice. Your own drinks at $10 each come on top of that.

For men visiting a super nightclub with the idea it being a brothel, the experience can be rather disappointing. In principle, customers are not permitted to leave with a girl and girls are not allowed to offer sexual favors. The clubs are not bordellos and are subject to regular spot checks by undercover policemen or Surete Generale officers. However, if the customer spends the minimum $60 to $100, the customer is entitled to ask the girl “out” the next day between 1pm and 7pm. (The Surete Generale, which regulates the entry and stay of the girls in Lebanon, demands that the girls are to be in their hotel by 5am. They are not allowed to leave before 1pm and have to be back in the club by 8pm, hence the specific window of opportunity).

This does not mean that she will consent to sex. While some will (the rate is roughly $100), others will merely go for a walk or have a meal. In rare cases, clients can take a girl home the same night, but this is risky and restricted to long-term customers and both club owner and girl must agree. The fee is usually $300, $50 of which goes to the girl. The rest is divided between the owner (for loss of business), and the hotel owner, who must pay off the policeman who checks the hotel in the morning.

From Russia with love

For a foreign worker (they are mostly Russian) to find employment in the Lebanese super nightclub circuit, she must first sign up with an agency (most are in Moscow). A successful applicant’s contract will not stipulate the entire range of what is expected of her once she starts working in her new country of employment, but most arrive with their eyes open. (see Global Trade)

The Lebanese club owner pays a fee of about $150 per girl to the agency and must buy the girl a return ticket of some $800 and pay her an average salary of some $300 a month plus commission (based on her ability to sell bottles of champagne). Girls working in the top clubs however can earn salaries of $600 and even a $1,000. The employer pays some $400 for a permit and medical tests, as well as some $350 for medical insurance. Girls share a room in a hotel. Most club owners will pay for the cost of accommodations, which is roughly $300 a month per girl. Cases have been reported however, in which the hotel fee was deducted from the girl’s basic salary. Total cost to the employer per girl for her six-month stint in his employ is some $5,300.

Massage Parlors

Found throughout the Greater Beirut area, massage parlors, or anti-stress centers, as they are euphemistically known, are technically legal and generate as a “sector” over $20 million per year. Generally clean and well-run, these operations employ some six to 12 mainly Lebanese or Filipino girls, who will give a regular 40-minute massage before offering the extra service. The massage usually costs $20, which goes to the house, while any extras, usually another $20 to $30, is kept by the masseuse, who will often cater to around seven customers per day. A few years ago a string of parlors was raided by police and closed down. Today this “problem” has been resolved and many of the best businesses openly advertise in the local press.

Girlie bars

This cottage industry, the closest you will get to a traditional brothel in Lebanon, generates revenues of roughly $6 million per year. There are about two-dozen in Hamra and Ain Mnreiseh alone, recognizable by the universal red light outside their door. The price of a drink is about the same as in your average club on Monot Street, but there all similarity ends. The madam will waste no time in asking you right away if you want to take one of the three or four (often mature) ladies employed in the bar to a quiet place upstairs or behind the bar. The police are paid off at a local level and the cost of full sex is about $50.

Call girls

The top end of the “adult entertainment” market is dominated by the fearsomely popular Lebanese call girls, who ply their trade in the hotels of Beirut and the Gulf countries. Many of the less ambitious operators advertise in the local press as dancers seeking employment or women looking for a marriage partner, but for the high-net worth clients, the local model agencies and pages of the glamour magazines (showing contestants at bikini contests etc.) are their tele-shopping heaven. In these cases, the agency will arrange a contact and take a cut. In this sense, their activities are indistinguishable from regular pimping. The girls, often aspiring singers or models, can earn up to several thousand dollars a night, more if they are requested (and agree) to travel on one of the regular weekend party charter flights between Beirut, Saudi Arabia and other Gulf countries.

The Freelancers

At the budget end of the market are those women who ply their trade at the street level. Still, they are a solid component of the industry and contribute around $4 million to the sector. They are generally Lebanese, Syrian or African and offer their wares mainly on Raouche and the Jounieh Highway, but they can be found all over Lebanon. They charge between $25 and $50.

Many women (and men) work out of cafés, especially in the BCD, and in collaboration with a waiter who acts as a middleman between the professional and the potential client. She will charge anything between $100 and $500. Given the nature of their work, it’s difficult to estimate how many women are on the game, but it is assumed the number is in the high hundreds.

Lebanon and the Lebanese: part of a global game

Early last month, former British model David Barnett, was sentenced to four years in jail for running a jet set prostitution racket of 40 men and women for rich Lebanese and Saudi businessmen, including members of the Royal family. Barnett was sentenced to four years in prison. Among his four accomplices was 31-year-old Lebanese Wissam Nashef, who helped Barnett to find prostitutes. Nashef was sentenced to three months in jail and had to pay a 3000 euro fine. During the trial Nashef admitted to having pimped for wealthy clients from Lebanon and Saudi Arabia. The global trade in women to work in the sex industry is estimated to be worth between $7 and $12 billion. Since the fall of the Berlin wall, Russia and Eastern Europe have taken over the role dominated by the Asians in the 1980s. An estimated 500,000 Russian girls, or “Natashas,” are working in the global sex industry today, as well as some 100,000 Ukranians and up to 100,000 Moldavians. An estimated 1,500 of them reside in Lebanon.

Keeping up with the neighbors

In Israel the situation is somewhat different. It’s estimated that every year some 3,000 women are smuggled into the country by the Russian mafia and sold for $3,000 to $6,000 each. According to a local media investigation, these unfortunate women work up to 12 hours a day, serving 10 to 15 clients for an average of some $30 a customer, of which the pimp takes up to 90%. In July 2001, the US State Department placed Israel on the black list of countries that do not meet the criteria for dealing with sex crimes.
 

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Economics & Policy

Slippery Business

by Anthony Mills
written by Anthony Mills

Declining domestic consumption and an inability to compete on the international volume market are forcing Lebanon’s olive oil producers to go niche. It’s a nice idea (selling as it does, Lebanon’s ancient olive-oil-producing heritage and a quality attributable to the country’s soil, climate and general environment), but for the $250 million olive oil sector, which accounts for only 0.2% of worldwide production, it is a strategy that is fraught with challenges, not least the need for regulation and quality control. In a local market that is defined by brand fraud and sub standard products and flooded with cheaper oil (often smuggled from Syria), local producers have little incentive to make a high-end product, especially when exports represent only 10% of production. “I don’t see any hope for regulation,” said Ramzi Ghosn, producer of NAY olive oil as well as Massaya wines and arak. “Even if the laws existed, no one would comply with them. This is a bulk market and cheating is the name of the game.” Ghosn and other olive oil producers argue that the only way to reduce the volume of inferior quality oil is by building a brand image, but he said that the conditions do not exist for such an initiative. “So far, the market is not ripe enough for the development of brands. It is only ripe enough for bulk sales and cheats,” Ghosn said. This state of affairs in a sector once touted by the UN as a potentially lucrative agro-industry has forced many producers to reconsider their strategy. Ghosn admitted that the optimism with which he began producing his olive oil a few years ago had been misplaced. “We thought it would develop fairly fast. It hasn’t. We have put our olive oil operation into a dormant phase and are focusing on wine.”

Roughly 30% to 40% of olive oil sold in Lebanon enters the country illegally. In such an environment, the opportunity for brand fraud is considerable. “Some producers import low-quality olive oil and then market it as extra virgin Koura oil,” noted Mousa Nimah, an American University of Beirut professor of agriculture and food sciences who is a specialist on olives. “It’s not good quality, but it’s cheaper.” This focus on price means that less than 10% of olive oil produced in Lebanon is of “extra virgin” quality.

The doubt over quality extends to supermarket brands, which are assumed to have a quality threshold. Spinneys told EXECUTIVE that “its own label products are tested at the Industrial Research Institute and follow the strict regulations set by the ministry of economy and trade,” and that its “extra virgin” oil came from the “finest olive trees” in Koura. However, one international agricultural consultant who is working to bolster Lebanon’s olive oil sector, said that in the absence of stringent compulsory government controls, it was impossible to monitor – or guarantee – the quality of these products. “They sell it at a higher price because they say it is ‘extra virgin’ but where is the piece of paper proving that?” the consultant asked. Wafa’a Dikah, head of the ministry of agriculture’s agro-industry department, confirmed that an informal team of international olive oil experts spot tasted alleged “extra virgin” olive oil at a variety of Lebanese supermarkets. “Not one conformed to the organoleptic (involving use of sense organs) characteristics of ‘extra virgin’ oil,” she said.

Because of the worrying domestic situation, the quality of Lebanese olive oil cannot be guaranteed abroad. Often, oil marketed as high-end Lebanese is simply foreign oil bottled in Lebanon. “There should be rigorous pre-export testing,” said Nimah. “The absence of it is probably what has killed our markets abroad. Instead of applying the law, we help those who break it, and then break it again. You have to separate politics from production and marketing.” The government should be doing more to market high-quality Lebanese oil around the world than simply buying in bulk for the army, critics say, but in the absence of export quality controls this is a well-nigh impossible task. Exporting is made harder by the restrictions on imported olive oil imposed by the European Union to protect the olive oil produce of member states like Spain, Italy and Greece, which produces further hurdles for Lebanese exporters of quality oil hoping to establish markets in Europe. “It is a hidden way of creating trade barriers,” said a condemnatory Ghosn. “The government should have included these unreasonable restrictions on Lebanese olive oil in its trade discussions with the EU to make it easier for us to sell.” Meanwhile, the absence of major producers has affected the sector’s lobbying clout. “Big producers would have had enough power to get the government to put this on its agenda,” Ghosn said. So, for the moment, marketing initiatives, with the exception of those espoused by the non-governmental Rene Moawad foundation, are individualistic, place greater emphasis on price than quality, and do little to buttress the image of Lebanon’s olive oil at home and internationally. Olive oil farmers and the NGOs helping them say they also need research, training and equipment under government rural development projects if they are to assimilate to an evolving international market and to ensure that exports conform to its standards. “To have high quality, you need special training courses. We need new machines to compete at the international level,” said Mansour Azzi, an olive grower from the Chouf region. He said olive growers also needed government assistance to fight off an insect plague that was destroying up to 60% of crops. “In Europe, the governments are doing something. Here, no.”

The ministry of agriculture contends that with a limited (and shrinking) budget, it is doing all it can to bolster the sector. Dikah acknowledged that agriculture was not the government’s top priority but she said that the ministry was now trying to modernize the marketing of olive oil in Lebanon and was distributing machinery and hosting educational seminars. The ministry is also working on olive-oil-specific legislation that would allow for increased regulation of quality – both on the domestic market and with respect to oil bound for foreign countries. Those in the ministry believe a crackdown on illegal olive oil imports across the notoriously porous Syria-Lebanon border could in fact be implemented although the industry says this is unlikely. Dikah also pointed to increased olive oil funds from international donors such as the Italian government and the EU. A current agreement under negotiation with Italy would provide for $3 million in assistance. But it would be channeled through the Council for Development and Reconstruction – a body that has been criticized by observers in the past over alleged impartiality and corruption. “At the ministry, we treat all regions equally,” asserted Dikah. “There is a recognition of the importance of the sector, of producing quality olive oil. But things won’t change just like that,” Dikah continued. Overall, the future is bleak and any efforts to establish Lebanese olive oil as a luxury, top-quality product is a pipe dream – a pity since, according to Naame, “virgin Lebanese olive oil is among, if not the, best olive oil in the world.”

But not everyone is pessimistic. The Rene Moawad foundation, which together with USAID has created an olive farmer cooperative, constructed technical premises, provided technical support to farmers, organized olive oil conferences, and invited olive oil experts to Lebanon, exudes optimism about Lebanon’s olive oil sector potential. It says that the ministries of agriculture and economy have understood the need for development of the sector and that Europe is not the only potential market for Lebanese olive oil. It points, in particular, to Asia. Fady Yarak, the Rene Moawad Foundation executive director, declared: “Lebanese olive oil can compete in quality terms with any other international oil on the market.” The foundation boasts that thanks to its efforts, Lebanese olive oil is now sold by French firm Olivier & Co., but it acknowledges that certain kinds of Lebanese olive oil, although as good as their European counterparts, are excluded from the EU market because of the restrictive criteria, which cannot be fulfilled by certain varieties of Lebanese olive oil.

And the foundation concedes that even if some momentum has been generated, change on the ground may not be just around the corner. “I am sure that when the proposed legislation comes before the parliament, something [negative] will happen,” said one consultant who works with the foundation. However, time for genuine change may be limited. In Choueifaat, a region southeast of Beirut once renowned for its olives, concrete has replaced groves in an ominous trend that is gathering pace across the country, much to the chagrin of people like AUB professor Naame. “Choueifaat was full of olive trees. Now you can’t find a tree,” he lamented. “Lebanon is becoming interconnected with cement.” As a consequence, he said, olive oil production had decreased by 10% to 15% over the last decade, a development hastened by the declining social status of working in the olive groves. “Young gentlemen don’t want to work in the fields,” he noted. “They don’t want to dirty their hands.” Instead, Syrian, Egyptian and other foreign workers provide cheap labor. Often, though, they lack know-how passed down from generation to generation, let alone any modern training, and unwittingly help produce the inferior quality oil that is sullying the image of Lebanese olive oil in general.

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Real Estate

Old may be cheaper, but it’s harder to sell

by Anne Robinson
written by Anne Robinson

To Rita Fakhoury it was the find of a lifetime. The three-bedroom apartment in Beirut proper was on the market for just $80,000. It was a little higher than the budget she and her husband Nadim had set but the prospect of a 160m2 home right in heart of the capital was a dream. In any case, they hoped to bargain the price down a little.

The 42-year-old building in Ras El Nabeh is solid but run down. Their new home on the third floor needs rewiring, replumbing and redecorating. But, having spent weeks trying to bring the price down – it finally went for $76,000 – they calculated on renovating the place at a speed they can afford and without piling up massive debts. To the young couple and their two small children, it was a passport to the Lebanese dream. To own their own home with no mortgage and no bank loan for restoration.

The flip side will come only if the Fakhourys ever want to sell the place. According to real estate experts, they are highly unlikely ever to get their money back. Indeed, they will face considerable difficulties in finding a buyer at any price. Rita Saade, a real estate consultant with The Landmark company in Riad Al Solh Street downtown, said even if the figure sought was very low, most buyers would not rush in. Price was a much lower factor among buyers than the amenities offered and the overall condition.

She said around 80% of the market was in new homes – “new” being defined as anything up to ten years old. Most of the rest is taken up with home-hunters seeking traditional Lebanese dwellings, with high ceilings and character, leaving minimal demand for everything in between.

“The attraction for young couples in a new building is that is likely to contain all the facilities that make life easier,” said Saade. These include parking space, a heating system and a standby generator. The properties in Sodeco, for example, don’t have underground parking because it wasn’t a requirement at the time the area was developed. For Rita and Nadim the lack of underground parking is the least of their concerns. They don’t even have a lift. Their bit of heaven is reached by a stairway.

The current trend, Saade added, is for people to move in from the suburbs and seek apartments in Beirut because of the increased potential for both work and entertainment in the capital, as well as the happy avoidance of the daily commuter battleground known as the feeder roads into the capital.

The benefits come at a price. Modern properties in Beirut rarely come at less than $1,000/m2 and can easily be double that figure. And even those numbers refer only to buildings outside the Beirut Central District (BCD) area, where $4,000/m2 is closer to the mark. It was a swift retreat from the high prices and an abiding fear of the never-ending process of repair and replacement involved in an old building that encouraged Christine Haddad to buy a home in Mansourieh. For $18,000 less than the Fakhourys paid for a wreck in the city, she bought a new three-bedroom apartment directly from the builder, who also helped to fix the financing. The 180m2 ground-floor home has a small private garden, an uninterrupted view down to the sea and the advantage of having a few minor defects fixed free-of-charge by the builder.

“My two girls go to school locally and happily I don’t need to travel regularly into Beirut,” said Haddad. “There is no way we could have afforded this level of comfort in Beirut itself and, in any case, I am confident that if in the next few years we need to sell the house and move we would be able to find a buyer.”

Saade confirms that view. “There is definitely a market for modern apartments and there is even a possibility that the seller may make a 5% 10% profit on the deal, depending on overall confidence in the economy at the time,” she said. The prospect of making a killing out of soaring property prices – as in, say, Britain, where values have increased by more than 500% in the past eight years – doesn’t exist. BCD is seen by people in the real estate business as the only area in the country where values may double over a period.

“In any case,” said Saade, “buying property in Lebanon is most often done on the basis of buying for a lifetime. Chopping and changing every few years is a phenomenon that doesn’t exist.”

Selling up and moving on was never in Farida Khazem’s mind anyway when she opted earlier this year to buy an old home in Sanayeh. “I know that almost no one else would want it, but that’s irrelevant to me,” she said. “I bought what I could afford in Beirut to be free of negligent landlords and to be close to all the amenities.” What is of “no value” to anyone else is, after redecoration and some repairs, a priceless palace for Khazem.

What consistent small demand there is for old homes that don’t quite fall into the category of “charming period Lebanese home” depends on the location and the fact that the apartment does have at least, as Saade put it, “some cachet.” It’s not enough to say Ashrafieh in this regard; it depends on which bit of Ashrafieh. Sassine down to Abdel Wahab, Tabaris, Monot and Gemmayzeh is a much easier sell than Jeitawi. Sioufi falls somewhere in the middle. Most difficult of all is to try to sell a soulless home in a place like Sin El Fil or Jal El Dib. What emphasizes that difficulty is the fact that some buildings were very poorly constructed and may even be illegal in respect of both planning applications and building standards.

“At the time, these cheap apartments in the suburbs were attractive for people with very limited budgets who wanted to move down from the mountains and be nearer to Beirut,” said Saade. Nowadays there are very few takers for these homes. Even some of the newer apartments suffer from questionable construction practices but since the amateurs have been squeezed out of the building market in the past three to four years, average standards have risen.

An added difficulty to modernizing older blocks was highlighted by Mark Morris Jones, a real estate consultant at Michael Dunn and Company. “The chances of getting a collection of existing owners in a building to share equitably the installation of a generator or the provision of parking facilities is often so small as to be negligible,” he said. Even where agreement was reached, the improvements would be solely for the benefit of the owners since it would have little effect on the resale value of the property.

One section of people on the move that form an increasingly significant factor in the residential real estate market is the Lebanese diaspora and other Arabs. While an image exists of the mega-wealthy moving in, exemplified by the reported $12 million paid for the downtown Park View penthouse by Mohammed Sleiman, chief adviser to Saudi Arabia’s King Fahd, the bulk of the market is much more mundane. The demands of Lebanese expatriates – and most other Arab buyers – are predominantly similar to those of the domestic market. They want modern apartments with modern facilities.

“The budgets of expatriates tend to be a little higher than those of people already living here,” said Saade. Their choices of what to go for are unaffected by the reason for buying – either as a personal home or as an investment to rent out. Just as it’s more convenient to move into a home where everything is both clean and functional, so it’s easier to find a tenant for a modern apartment than for an old building. The percentage return is also better and, with reasonable tenants, the income from a new lease can make it a sound investment.

Cheap old houses bring in much smaller rents and much larger headaches as far as maintenance is concerned. But the Fakhourys didn’t enter the market to make money. They see the mountainous list of tasks to be done to convert their decaying acquisition into a home fit for the family more as a labor of love than a headache.
 

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For your information

When Black isn’t beautiful

by Executive Editors
written by Executive Editors

After an absence of almost 40 years, Chivas Regal has returned to the Lebanese market. But the whisky that was once the by-word for sophisticated drinking is now having to slug it out with the lesser brands in promotion wars fought in the aisles of Lebanon’s supermarkets.

Sales Manager Isabelle Dahan said Chivas intends to become a major market player within three years. What that effectively means is that it hopes to overtake Johnnie Walker Black Label as the market leader – an ambitious undertaking since Black Label currently controls 70% of the deluxe whiskey market and sells for roughly $2 less. The remaining 30% is currently split between Dewar’s Ancestor’s (15%) and a handful of other brands, such as Dimple’s.

Naji Hammoudeh, business manager for KFF Food & Beverage, which distributes Dewar’s, said he expected Chivas to gain a 20% to 30% share of the deluxe market within two to three years. “The domination of Black Label will be significantly reduced,” he predicted. Black Label distributors Diageo didn’t comment.

Chivas Advertising Director Carla Zoghby refused to reveal the amount of the brand’s advertising budget. Dahan declined to reveal sales since the product’s relaunch at the beginning of August, but she said Chivas was being sold “everywhere,” even in corner shops.

Chivas is being promoted through a widespread billboard campaign, as well as in newspapers, magazines and cinemas. Female promoters have also been positioned at various points-of-sale, armed with brochures. So far, Chivas distributors NEXTY are not offering promotional gifts. But, Dahan conceded, they may.

Zoghby dismissed the suggestion that billboard advertising might damage Chivas’ deluxe brand image. “Chivas is a legend,” she stated. At the same time, Dahan acknowledged that below-the-line promotion was never good for brand image, but said that in a market in which other players had embraced the practice, Chivas had no choice but to follow suit.

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For your information

St. Georges and the Dragon

by Executive Editors
written by Executive Editors

“We can’t keep the blinds open” said Fadi Khoury, chairman of the once magnificent St. Georges Hotel. “They will be able to see me and I can’t risk that.” After more than a decade of fighting, often very publicly, with Solidere and the Beirut municipality, both in the courts and in the press, Khoury initially comes off as determined to press ahead with his vision of reconstructing what was once Beirut’s, and the region’s, star attraction for the rich and famous. “I will not sell out, never!” he told Executive.

While the last two scraps have kept up the image of Fadi the fighter, the culmination of so many years of battling has clearly left him fatigued even as he pulls out map after map of what has, for him, been an exhaustive exercise in the complications, contradictions and “injustices” of Beirut’s rebirth.

Khoury acknowledges that the long-running saga on rebuilding the St. Georges has also taken its toll on his personal fortune. Several years ago, the authorities ripped up the hotel’s berths that were bringing him an average of $1.5 million in annual boat docking fees. Shortly thereafter, he had to endure various municipal obstacles to fully operating his beach club – his main source of revenue. Now, he says, “My revenues have been cut to so little. I have virtually no way to make a profit.” A pathway to the oceanfront, a reduced sea wall, his old piers and permission to build are all that he wants, he says. The crusading sound bytes of public space, “just compensation” and “anti-monopolistic development” would all stop there – he is, after all, a businessman.

As he adjusts one of his many remote cameras from his desk to close in on what he calls an illegal Solidere office trailer near the St Georges, Khoury adds, softly, almost to himself, “I don’t know how long this can continue.”

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For your information

Eating goes upwards

by Executive Editors
written by Executive Editors

With the number of tourists entering Lebanon reaching an all-time high, business has been booming for Beirut’s retailers and restaurants this summer. Cafés and eateries in the Beirut Central District reported an average increase of some 30% compared to normal year-round sales, and a general increase of 5% to 10% compared to last year. Serge Kirbeh, however, manager of Asia rooftop restaurant, reported a 30% increase compared to the annual average, even though he added that “last year was better.”

Restaurants in other parts of town did well too. George Khoury manager of Amore in Verdun, a traditional hotspot for Arab tourists, reported an increase similar to last year of some 35% compared to spring figures. The management of the Blue Elephant in Raouche estimated July turnover to be up 25% compared to last year, and no less than 200% in August, “thanks to an intensive advertisement campaign.”

But it is not just restaurants that are doing well. “Every summer sales are up some 60%,” said Jihad el Murr, managing director of Virgin Megastore, “not just because of Arab tourists, but also because of the Lebanese who return for holidays.” Most retailers in the downtown reported a figure similar to the ones in the restaurant business.

Likewise, most shops and retailers in the Verdun area experienced a 25% to 30% increase in sales, while lingerie, souvenir and clothing shops in Hamra reported an average increase of some 25%. Though Arab tourists did visit the ABC shopping mall in Ashrafieh, it seems it has not yet become their favorite hangout, as most shops reported an increase of no more than 20%. A comparison with last year is not possible, as the mall only opened its doors six months ago.

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For your information

Banking on religion

by Executive Editors
written by Executive Editors

Islamic banking products continue to rise in market appeal, with international and regional banks working to meet demand. The latest Sharia-compliant financial tool to be made available to Lebanese and Middle Eastern investors is the HSBC Amanah Global Equity Index Fund. Launched last month as the first index tracker fund to invest in the 100 largest Sharia-compliant companies by market capitalization, the fund is a product of HSBC Amanah, the Islamic financial services division of leading global banking group HSBC.

Buyers can participate with a minimum of $5,000 in the fund, which is designed to provide them with long-term appreciation of capital through investment in a portfolio of worldwide listed equities that meet Islamic standards. These standards mandate, among other requirements, that companies under investment not be involved in activities such as gaming and alcohol, which are forbidden under the tenets of Muslim faith.

Demand for Sharia-compliant banking products among customers of HSBC Lebanon has been increasing consistently and amounts to “a lot,” confirmed a spokesperson for the bank, who declined, however, to give figures on either the number of private banking clients at the bank’s Lebanon branches or the exact demand for Sharia-compliant products among its customers.

Meanwhile in the local market, Beirut-based Al-Baraka Bank announced that it is opening four new branches. The bank, which operates under Islamic principles, had seen several years of minimal activities in Lebanon until it undertook a restructuring beginning in 2003.

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Italian furniture, made in Lebanon?

by Executive Editors
written by Executive Editors

Lebanon has untapped potential to serve Italian furniture makers as a manufacturing base for medium-range lines for the Middle East market. Paying a visit to Lebanon, the president of the Italian federation of wood, cork, furniture and furnishing manufacturers, Roberto Snaidero, told Executive that he is envisioning increased collaboration between members of his association and Lebanese enterprises.

To open more opportunities for Lebanese companies for joint ventures with Italian furniture producers and manufacturers in general, Snaidero organized meetings with industry leaders here and in Italy. “As the president of our association, I now want to go deeply into this matter here in Lebanon,” he said. “This process cannot be resolved in the short term but it is important to begin. I think it is important for us and for Lebanese companies.”

Developing the skill base of engineers and staff in partner firms here would be essential, while large investments would not be a guarantee for success. “Lebanon is not a big market and some countries around it cannot buy the top class of furniture. We have to move into these countries with medium-range furniture, so we can start with investments in the range of $1.5 million to $2 million,” he said.

He pointed to Snaidero Middle East, a kitchen manufacturing joint venture between the Italian Snaidero Group and local partners (Indevco) as a model for such partnerships. Snaidero Middle East, established in 1995 with an investment of $1.3 million in equipment and training, succeeded in marketing its products in 14 countries of the region and today contributes 5% to 6% to the total turnover of Snaidero Group, according to Maro [OR MAURO?] Matiussi, general manager of Snaidero Middle East. “We estimate to have around 10% market share in Lebanon, which we estimate makes us leaders in Lebanon and in the region as a whole,” he said.

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Little progress after Allawi

by Executive Editors
written by Executive Editors

The recent visit to Lebanon by Iraqi Prime Minister Iyad Allawi produced little in the way of progress on three pressing economic issues: the fate of $500 million deposited by the previous Iraqi regime in Lebanese banks (now in the custody of the central bank); alleged losses incurred by Lebanese exporters who say contracts with Iraq, or Iraqi trade pledges, were not honored once the war ended; and the drastic drop in Lebanon-Iraq trade because of security concerns, which were accentuated by the harassment and kidnapping of truck drivers and businessmen, some of them Lebanese.

For example, the Port of Tripoli has registered a 50% drop in Iraq-bound trade, while road transit from Lebanon to Iraq has plummeted by 70%, denting any optimism generated by Lebanon’s $197.1 million cumulative balance of payments surplus for the first five months of 2004.

“Up until now, there has been nothing on the economic issues,” said Fadi Abboud, president of the Lebanese Industrialists Association. Although the oil, gas, transport and currency sectors were all discussed, observers said Allawi’s visit was primarily of a political nature, designed to improve diplomatic relations between Syria and Lebanon on the one hand, and Iraq on the other. “As long as the security situation in Iraq remains as it is, nothing will be done with respect to the economic matters discussed during Allawi’s visit,” Abboud added.

“I don’t think the issue of the Iraqi deposits will be resolved in the near future,” opined economist Kamal Hamdan. “It will depend on the political situation in Iraq. We may have to wait for elections there, and a legitimization of the political structure.” Hamdan predicted that Lebanese exporters would, eventually, be compensated for actual contracts not honored by Iraq. But he said that Lebanese exporters hoping to be compensated for investments they claim they undertook in response to informal import agreements could be disappointed, in part because of the difficulty in verifying such claims.

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Politics and pension funds

by Executive Editors
written by Executive Editors

The creation of a viable social security net in Lebanon inched a step forward as the cabinet adopted a plan for a national pension project, under which retirees would receive continuous monthly pension payments and be insured for medical services. If passed into law, the plan would gradually replace the one-time end-of-service indemnity payments scheme managed by the National Social Security Funds (NSSF).

The plan’s provisions stipulate that participants can receive pension payments after a minimum employment of 20 years, during which the retiree and his employer would contribute a total of 12.25% of the retiree’s salary: 5% deducted from the salary and 7.25% payment by the employer, up to a salary ceiling of $3,340. Employers would also be responsible to pay a contribution to their employee’s retirement health insurance, amounting to 5% of the salary without a ceiling.

Participation in the scheme would be mandatory for all new employees entering the job market (more than two-thirds of the Lebanese workforce is younger than 35) and all those currently enrolled in the NSSF who were born after 1969. Working persons born before 1969 may participate on a voluntary basis, on condition they do not withdraw their end-of-service indemnity and will have at least 20 years of insured employment at their retirement.

Pension advisors and insurance actuaries Muhanna group, who drew up the pension project for the Lebanese government, set the minimum monthly pension at $120, based on an employee earning a minimum salary of $200 [CORRECT?] over 20 years of membership in the scheme. If he or she is registered for 40 years, the minimum monthly pension would be $240. [CORRECT?] Under the model, a person starting to contribute at a salary of $600 and average annual salary increases of 3% would reach a pension of $642 after 30 work years, or 44% of his final salary.

Given the political stakes involved in the plan (and it was largely depicted in the local media as a defeat for Speaker Nabih Birri, who has considerable influence over the NSSF), debate over the plan is far from complete and adoption of the plan in parliament is anything but certain. After being passed into law, it would take at least two years to implement the scheme.

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