Economics & Policy

Crying over spilt milk

by Eleanor Blanch
written by Eleanor Blanch

The government and the private sector must do more than squabble over the standards in the dairy product sector if proper regulation is to be achieved. Cutthroat competition between small and big producers, chaotic ministerial control and sluggish exports of a mere $3 million all have to be addressed.

The health standards of dairy products, which became a subject of tit-for-tat accusations late last year, are not as dire as they seem, but their problems have been writ large due the chaos gripping a private sector trying to maximize profits and a government trying to deflect attention away from its failure to boost the troubled sector.

Prior to Agriculture Minister Ali Hassan Khalil’s statements last year about the poor standards of dairy producers, state prosecutors were investigating embezzlement charges by his predecessor, Ali Abdullah, who has been accused of using a $15 million loan for a dairy projects for his personal use.

Abdullah faces 15 years in jail for dipping his hand into credit extended by the United States Agency for International Development (USAID) to finance the import of some 5,000 cows and the creation of milk collection centers in rural areas.

The US-Lebanese cow project and numerous other internationally funded programs aimed at revitalizing the dairy sector have failed over the years due to political intervention, dairy producers say.

“The International Fund for Agricultural Development was working on a project to set up some milk collection centers in the Bekaa but it was only able to create one because politicians wanted a piece of the pie in other centers,” said Iskandar Chedid, head of the dairy producers committee at the Syndicate of Lebanese Food Industries.

And any funding that is made is not focused. “Over the past four to five years, the government has spent at least $100 million of donor loans on dairy projects and yet we still have a load of problems linked to the chaos within the government,” said Atef Idriss, President of the Lebanese Food Industries. “Some of these projects did not involve the private sector and in fact competed with it.”

Elsewhere, many dairy producers say their sector has numerous problems with government licensing, rivalry among small and big producers and the implementation of standards.

Minister Ali Hassan Khalil said last year there were up to 400 dairy units in Lebanon, out of which only 25% were licensed. The rest may be selling contaminated milk and other dairy products. There are no accurate figures for the true number of the dairy units that fluctuates with the seasons and can reach up to 600 units.

While most producers welcome regulation, they say the minister’s public accusations have not lead to a genuine clampdown on unlicensed dairies and instead dried up demand for locally-made products; sales plunged in the weeks that followed.

“Our sales dropped by 60% in the first few days after the minister made his statements, then it went down to 40%,” said Chedid. “We are still smarting from the scandal, but our problems are not over yet.”

The ones that the ministry shuts down, mushroom in other places and in the basement of shops where they go undetected. “For a long time we have been calling on the ministry to control unlicensed ‘under the stairs’ producers, but it is unable to control the whole sector, particularly producers of unpackaged dairy products,” said Chedid. Unpackaged dairy products are banned under a four-year old law, which is not implemented forcefully by the agriculture ministry, he added.

Difficulty of controlling the dairy sector lies in the intertwining of authorities between the agriculture, health, industrial and economy and trade ministries. The agriculture ministry is responsible for supervising dairy farmers, the health ministry is tasked with controlling health standards, the industry ministry is responsible for granting licenses to big and medium sized dairy producers and the economy and trade ministry is supposed to catch any violators through its consumer protection department.

“The are some 12 main legal dairy producers – four of them have their own laboratories -which are licensed by the ministry of industry and 30 factories that produce raw materials or milk and are licensed by the agriculture ministry,” said Zuheir Berro, head of the non-governmental protection agency, Consumer Lebanon. “The 200 other unlicensed dairy units work on a temporary basis and are responsible for the sector’s problems, because their health standards are not controlled.”

Small producers accuse big ones of mass producing dairy goods in modern factories without adhering to standards while big producers accuse small producers of churning out contaminated dairy products. Little wonder there is no esprit de corps within the sector.

“There are small dairy units that are unlicensed and there is also unfair competition from big producers,” said Idriss. “Retail chains also are not paying dairy producers on time and they sometimes have to wait five to six months to receive payments for their perishable goods.”

Some dairy producers accuse big dairy companies of deliberately selling at low prices and forcing smaller ones to neglect health standards to sell cheap products. “It is an abnormal situation,” said Ara Baghdassarian, head of Karoun dairies, Lebanon’s oldest dairy producer, which has stopped producing dairy goods until the market is settled. “Some of the big producers are selling their products without adhering to quality control, falsifying the nutritional contents and tampering with the production dates.”

Not true say big producers, who argue they are complying more than any other party with the standards. “We support the minister’s statements because the industry has to be controlled and unlicensed small producers have to be stopped,” said Marc Waked, marketing and sales manager at Liban Lait, one of Lebanon’s largest dairy producers, which has franchises to produce Yoplait and Candia products in Lebanon. Liban Lait was establish in 2000 at a cost of $30 million – it has yet to make money.

“We have our own farms and we control the production of our milk. We are also exporting some products to Syria, where the issue of price is a problem and recently to Iraq.”

Liban Lait is relatively a new establishment that was set up in 2000 with a $30 million investment and has yet to get a return on it. Meanwhile, both big and small producers face competition from cheap goods coming from Syria and Cyprus and some depend on small milk producers to process their cheese and other dairy products.

“There is no real control of food safety in Lebanon and that’s why it is important to push through the food safety bill and create a regulatory authority along the lines of the Food and Drug Administration in the United States in cooperation with the private sector,” said Berro.

Dairy producers are pushing for the creation of a milk board made up of government and private sector officials as a first step toward regulating the industry. But they are not the only party supporting this idea. A study conducted last year by a French dairy expert on behalf of the syndicate said the creation of the milk board could help win back consumer confidence and improve the quality of goods.

“The creation of a dairy board could therefore be a fair track to concentrate donor money and skills in the same direction,” said Francois-Xavier Pinard’s in the study. His analysis of the dairy industry was not all doom and gloom. “Has Lebanon achieved a fair basis for further investments in the milk and dairy sector?” Pinard asked in his study. “The answer is ‘Yes.’ All development programs and private investments in farms, dairies and in structured retail chains show a potential competitive 20,000 hectares/25,000 cows/140,000 tons of milk produced by specialized farms.”

The expert estimated the value of the dairy market at retail value to be around $200 million and the present value of small and medium-sized enterprises producing dairy to be up to $47 million. He recommended that dairy producers try to wean off consumers from using imported powdered milk, promote dairy products through a dairy board and sustain intensive dairy farming for 25,000 specialized cows. Convincing consumers to abandon powdered milk is one common interest shared by small and big dairy producers. “Why should Lebanon spend each year $50 million on imported powdered milk?” asked Waked. “Only five percent of Lebanon’s milk market of 80 million liters is fresh liquid milk.”

Each year, Lebanon imports around $150 million worth of dairy products and exports only $3 million, based on customs figures. Nonetheless, Pinard portrayed in his study a bright view of the dairy sector’s capabilities, a view shared by Berro.

“In general, the health standards of Lebanon’s dairy sector are much better than other products where the use of pesticide is quite prevalent,” said Berro. “Even cases of food poisoning from dairy products in Lebanon are much fewer than in some other Western countries, where there are rampant food poisoning cases despite the existence of regulatory authorities.”

But Berro said dairy producers have to strive to improve their standards if they want to export goods to international markets to counter lower domestic purchasing power and compete with the flood of cheap imports once tariff barriers are removed in the near future.

“In a few years time, tariffs on European dairy imports will be removed under Lebanon’s Association Agreement with the European Union and the Lebanese market could become flooded with European dairy goods,” said Berro. “Consumers will not hesitate to buy European goods instead of locally-made ones and the local dairy producers will suffer even more.”

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Business

Q&A: Gebran Tueni

by Executive Contributor
written by Executive Contributor

How do the Lebanese print media survive?

The word survive is very accurate. Before the war, the Lebanese media was flourished in terms of sales and advertising revenues. Unfortunately, during the war we had to spend all our reserves and now we are surviving. The print media market is depressed not just in Lebanon but worldwide has fallen by something like 25% to 30%, the broadsheet media and the dailies, that is. But because of the political and economic situation in Lebanon and the region, the advertising market has dropped – by something like 35% to 40% for television and 25% for the print media. We face a major problem with all our budgets, short-term, mid-term, and long-term. At the end of 2003, we had lost something like $1.5 million in advertising revenues. That’s a big amount in the print media.

How do you cover your losses?

Our first step, years ago, was to increase the price of the newspaper, from LL1,000 to LL2,000. Then, we increased the capital of the company that publishes An Nahar. We knocked on the door of people who were interested. We integrated them into our family. And of course, in buying the shares, they paid a different price than the normal price. We’ve been able to bring in something like $10 million, just to cover all the losses of the war, to ‘clean’ everything, and to prepare the budget for the next six years.

Has your dependence on investors interfered with the paper’s independence?

In our case, no, because in the charter of the company it is written very clearly that the policy of the paper is decided by the journalists and the Tueni family – because it’s a family business – based on the mission set out in 1948 by my grandfather, Gebran Tueni, concerning the role of An Nahar, the defense of press freedom, and the defense of the integrity of Lebanon. Anyone who buys shares in An Nahar must agree to this.

Is there an advertising monopoly?

I don’t oblige advertisers to advertise in An Nahar. And our prices are high. There is no monopoly of advertising. People can compare and choose.

Why has Prime Minister Rafik Hariri relinquished his 34.5% stake in An Nahar?

I don’t know but I’m happy. He has his own reasons. I had mine for buying back the shares. A lot of people told me I was stupid, but I said: No, no, no, when you want to pay for your freedom, it costs you a lot. I don’t think he was very happy to give them up. I was very happy, but you should know that the price was very high. I can’t tell you how high. But it was a very high price, a really high price. He did good business. But I think politically it was good for An Nahar. A long time ago, I asked him to sell me back the shares, but he didn’t want to at the time. Now I think he feels that the policy of An Nahar for the time being is very independent and maybe he thought that he cannot exert pressure to change that policy. Maybe he thought that it was too much for him to support.

Is there any truth to the suggestion that he relinquished the shares under pressure, indirect or otherwise, from Syria because An Nahar espouses an anti-Syria editorial line?

That is pure fantasy. That would mean that today, I can thank the people I attack in my newspaper for exerting pressure on someone to sell me shares, so that am now more independent. It was a very positive point for the readers also who wrote to congratulate me. Now I’m going to sell shares with the new philosophy that no one person can own more than 30% of An Nahar.

Why was it so important to you to get Hariri’s shares back?

It is very important for a journalist to feel that they are completely independent, that they are not dependent on the money of someone, that no one can say to them: I am a partner, especially when your partner is not always on the same political line.

Did Hariri ever try to exert pressure?

Frankly, yes and no. The relationship was comfortable, though. He endured much more from me than I endured from him, because he knew that he couldn’t exert pressure.

Does Antoine Choueiri have an unfair grip on media advertising?

How? Ok, he represents An Nahar, L’Orient Le Jour, As Safir, but I chose him, he didn’t choose me. Nobody obliged me to go to Choeuiri. I went to Choueiri because I think he is doing very good business. It’s a business contract between him and me. I chose him to manage my ads because I don’t want to create an advertising department in my newspaper. If someone has a newspaper or television station and cannot attract advertising, that’s not my fault. Let him improve his product, convince people that he is number one. Either we are in a free economic system, a free market, or not. This is not dumping. Before [we dealt with] Choueiri, we used to have our own in-house ad department, and it didn’t work. We had the problem then of going out into the market to collect payment. We need a cash flow.

Are the orders of the press and of journalists doing their job as they should?

They are doing the minimum and the minimum is never enough. In this business it’s never enough. With respect to major problems regarding press freedom, they are doing their job. We were able, through the Orders, to get the press law amended. Now, Lebanon’s press law – and I am against any press law – is a good press law. The government can no longer send someone to prison as they do with the audiovisual law, which is a very bad law. But none of the TV owners has presented an amendment of this stupid law, which allows the government to close down TV stations.

How did you feel about the arrest of New TV owner Tahseen Khayyat?

I’m against the arrest of any journalist, of any owner of a TV station or newspaper. I think the TV law in Lebanon is a very bad law. I can tomorrow morning say you are an Israeli agent and put you in jail for 24 hours.

So Tahseen Khayyat’s arrest constituted harassment?

I think it was a form of harassment.

Is this good for Lebanon’s image?

It is very bad for Lebanon’s image, for people to see, as well, that MTV is still closed because our government, our president, was upset with MTV’s policy. The government is trying to bring us back to the Middle Ages. It affects the credibility of the government, of the president, of the prime minister, of the general assembly.

Why is this happening?

Because we don’t have politicians in Lebanon. This is not an independent state. These people have been designated to do a certain job, by the Syrians.

What is your reaction to Walid bin Talal’s purchase of a 49% stake in LBC International?

It’s good. It’s good to see that Lebanese television can attract the interest of foreign investors. If it was a bad TV station, bin Talal would not have invested in it. It’s good for the sector, of course, good for the brand name of Lebanon, good for the whole industry.

What is your evaluation of Walid bin Talal’s newly-formed 24-hour Rotana music channel?

It’s good because I think that Walid bin Talal will be able to help a lot of Arab artists, who do not have the money to produce clips. I hope that we will have real artists and not popcorn artists and video-clip artists.

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Economics & Policy

Is it worth the risk?

by Tony Hchaime
written by Tony Hchaime

Fluctuating performances, a harsh competitive environment, a limited market, and high threats of terrorism and war are just a few of the critical factors affecting both the current operations of foreign banks in Lebanon, and their future strategies with that regard.

Major shock waves have hit foreign banks in Lebanon over the past few years, ranging from the economic recession plaguing the country since 2000, to the threat of terrorism and heightened war activity in the region. Foreign banks in Lebanon, as in other countries in the Middle East and the Mediterranean, suffered a number of terrorist attacks or attempted attacks. A major explosion at HSBC headquarters in Turkey late in 2003 sent all European and American banks in the Middle East scrambling for additional security measures, to the extent of almost paralyzing daily operations. In the case of Lebanon, this has translated into armed guards protecting the entrances of European and American banks, in addition to those of Arab countries considered at risk of terrorism. It remains to be seen, however, how such banks have coped with years of struggle and hurdles, how they have performed, and what are their strategies for the near future.

Numerous banking professionals have addressed the presence of foreign banks, often criticizing their inability to compete with the major local institutions, and their overall risk aversion towards lending and retail banking.

While the end of the war in Lebanon saw the return of a number of foreign banks to the “lucrative” financial sector in Lebanon, the trend has been reversing over the past four years, with a number of banks abandoning their attempt to establish a significant presence in the country. At present, there are 12 foreign banks operating in the country – of which seven are Arab or Iranian – compared to 17 in 1999. The latest foreign bank to shut its operations in Lebanon was Dutch banking giant ABN Amro NV, which sold off its assets to Byblos Bank SAL and halted operations at the end of 2001.

Total assets of foreign banks in Lebanon have shrunk by more than 24% between 2000 and 2002, reaching $3.9 billion, compared to a growth of 15% for the Lebanese banking sector, and 20% for Alpha Group banks. Accordingly, total deposits at foreign banks in Lebanon have also fallen by more than 24% between 2000 and 2002, to $3.3 billion, compared to a growth of 15% for the Lebanese banking sector and 18% for Alpha Group banks. Loans and discounts have also dropped in tandem with the shrinkage in customer deposits and total assets.

Of the existing foreign banks in Lebanon, the three largest (Arab Bank, BNPI, HSBC) account for close to 80% of both total assets and total customer deposits of foreign banks in Lebanon. Arab Bank is the largest, with total assets of $1.5 billion, and customer deposits of $1.3 billion – thus making it party to the elite Alpha Group of banks. Furthermore, Arab Bank enjoys a market share of 2.9% of customer deposits domestically, compared to 1.8% for BNPI and 1.2% for HSBC. Other foreign banks in Lebanon, such as Citibank, Saudi National Commercial Bank, and National Bank of Kuwait, play a much more limited role in Lebanon, with respective market shares not exceeding 1%.

The overall performance of foreign banks in Lebanon is mostly geared towards that of Arab Bank, HSBC, and BNPI. Significant improvements in profitability, resulting mainly from better lending strategies and lower cost of funds, have contributed substantially to the bottom line of Arab Bank and HSBC, especially between the years 2001 and 2002. On an overall note, growth in the net earnings of foreign banks in Lebanon has fluctuated widely over the past few years. The year 2000 saw a 10% drop in net earnings, which was followed by a significant 51% gain in 2001, led by HSBC’s ability to turn an $11 million loss in 2000 into a $2.5 million net gain for 2001. Things improved in the year 2002, with net income for foreign banks in Lebanon jumped by a staggering 68% to reach $35.6 million. This growth was heavily influenced by the performance of Arab Bank and HSBC, which saw their bottom line increase by 206% and 167%, respectively, to $10.9 million and $6.7 million. Bearing such fluctuations in mind, the compounded average growth in net income for foreign banks in Lebanon between 1999 and 2002, remains in excess of 25% annually. This compared to a shrinkage in net income of 9% for the whole banking sector in Lebanon over the same period.

Excluding such outliers as Arab Bank and HSBC, however, the sector’s net earnings have grown by a more modest compounded average of 3% per year over the same period. While basically contributing the majority of revenues to foreign and local banks alike, interest income has played a minimal role in the increased profitability of foreign banks in Lebanon over the past few years. In fact, interest income for the sector as a whole grew by merely 6% annually on average between 1999 and 2002, compared to the 25% growth in net income. With the high number of banks operating in Lebanon creating strong competition, and foreign banks’ common policy of avoiding interest war with local banks, most opted to offer value added private banking and other specialized banking services. Backed by their international networks, foreign banks have been able to tap into a niche of banking services yet not fully supported by local banks. The foreign banking sector’s net financial income grew by an average of 10% between 1999 and 2002, while net commission income grew by an average of 8% over the same period.

As previously stated, foreign banks in Lebanon have attempted to tap into a niche market of private banking and other specialized services in which the Lebanese market is not yet saturated. In such a sense, foreign banks are dwarfed by local entities in terms of deposits and loans, while they remain highly competitive in other banking services. Such a strategy has, to a certain extent, limited their direct exposure to political and economic risks in the country, while, on the other hand, limited their ability to achieve sizeable income. While this approach may have a certain risk-control aspect to it, its restrictions on growth and gain in market share has severely misrepresented the attractiveness of Lebanon to foreign banks with, as of yet, no presence in the country. In such a sense, the highly competitive environment and the resulting slim margins put Lebanon at a competitive disadvantage to other emerging markets such as Africa, Qatar, Russia, and Eastern Europe.

These developments have been accelerated by the threat of terrorism against western interests globally, which have partially led many international banking institutions to scale down on their operations in emerging markets. As such, Europe’s leading banking institution, ABN Amro, has opted to shut down its operations in a number of countries in the region, including Lebanon. In addition, it has been recently rumored that a number of international banks are seeking to sell their equity stakes in major Lebanese banks. Although such developments may be misinterpreted initially as originating from domestic or regional factors of various natures, it is rather, a result of revisions to strategies regarding emerging markets.

Nevertheless, the activities of foreign banks in Lebanon are certainly not on a definite shrinkage route. In fact, a number of foreign banks, namely HSBC and Standard Chartered, have successfully clawed their way into a decent market share. Their strategy was aggressive and focused on services – including, credit cards, internet banking, investment products, and other special banking packages. Needless to say, the growth of foreign banks in Lebanon, or lack thereof, does have a direct impact on the Lebanese banking sector as a whole. In essence, large Arab banks or sizeable international banks grabbing a foothold in Lebanon would put pressure on the smaller Lebanese banks, thus enticing consolidation in the banking sector – a development long sought after by Riad Salemeh and the central bank.

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Business

Overvalued aid deals

by Michael Young
written by Michael Young

In early December 2003, a Pentagon decision outraged a number of American allies. US Deputy Defense Secretary Paul Wolfowitz issued a memo stating that several countries that had opposed America’s war in Iraq, including France, Germany, Canada, Russia and Mexico, would be barred from bidding for $18.6 billion in US-financed Iraqi reconstruction contracts. By January, the Bush administration’s mood had changed. It became clear that the stated rationale for the decision, namely that it would protect “the essential security interests of the United States”, somehow implied that countries historically close to the US, somehow threatened its national security. This was a bit too much even for noteworthy Bush administration unilateralists. At the Summit of the America’s in January, President George W. Bush rescinded the ban on Canadian companies, amid signs from the Defense Department that three or four states in all might be removed from the list of proscribed nations. If that’s the case, then it’s good news, because aside from the fact that the move was no more than petty payback, it undermined one of the key things that Bush and his acolytes claim to be trying to spread in Iraq: the benefits of the free market.

Writing in the New York Times, Nancy Birdsall and Todd Moss of the Center for Global Development in Washington noted: “All the fuss must seem rather strange to the more than four billion people in the developing world. After all, restricting overseas development contracts to domestic bidders – so called ‘tied aid’ – has been standard practice in the aid world for the past 40 years.” However, the authors didn’t defend the habit; they argued it led to one of the main problems in current aid spending practice -and in the Bush administration’s decision to bar non-American competitors: restricting bidders increases costs by limiting competition.

As Birdsall and Moss observed: “Advocates of improving aid effectiveness have long argued to eliminate the practice of tied aid – which, according to one economic study, reduces its value by 15% to 30%. Untying aid would allow poor countries to purchase the most efficient and cost-effective goods and services necessary for their development projects. That makes sense because the real point of aid is to help people escape from poverty. But old habits die hard.”

That may not matter much if American companies, particularly ones financing presidential election campaigns, benefit. However, as the post-war situation in Iraq has dragged on, and as American taxpayers have been compelled to pay tens of billions of dollars for Iraqi reconstruction, the matter of financial transparency has become highly sensitive politically. Very simply, voters are not keen to fatten the accounts of American multinationals like Halliburton, which recently overcharged the Pentagon by $61 million through a competition-free contract, even if the prevailing, and fallacious, wisdom in the administration is that what is good for American companies is good for America.

As writer Matt Welch observed in Beirut’s Daily Star, conflating companies with countries is “a marriage which the trade liberalization project has long been trying to de-couple.” The problem is that “where large companies are so intertwined with the identity of their countries […] their governments won’t allow them to fail.” This means that the pathologies of private firms instead of being filtered out by market forces are enhanced by them, so that mismanaged or corrupt companies survive.

A second problem is that it makes no sense to peddle the advantages of free minds and free markets to the Iraqis, if half of that equation (or indeed all of it) is ignored. From the outset, the American-led reconstruction process in Iraq has been dipped in controversy, some of it unjustified. And in a country like Iraq, where animosity to the U.S. presence is rising and where unemployment may be as high as 50 percent, according to a UN-World Bank report (including an estimated 400,000 soldiers), even the semblance of financial impropriety can be politically disastrous.

It is to avoid this that, for example, George Soros’ Open Society Institute instituted the Iraq Revenue Watch (IRW) project, to “monitor Iraq’s oil industry to ensure that it is managed with the highest standards of transparency and that the benefits of national oil wealth flow to the people of Iraq.” As IRW remarked on its website, implicitly linking transparency and political stability: “In many parts of the world, the lack of proper stewardship over oil resources has resulted in corruption, the continued impoverishment of populations, and abuses of political power… If Iraq is to become an open, democratic society it will need to develop transparent accountable institutions for ensuring honest management of oil revenues.”

Economic policies born of pique are rarely profitable, and the Pentagon’s intervention in limiting participants in Iraqi reconstruction was surely an example. The Bush administration has backtracked, and might console itself by recognizing that there are two beneficiaries: American taxpayers, who will get more aid for their money; and Iraqi citizens, who will get more money for their aid.

Michael Young is a contributing editor at Reason magazine in the US.

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Economics & Policy

Yet another bad year

by Faysal Badran
written by Faysal Badran

It has become customary, in the first few weeks of January, to lay out forecasts for the rest of the year. Analysts from the London-based Economist Intelligence Unit (EIU) to the World Bank get the chance to wipe clean their slate and begin a new framework, maybe with a little carried over optimism from the holiday season. Not so for Lebanon, where the omens from the international financial community do not augur well as, contemplating the undelivered promises of Paris 2, we are left to ponder the immediate future with few signals of any improvement, and frankly, not much momentum except hope, as most of the body politic focuses on the presidential possibilities and the never ending “regional circumstances”.

The EIU report makes sober reading as it predicts Lebanon’s fiscal drama to continue unabated. The 2004 budget contained nothing that would change this trajectory, with the government set to overshoot its 2003 targets by a whopping 30%. With the poor state of the economy, which is growing only in a statistical sense, the fiscal drag is worse than ever. Debt servicing is at a staggering 42% of total public expenditures, and 15% of forecast GDP. This makes it is hard to imagine a worse situation especially in the context of the continuous bipolarity between president and prime minister, which seems to have all but paralyzed the political process. At a time when one would expect political debate to be the engine of reform and the budget a pivotal point of discussion for the future, the bickering continues to “crowd out” real economic imperatives, and the media, and public appear mesmerized by the nonsense of elections. At a time when we need the troika machine to be well lubricated, the divisions intensify and credibility, especially on Paris 2 pledges goes by the wayside.

While it is true that the $3.5 odd billion from the banks will provide some relief to public finances, the whole economic and fiscal architecture seems more fragile than ever, with debt making any stimulus from government impossible.

The tourism sector, which fared well in 2003, with approximately 850,000 visitors (a shade under the 1 million trumpeted by the government), is possibly the only bright spot. Mind you, none of the improvements are due to any policies or plans by the snoozing leadership and the packed hotels, restaurants, and beaches are pleasing, but are not sufficient to revive an economy. With many Arabs preferring the proximity of Lebanon, in the current state of the world, their influx has brought some deposits to the banking sector, and emptied some hotel mini bars, is but a drop in the ocean. It simply isn’t something that can trickle down enough to affect economic growth. Though many politicians point to tourism as a potential savior, the figures suggest otherwise. What has kept the economy from completely imploding is a phenomenon that is totally beyond the government’s reach. It is primarily the inflow of expatriate money. This underground economy, if you will, has maintained many households’ purchasing power, and has served to offset the contractionary effect of fiscal tightening and high youth unemployment. The end game is really the ability to attract investment, and in this category, the signals into 2004 are not encouraging. The EIU tells us that commercial bank credit to the private sector, a gauge of investment activity as well as the pace of domestic spending, had fallen in the last quarter of 2003, and that despite a huge drop in interest rates. This is alarming, frankly, as one would think that a 7% across the board fall in borrowing rates. Even more eye popping, was the 90% fall in net credit to the industrial sector in the first three quarters, and of course, more deterioration in the agricultural credit numbers. So much for policy. Construction, more a testament to continued private investment in real estate than any government initiatives, continued to fare better, and may carry on into 2004. On the trade front, a falling Euro may bring some relief, but overall, the situation is fairly benign and does not presage any significant improvement in spending.

Having looked, briefly, at the key data points, it is worth pointing out that the most relevant issue for the Lebanese economy going forward is not so much the actual economy but confidence. This is where there has been the most clear devastation. Confidence in the ability of the current caretakers to come up with workable plans, and in the notion of political and institutional reform is far more important for Lebanon. Without credibility, that somewhere in the future, change is on the way, direct investment, the lifeline of any emerging economy, will lag. The political bickering, and the accompanying economic reform paralysis are likely to converge with deteriorating debt conditions, and impose a serious speed limit to real economic growth. Attracting investment without at least creating an impression of political movement is a futile endeavor. Investment requires, most importantly, delivering on promises, and creating the right environment. The telecom fiasco, the lost opportunity on privatizations in general, and the continued tribalism of the political system are, for 2004, the natural obstacles to any real improvement in the economic fortunes of the country. Meanwhile, the drain of young Lebanese talent continues, and the banking system, stuck with the debt addiction of the public sector is unlikely to provide the necessary catalyst to private enterprise and capital spending.

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Economics & Policy

Year of the bull

by Executive Staff
written by Executive Staff

The year 2003 is history and, in the US, the market battle is now beginning again. For the month of January, we will have to struggle with summaries of what happened during the last year and predictions of how the major indices will perform in 2004. Neither times gone by nor anticipation will make us a great deal of money, but they make for great marketing tools for journalists and investment bankers. There are two things to watch out for as 2004 unfolds: the folks most likely to predict are those that have been singing the same market song for the past five or even 10 years. The extreme bears will predict the end of the world, while the extreme bulls will continue to predict major gains with nothing that could impact the short-term and long-term positive sentiment.

In addition, if you listened to the business news during the first week of January, the common theme seemed to be continued economic growth and a new bull market. The charming sound of agreement among the analysts and journalists is a warning sign that things might not be that easy going forward. The crowd is rarely correct. It hasn’t been effortless to understand the price action in the past 12 months, and with the macro crosscurrents unfolding daily, there has never been a time when so many balls are in the air.

Rather than look at everything at once, and rather than trying to choose whether to be a bull or a bear, let’s break the market into two important trading metrics and see where we stand:

Fundamentals: if we buy stocks at these levels, we are buying stocks at a time when the S&P is selling at around 30 times earnings while yielding dividends of around 1.7% before taxes. Historically speaking, we have lofty valuations particularly in the technology area. It’s noteworthy that analyst estimates on the earnings of individual companies were continually lowered to levels that would eventually be met. The degradation in the market fundamentals could not continue forever. That we already knew. Currently, we have continued layoffs, most recently at Eastman Kodak and Kraft. Companies with a nice tie-in to the consumer (thanks to the tax cuts) did better than most companies in the third quarter. Companies that benefited from the inventory build showed better numbers. In addition, cyclical companies benefited greatly from the rally in commodities. So yes, the tax cut helped; the rise in the stock market helped; lower rates and the refinancing boom helped; and the dollar decline helped. But there are no real signs of an improvement in end demand, excess capacity is still at high levels, and big companies like Microsoft and General Electric are struggling to grow. It’s hard to imagine a new bull market taking off with these levels of fundamentals.

Technicalities: short term traders will tell you that rather than become paralyzed by the bulls’ and bears’ sophisticated macro arguments, the easiest thing to do is to simply pay close attention to the price action that is in front of us. Rather than try to forecast what might happen next year or next month, enjoy the blessings of the current trend but be prepared to act quickly if it bends. The only problem from a technical perspective is that the indices are far above their 200-day moving averages. This means that a lot of the good news emerging (GDP up 8.2% for the third quarter) has already been discounted by the rallying indices. In other words, the stock market has simply gone very far and very fast on the upside, therefore, it may need a rest. But we are still in a major and clearly defined upward trend, and upside momentum is running high.

The business of rectifying the damage from the mania is unfinished and the excesses could take years to unwind. But this does not mean that the rally will be over soon. I’m aware that the market can do anything. John Maynard Keynes wrote: “The market can stay irrational longer than you can stay solvent.” We are in this irrational type of market. Billions and billions of dollars, euros, and yen are being tossed out in this global attempt by the central banks to keep the good times rolling. Due to these central bank actions, the dollar has seen one of its biggest drops in the last 20 years. Debt levels are the highest they have ever been, with the debt-to-GDP ratio now about 350% (in the US). One of the largest collapses in the history of the bond market recently occurred. The US budget and trade deficits are just astounding. But equities are still rallying. When you put a summation sign in front of all the above, the risk/reward equation in equities is still completely out of whack (especially for long term investors). On the other hand, if you are a nimble trader, you probably can enjoy the current positive technicals of the market and stay with the trend for now.

Ziad Abou Jamra is the head of the trading desk at FIDUS GROUP SG

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Economics & Policy

Age of the mega mall

by Nadine Fares
written by Nadine Fares

ABC opened its much-trumpeted 120,000m2 shopping mall in November and there are five more massive retail projects in the pipeline – the Habtoor Group’s Metropolitan City Center in Sin al-Fil, ADMIC’s Geant in Dora and Carrefour Dbayeh, Solidere’s Souqs, and the Landmark mall, also in the BCD. But what does this mall craze mean for Lebanon’s retailers and shoppers? If the reaction to ABC’s latest venture is anything to go by, malls are impacting on us in more ways than one.

“The ABC mall is a brave step,” said Mark Jones, a consultant for Cushman & Wakefield’s representative office in Beirut. “It is hard to change shopping habits, but introducing this mall means that one is reshaping the way people shop in Lebanon – from high street to indoor shopping and it should pave the way for the other malls.”

Shopping malls, albeit, smaller ones, are not new to Beirut. Dunes, Verdun 730, Verdun 732, and the ABC outlet in Dbayeh are all ingrained in the Lebanese retail consciousness. But all eyes are monitoring the performance of the new ABC mall in Ashrafieh, which cost $120 million to build and has 40,000m2 of net retail space. The experts are confident: “There’s been a giant leap in the retail sector. The market is shifting and we are expecting that shopping malls will have the majority of revenues, especially since those planned [in the next two years] will have twice as much retail space as the ABC,” said Jones.

The rush to fill Lebanon with shopping malls is inspired by Lebanon’s mission to be the Levant’s retail hub. Such a boast would need to be backed up with modern, well-specified shopping centers selling international consumer brands. Retailers can already point to defined shopping periods: summer, ADHA and FITR, while statistics show that most of the retail activity occurs in Beirut – mainly in the BCD and Verdun. Arabs are very discreet shoppers and prefer to do it away from home, so Beirut is the ideal destination. According to the World Tourism Organization, tourists arrive in Lebanon with roughly $2,000 per person, most of it allocated for shopping. It is these people that the ABC hopes to woo. With a total of 170 shops on three retail floors, the ABC mall has, according to the mall’s director Robert Fadel, already reached 80% occupancy. He expects the shopping complex reach cruising speed in about three years. “If all goes as planned, we should be gaining back our investment in 10 to 15 years,” he added.

Estimates in a feasibility study commissioned by ABC and carried out by Horizons Europe, a British retail consulting firm, predicted that the mall would achieve annual sales of $255 million, 16% share of the local retail market. Many see the figures as optimistic. “That’s revenues of $5,600/m2 per year,” said one retail consultant. “In the short term, they will struggle to do this.”

Most shops dream of such revenues, but ABC felt it had to woo local retailers to take space in the mall. Attractive rents (in some cases as low as $500 per m2/annum) were used as incentive. Some, like Pa Kua upped sticks and moved but Eden Park, an upscale men’s boutique, is staying put. “I decided to stay out, as I believe that stores with a unique identity have nothing to worry about. It’s the shops that sell things that can be found in the mall that are threatened,” said Mazen Moussallem, Eden Park’s owner.

Whether or not more shop owners in the Sassine area decide to join the ABC venture, a lot of changes are expected to happen in the area. “There’s going to be a lot of shuffling around within the mall,” said Jones. “People, who have stores in and out of the mall, might decide to close their store outside and remain in the mall – or the opposite might happen.”

In fact, most of the retailers that have so far joined the new venture have been with ABC for years. “I have been with ABC for over 15 years and because I trust the way they do business, I decided to join them at the new mall,” explained Nadim Amm, owner of Milord stores. However, not everyone is as satisfied. Two storeowners have complained that they have not been doing as well as they expected, not even during the holiday season. “We are paying a great deal of money [in rent] and had high expectations, but so far it has been very disappointing,” said one shop owner. But not all retailers at the ABC are concerned about the sluggish holiday sales and high rents. “One should not judge and cannot expect to make money instantly,” said Milord’s Amm. “Personally, we are giving ourselves six or seven months to evaluate our situation. So far so good, but we are expecting better sales when the mall is completed.”

Whatever the outcome of the ABC effect on Sassine, at least one positive factor on independent businesses in the area will be that small landlords and retailers will be forced to improve their services. “We’re not happy with the situation, but we know that in this business, competition is fierce and we know that it’s our job to improve and create better facilities for retailers,” said a local landlord. “We cannot sit and complain; we have to work around what’s available now, and maybe benefit from the mall.”

Trouble next door

Despite conducting a traffice impact study before constructing ABC in Sassine, the new development has earned itself the ire of locals, harassed by a surge in traffic to the mall

In addition to concerns regarding negative repercussions for individual outlets in the Sassine area, many residents and commuters are concerned about the recent increase in traffic congestion that the ABC has brought with it. “It’s been crazy all throughout the holidays,” said one angry resident. “It took us hours to reach home everyday. I can’t believe they got planning permission!” Despite complaints, the ABC seemingly went by the book as far as Lebanon’s urban development laws are concerned. Code 523 specifically states that whoever wants to create a development of any size must conduct a traffic impact study on the desired area, so the ABC turned to traffic consultants, Team International, to design the best possible multilevel access and parking facilities to cope with Beirut’s traffic. As a result, many mitigation measures, including a new bridge from Alfred Naccache Street to the 2nd level, are in process of being implemented to enhance the flow of traffic to and around the mall, which is expected to be completed in the summer of 2004. “Although there has been no one following whether or not ABC is implementing the law, ABC decided to do it,” assured Tamman Naccache, partner and one of the directors at Team International, who also added that this is the first time such a traffic study was conducted in Lebanon. The issue of parking is another sore point among retailers and prospective shoppers. As a result of the lack of parking space in the Sassine area, ABC owners are charging their customers to park at their facilities, despite many complaints.

Several retailers suggested that when people buy from the mall, the parking should be validated. Jones agreed. “I see the point in charging – the area lacks parking spaces so anyone can park and just walk out of the mall. But I would suggest a different approach.”

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Real Estate

Gentrifying Gemaizeh

by Peter Speetjens
written by Peter Speetjens

In the last two years, Gemaizeh, the neighborhood due east of the BCD, has seen property prices rise by an average of 50% across all categories, as restaurant owners, property developers and discerning homebuyers have identified the district’s commercial potential. At least $50 million has been invested in residential and retail projects in the area and, unlike other areas of Beirut, demand appears to be strong. It is arguably Beirut’s most dynamic district.

Gemaizeh’s renaissance can arguably be traced back to the renovation of the old glass café (Ahwat Azaz) in 2001 and the opening of Paul, the up-market bakery in February 2002. Before that the area was charmingly distressed but commercially comatose.

Today, land is selling at $800/m2 of BUA, an increase of more than 200% in two years and an accurate reflection of its proximity to the BCD where plots are selling for roughly $1,000/m2 of BUA. Residential rents for old building are now at a healthy $50/m2 per year mark, while retail rents have reached up to $500/m2, an increase of some 70% in the last two years. Prices are still cheaper than the neighboring BCD by roughly 50% across the board and this, together with the area’s charm, is what is convincing many investors of the area’s potential. Today, the façades and the historic St Nicholas Stairs have been restored, while food aficionados can buy French bread at Paul’s, sample fusion cooking at Food Yard, Spanish tapa’s at Louis’ jazz bar and traditional Lebanese cuisine at La Tabkha. Two art galleries, Fadi and Alice Mogabgab, have opened, while Torino Express will soon be serving Italian coffee and cocktails. Fady Saba, a leading player on the Beirut nightclub circuit, is one of the new generation to invest in Gemazieh. He opened the club/restaurant Central in September 2001 and at the end of 2003 he followed this up with by plowing $100,000 into Al Tabkha, a 50-seat Lebanese restaurant that serves home cooked-style food.

“Gemaizeh still has the flavor of old Beirut,” Saba explained. “For Central I was looking for an old house with spirit, which you just don’t find that in anymore downtown, which has become Lebanon’s own Disneyland. Still, I went there to look for a location for Al Tabkha but it was also too expensive for a small restaurant serving Lebanese food for $7 a head.”

So it was back to Gemaizeh, where Saba found an unfinished building in which he rented the 100m2 ground floor for $25,000 a year. “In downtown, I would have paid at least twice as much rent and much more on refurbishing,” he said. “It’s good there are regulations in downtown, but they’re overdoing it. They want to have a say on everything from the paint on the walls to the lighting.”

To real estate agent Michael Dunn Gemaizeh’s ascendancy doesn’t come as a surprise. “It’s close to the central district, it has a certain aesthetic value, but most importantly it’s relatively cheap,” he said. “In downtown you pay some $750 to $1,000 per/m2. A 120m2 restaurant with a small mezzanine costs around $150,000 a year in rent. On top of that comes an on average $100,000 initial investment without kitchen, plus 8.5% municipality tax. So, the initial costs of opening a restaurant in downtown lie between $250,000 and $300,000. In Gemaizeh the same place would cost you about a third.”

Local broker Elie Zeeny, general manager of City Real Estate in Gemaizeh, confirmed that increased demand had seen retail rent nearly double over the last two years. “Then you paid between $100 and $200 per square meter,” he said in his office facing Electricité du Liban, “while today that will be between $200 and $300. Still, compare that to downtown Beirut, where Solidere asks up to $1,000, and even more for a premises on one of the main streets.”

According to Zeeny, residential prices have also doubled, although 50% is probably more realistic. One resident who bought a 3-bedroom, 140m2 apartment on the desirable St Nicholas steps in 1999 for $62,000 says he could realistically expect to sell for at least $90,000 today. Few areas of Beirut can boast that level of growth. Zeeny quoted current asking prices at between $500/m2 and $800/m2 per square meter for old houses and between $1,000 and $1,200 for newer ones. “The further you move into Gemaizeh the less you pay,” Zeeny said. “Past the Electricité du Liban rents can be half or even a third of what you pay in the area closest to downtown.”

Not surprisingly Gemaizeh has also seen some significant brand new luxury residential developments as many Beirut yuppies flock to buy or rent. Developer, Jamil Ibrahim is taking on the 23-storey half-built concrete skeleton off Tabaris (untouched since 1975) and, with $10 million, intends to turn it into the Aïdi Tower. The property will offer luxury 425m2 apartments for an average of $2,000/m2. Another developer, Joseph Moawad is developing an 11-floor residential tower on the edge of Gemaizeh and Saifi. Apartments measure between 150m2 and 400m2

Arguably some of the most eye-catching developments have been Convivium I and II. Both are new five-floor apartment blocks, yet built in the style of Gemaizeh’s traditional architecture characterized by arches, big windows and high ceilings. With an average price tag of $1,200/m2 all apartments have been sold, prompting developer Kareem Bassil to spend another $19 million on Convivium III, IV and V, all in Gemaizeh.

“I just love the area, it’s a bit of old Beirut” said Bassil. However, seeing current developments, isn’t he afraid Gemaizeh will loose the very character he loves so much? “As long as Gemaizeh can keep the old houses and developers respect the environment they work in, the area will be fine,” he relied. “That’s why I didn’t built a tower, which I could have done, but kept it a low rise construction in tune with its surroundings.

Bassil warned that people should remain reasonable not to kill the area. “I bought the land for Convivium V for $950 per square meter, but I have heard people are asking up to $2,500/m2. This is ridiculous.” Fady Saba has similar fears. “Gemaizeh is going to boom,” he said, “I know many people who are thinking of opening up a place in this part of town. I just hope that the inhabitants here realize what’s happening. They shouldn’t become greedy. The day American chains like TGIF move in Gemaizeh will just become an extension of downtown.”

Gemaizeh’s renaissance is a typical example of urban gentrification with the BCD acting as a magnet for investment. However, still does not have as much pedestrian traffic as the BCD, so its retail sector – restaurants, shops, galleries and café’s – must have a well-defined formula to attract customers. It must also have ample parking spaces. This is one of the area’s weaknesses but those who have invested argue the situation is not that bad. “People should stop saying that, it’s just not true,” said Andreas Boulos, former manager of Pacifico and owner of Torino Express. “In a sense the area has a three level parking: Rue Gourand, the parallel street of lower Gemaizeh and an enormous car park in front of Marine Tower.” Nevine Emad works for the Association for the Development of Gemaizeh (ADG), which in its own way contributed to the gentrification of Gemaizeh by refurbishing and painting several old buildings, as well as the stairs. “We welcome investments,” she said, “as they bring life to the area and encourage others to invest. Don’t forget that until recently there were a lot of closed windows in Rue Gourand. But, on the other hand, Gemaizeh is a residential area and investors must respect its general atmosphere. Though we are not the police, we, the inhabitants and the municipality must play a guarding role.”

Luckily for Gemaizeh, its largely elderly inhabitants also care about the area. When Maher Chebaro wanted to name his Jazz hangout Bar Louie, local residents protested and signed a petition against it. Problem was not so much the place itself, but the use of the word ‘bar,’ which to many people was a euphemism for a brothel. Chebaro removed the offending word. His establishment is now simply called ‘Louie.’ With such a robust community, Gemaizeh may just hold onto its charm.

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The Buzz

Home style cookin’

by Anissa Rafeh
written by Anissa Rafeh

Thanks to the rash of various eateries in Beirut, not to mention the ongoing sushi craze, the current trend in Lebanese dining would appear a long way from eating fassulya wu ruz in mom’s kitchen. But that is just the kind of image that La Tabkha – the latest eatery to open its doors in the increasingly ‘in’ Gemaizeh area – is hoping will lead diners to its doors. Offering a menu of hearty dishes that promise to taste like home, La Tabkha’s food is convenient and affordable, with the average meal costing about $10 per person. “We noticed there were no places offering home-cooked meals as their main concept,” said Fady Saba, managing owner of La Tabkha, adding that his restaurant is especially appealing to working couples not able to make their meals everyday and people who are sick of ordering junk food at the office. “We are trying to create a new food behavior by providing meals that are fast, good, healthy and available at good locations.”

For starters, La Tabkha’s healthy concept of eating consists of an all-you-can-eat appetizer buffet for LL8,000, which includes everything from fried eggplant, squash and cauliflower, to hindbi and loubieh bi zeit. There are salads on the menu, for LL3,500, including the traditional cucumber and labneh combination.

The entrees listed for LL5,000 include lentil soup, omelet’s and kichk wu kawarma. However, La Tabkha also offer a set menu for LL11,000 featuring the plat du jour – which was cheick mihshi with rice (stuffed eggplant) or a chicken casserole, on the day my companion and I visited the restaurant – and includes a salad and dessert (a choice of nammoura, sfouf, rice pudding, chocolate biscuits, and muhalabiyeh au chocolat). I opted for the appetizer buffet and my companion chose the set menu and, as it was a touch on the chilly side outside, we both decided to start with some sumptuous lentil soup. The portions were very generous and we both enjoyed the richly textured soup amid the charming backdrop of a combination of French bistro and Lebanese culture. It was also reassuring that the cleanliness of the kitchen was clearly visible thanks to large glass windows that allow patrons to see the cooks actually prepare the food. At the buffet, I helped myself to a selection of loubieh bi zeit, hindbi, mashed potatoes with olive oil, fried eggplant and my favorite, fried cauliflower with a noticeably fresh taheeni sauce. Of course, my biased taste buds would have to pick the fried cauliflower as the standout appetizer of the buffet, but it must be pointed out that the hindbi was nice and crisp, the loubieh and potatoes just the right amount of tangy and the eggplant light and not too oily. I would’ve liked, however, to see some hummous or mutabel on the menu to make the meal more complete, which was a thought reiterated by my companion. Despite the absence of hummous, my lunching buddy enjoyed his cheikh mihshi with relish. The presentation was very attractive with the eggplant and rice coming in separate plates. When I asked how he liked his meal, he replied, “It’s just like mama made it.”

For diners who prefer to avoid the bustle of a busy restaurant, La Tabkha also offers a delivery service, with meals coming in a neat, compact box much like the old-fashioned metal lunchboxes. As the menu is set a month in advance and includes a calendar of plat du jours, it’s easy to pick out your favorites. With the apparent initial success of the restaurant, Saba revealed plans of an expansion of their delivery options and a La Tabhka franchise. “We expect to have two more outlets in Lebanon over the year, and if we succeed, we’ll go abroad,” explained Saba. “But the locations of the different outlets in Lebanon are not official yet.”

If packed tables are anything to go by, then La Tabkha is certainly on the right track. By one o’clock, the restaurant was crowded with a sprinkling of celebrity clientele. In a nutshell, my companion put it best: “I think they’ve got it just right.”

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The Buzz

The art of leadership

by Executive Staff
written by Executive Staff

How can I become a leader? This question pops up quite often with the assumption that there is some magic formula for leadership lying around somewhere. There isn’t. People want us to tell them “the five easy steps to become a leader”. But, they don’t exist. How great it would be if leadership could be reduced to a simple formula. We only wish that it were this easy and that we had the answer.

We would be famous!

Whenever you see a book or hear of a training program promising that by following their proven method you will become a great leader, instead of signing up, be very wary of their promise. You do not become a leader simply by what you read or attend.

This does not mean that any self-improvement through literature or training is impossible. By all means, it is imperative that you develop behavioral qualities and skills if you want to lead. Case in point, leadership requires certain behavioral qualities like character, vision and creativity. Without these characteristics it is difficult for a person to lead.

Think about this, would you want to follow a person with no vision? What if she or he were not a person of character? Would you follow this person? The answer is a resounding no. We are sure that you desire to follow a person that inspires you and that you respect. Now ask yourself this question, what do people see when they look at me as a leader? Do others want to emulate me?

Throughout our careers, we have heard it said, repeatedly, Leadership requires thick skin. One of our favorite quotes on leadership is, “Unless you are being kicked in the rear, you are not in the lead.” Leadership is challenging and will bring with it resistance. Therefore, it is important that a leader have the skills of resilience, expertise in their field, and cultural fluency.

In leadership there is no room for the sole proprietor. If no one is following, you are not leading. The priority of leadership is working well with people. It requires skills to build partnerships and alliances. Leaders must be able to communicate and collaborate well with others.

One of the major facets of leadership is developing others; it is not good enough to have other people follow you. Every person who leads is in a role to coach others. Coaching sees the potential in others and then develops and encourages that potential. Leaders who coach are known for the people they develop.

It is also important for leaders to know how to share their knowledge. Great leaders are known more for what they give away than what they do. What knowledge are you giving away?

One last point about the skills for leadership is that a leader must have a global perspective. There is no denying or escaping the fact that the world is interconnected at so many levels. On any given day, we are exposed to and influenced by the Middle East, Asia, Africa, and the West. Learning to leverage this global network of mutuality will increase your opportunities abroad and at home.

You must realize, however, that acquiring a certain behavior and skills doesn’t automatically make you a leader. It’s just a starting point, and what you do next is what determines your leadership. It is also about you, your belief in yourself as a leader and what you do with the skills in order to achieve results.

For decades leadership has been taught as a science. The “experts” have taken the subject matter of leadership into the laboratory and dissected it and put it through all sorts of rigorous testing. The result was a simple formula. The world then applauded the “experts” and their experiments, without ever realizing that the experiment wasn’t over.

We have talked to people all around the world who have adopted the findings of these “experts” and failed miserably. Had they tested the results, they would have observed that the “experts” findings are unfounded. Why? Because leadership is not a science.

Leadership is an art.

Imagine with us what it would be like if today we went to the best leadership seminar in the world. While there, we heard fantastic teaching on the skills of leadership, and we actually believed that we could become great leaders. Then tomorrow we returned to work with our memorized tools, but with no action on incorporating them into our life. Are we leaders? Are we any better off? No! On the contrary, we are worse off, because we think we have become leaders, but in reality we have no idea.

This realization shows us that leadership is an art, a real art. Think about how ridiculous this scenario would be: You go to the art store and buy all of the supplies. You select the best brushes; you purchase oil paints in so many vibrant colors. You decide on a top quality canvas and have it stretched perfectly. Then you top it all off with a fabulous dark blue French beret and return to your rented studio and put up a sign that says: “Artist.” Are you really a professional painter? For that matter are you even a run-of-the-mill painter? You could be, only if you know what to do with the supplies that you purchased and if you actually use them. Becoming a painter is much more than the accumulation of the supplies and becoming a leader is more than amassing your skills. Art, and leadership, appears from what you do with what you already have.

Dr. Martin Luther King, Jr. once said…”There always has been difficulty in understanding and practicing real leadership. That’s because it is more of an art than a science.”

So, let’s now ask the first question again. Is it possible for anyone to become a leader? Yes, if they believe that it’s possible, acquire and express the skills of leadership. But, you may quickly argue, “What if I am not in a position of leadership?!” Answer: since when did the position make someone a leader? We have all observed many men and women who have the title, the office and the position, but they still are not great leaders. We can also list many people who do not have the position, the office or the authority, yet they are great leaders.

Think back to the elementary school playground. We do not know about your school, but at the schools we attended, there were not any designated leadership positions on the playground for the kids. Still, some kids took charge and led. Just for fun, visit the local playground during recess and observe the leadership that some of the students exert.

The business world is full of people who work in front-

line jobs and express great leadership; and many who hold the positions but do not lead. From our experience, we can assure you that we did not get to where we are by waiting on someone to give us a position of leadership in order to lead. We did and we do lead wherever we are.

So, no matter where you are, whether, you are a general manager or a clerk in the back office, you can lead. After all, all you have to remember is that leadership is the art or expression of all your skills. How do you do this?

Great question! Let’s go back to the painting example. Say, that you want to become a great painter. You buy the supplies, then what? Along with learning how to use the supplies, you need to remember that you have to just use them. The paint isn’t going to put itself on the canvas.

Start brushing!

To become a leader, you start where you are with what is in your sphere of influence, believe that you have the ability and identify the skills that you need to learn more about. Look above and select areas that you need to acquire more training or information about. Then do it. Act! Once you have learned about the skill, by reading or attending a seminar, start using it. You only lead by taking action.

Leadership is this simple – believe in yourself, understand the skill and express it.

Be the Best!

By Tommy Weir and Christine Crumrine, from the Beirut-

based CrumrineWeir, the global leadership experts. For more information, visit www.crumrineweir.com

 

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