Providing established brands at an affordable price has helped Toy Market Trading sell an estimated $14 million worth of toys in 2003. This represents 35% of the $40 million local toy market and it has China to thank. Cheaper operating costs have allowed the major international toy manufacturers to be more competitive and Toy Market Trading today imports 90% of its toys from the growing industrial superpower. “You get what you pay for in China,” said Wael Sinno, toy division manager at Toy Market Trading and son of Kamal Sinno, who founded the company in 1973. “All the main US toy brands like Chicco and Mattel have factories there.” The China factor, coupled with a slashing of import tariffs from 25% to 5%, has seen Toy Market Trading experience an 8% year-on-year growth for 2003, despite a wintry economic climate. Toy Market Trading – which distributes its products to 750 retailers, including BHV, Spinneys and Fahd Supermarket – employs a staff of 52 as well eight salesmen covering the Lebanese market and three drivers employed to distribute the goods.

Understandably, 40% to 45% of annual revenues come from Christmas and other holiday sales, but the summer season, from April to August, are also crucial selling months because of the sales of outdoor sports items, including bikes, skateboards and pool accessories, among others.

According to Sinno, an average parent or child will spend approximately $300 to $350 on toys per year, with an average of $10 to $15 doled out per toy. During Christmas, however, the average spent per toy increases to about $25 to $35. Toy Market Trading, however, aims to offer clients a wide variety of affordable toys of good quality by providing two to three brands of similar products in different price ranges. “We cater to all types of budgets, even if that means we compete against our own products,” explained Sinno.

Affordable playthings, like balls and water pistols, and high-end toys, like remote control cars and lifelike dolls, comprise a ratio of 60:40 of cheaper to more expensive toys. Some of Toy Market’s main brands, for example, like Blue Box and Playgo offer products that are as much as 30% cheaper than Fisher-Price toys, even though all three produce similar products for pre-schoolers. Some of the hot selling items this season are “everything funky and trendy,” said Sinno, like the Brats (not distributed by Toy Market Trading), which are the anti-Barbie doll. Toy trends usually last up to a maximum of one to two years, except for classic mainstays like Barbie and Disney toys, which have been successful for years. But coming up with a top seller in toys is becoming increasingly difficult in the computer and internet age, especially with eight- to 10-year olds. As a result, Toy Market Trading has shifted focus on pre-school items, targeting six-month- to five-year-olds. “We now have to be very selective,” said Sinno.

Some of their past successes included the pottery wheel, which sold 12,000 units at about $25 each. Other toy hits imported by the company included an ice-cream maker, and a talking pen made by educational toy brand Clementoni. In addition to their successes, Toy Market Trading has also suffered some misses.

“The pregnant doll was not very well received,” admitted Sinno, who explained that the doll, imported in 1993, came with another plastic baby inside the belly of the main ‘mother’ doll. “It was mainly opposed by religious people.”

Surprisingly, film merchandizing has also not done very well in Lebanon. “HARRY POTTER was a failure and HULK was a disaster,” said Sinno. Only very few films have succeeded in merchandizing in the country. “THE LION KING was a great success – we were selling lions for about three years [when the film was released]. ALADDIN was also a hit.”

Other than dealing with toys that flop, Toy Market Trading and the other importers also have to contend with illegal importers. Sinno admitted that his company loses up to $600,000 a year from smugglers who purchase cheap toys from Dubai – where there are no tariffs – and import them into the country through Syria. In fact, illegal traders are what Sinno consider the greatest competition to his company, and not the three other main importers (Middle East Market, Tamer Freres and Boch).

“Retailers are not going to buy from me at prices 10% higher than smuggled toys. They want the best price they can get and this is understandable,” said Sinno. Sinno explained that the lax laws concerning the toy industry extend further than implementing controls over smuggling. “Lebanon is an open chaotic market that is still underdeveloped with no safety regulations,” he said. As a result of Lebanon’s complete lack of regulations, said Sinno, the Syndicate of Toy Importers and Dealers – which was founded by his father – takes the initiative to not import toys that are unsafe. Most recently, the Syndicate decided to stop importing pellet guns and worked with the ministry of the interior to have them banned. “These guns are made China, but even the Chinese government has banned them,” said Sinno, adding that despite the Lebanese ban, illegal importers have made these dangerous toys available in the country.

Although the smuggling business is indeed lucrative, Sinno has no intention to stray from the straight and narrow. “We go by the book 100%,” he said. It is a policy that has kept them on top of their game, together with a new strategy they have adopted over the past five years to shift the focus on brand loyalty as opposed to just importing Chinese items. “We are now focusing on the brands,” said Sinno, who explained that such an approach, is one way to escape competition and to build loyalty among customers. The strategy seems to be working for the company, which currently enjoys its status as the leading toy importer in the country. As to the secret of their success, Sinno put it simply: “A class products for the most competitive prices.”

It started as the $40,000 pet project of a young entrepreneur in 1995 and ended up a trend that today seems to have been with us forever. The Ramadan tent, originally an Egyptian invention, was stunningly simple in that it offered a venue for people to meet and socialize after breaking the fast. Today, such is their popularity that practically every major hotel has jumped on the bandwagon, raking in as much as $550,000 for the month.

“I came to Lebanon in 1992 after living in Egypt and realized there was nothing to do in the evening for SOHOOR during Ramadan – there was only Barbar,” said Wassim Tabbara, who started the first Ramadan tent eight years ago at the age of 26.

While successfully participating in the organization of an Egyptian week in Lebanon with the Lebanese-Egyptian Association, of which he was a member, Tabbara had the idea of bringing an Egyptian-themed tent to Beirut. Patching together several boy scout tents provided by the Makassid Foundation, and spending about $20,000 on accessories from Egypt – including tablecloths, Egyptian NARGILEHS and an old Egyptian FURN – Tabbara set up shop in a family-owned plot of land by the LAU. With seating for 130 people, the tent was an instant success and packed to capacity every night. The menu offered the traditional SAHOOR fair, including MANAKESH and SAHLAB, and entertainment consisted of NARGILEHS, a TV set and music playing from a cassette deck. There was no cover charge and the average customer spent about $8 to $10. “I had a lot of costs, so I did not make huge profits,” admitted Tabbara, “it was my first experience in the food business.”

It was an experiment, however, that proved successful despite the paltry returns. “Everyone called for reservations, but I did not take any to be fair. So, by 7pm, people would send their drivers to wait in line till we opened at 8pm to reserve tables,” said Tabbara. “When we would tell people they couldn’t come in because we ran out of chairs, they would go home, bring a chair and come back. It was really funny.”

With such popularity, Tabbara had discovered an untapped market, but by the next year, in true Lebanese fashion, others wanted a piece of the action. The Coral Beach and the Escape club both opened tents in 1996. Both provided serious competition to Tabbara’s second tent, which by now had moved to the newly renovated BCD. The second tent saw profits increase fivefold, but by 1997, a sponsorship dispute and government red tape forced Tabbara to abandon his project. By now, Khaymat al Hanna had opened its doors and Tabbara’s previous alliance with Future TV was abruptly severed to solely advertise Bcharra Namour’s venture. After nine days of tough negotiating, Future reinstated its agreement with Tabbara, but as it was nearly two weeks into the month, and much of the financial momentum was already lost. “I was shocked [by Future’s actions],” said Tabbara. “And then the ministry of tourism said they would not give me a permit to open a tent [the next year] because all the hotels complained about the competition. In the end, I just gave up.”

Although Tabbara is no longer in the business for now –

“maybe I’ll come back with a KHAYMI next year” – he certainly paved the way for Ramadan tents today. There is no clearer legacy to his innovation than the splendid tents operated by Lebanon’s finest hotels.

“There is a good market for Ramadan tents, but unfortunately in Beirut, there is no high quality in terms of décor, entertainment and food. That’s why we focus on those parts,” said Simon Saade, food and beverage manager at the InterContinental Phoenicia. “We wanted to have a tent for the people to enjoy the luxury and ambiance of Ramadan.” Part of that luxurious ambiance includes extravagant decorations á la 1001 Nights, which one insider estimated at costing $200,000. Still, with a seating capacity of 640, a relatively full house every night of the month, and the average customer doling out $28 a night on a set menu (not including a NARGILEH), the expense seems worth it. Just across the street, however, is the more rustic Fishawi tent, run by the St. Georges Yacht Motor Club, which does not have a set menu. According to Michel Farhat, the operations manager at the St. Georges, the average client spent about $20 a night at the Egyptian-themed tent, which included a LL10,000 cover charge for the live entertainment.

“The Fishawi tent offered people something simple, an affordable way of capturing the idea of Ramadan,” Farhat explained. “The Phoenicia tent was more upscale.”

Operation costs for running a Ramadan tent vary according to type. At the Phoenicia, for example, about 80% of the tent staff consisted of fulltime employees in the food and beverage department at the hotel, which kept overhead down. “We used our own people to construct everything [in the tent] and we saved money by using our own people. It has proven a successful business experience,” said Saade. For establishments that do not have a hotel’s business to rely on, they are faced with a different situation. For the St. Georges, the Fishawi tent was an effective way of keeping its summertime staff (from it’s beach club) employed during the winter, which would otherwise be a dead season. Farhat estimated overhead costs at $50,000 to $60,000, with $30,000 spent on advertising and live entertainment. At the end of Ramadan, Farhat estimated the revenues of Fishawi at $133,000.

Although hotel and resort ventures have proven successful –Saade admitted that the Phoenicia tent has been packed since it’s opening in 2001 and Farhat said that 2003 profits from Fishawi increased by 10% from 2002 – independents like Tabbara were not so lucky. “I spent $300,000 on my third tent,” said Tabbara, “and I lost 33% of my profits [because of the Future TV deal fallout].” For the first nine days of the holy month, out of the 1,500 seats available, only about 200 to 300 were filled each night – which was catastrophic considering the $80,000 monthly rental fee of the BCD lot. Tabbara also faced backlash from religious clerics, who associated him with tents that featured dancing, although he did not permit such activity at his establishment. “I was very strict about dancing because I knew people would talk about it. But the Mufti sent a representative to talk to me because they [the clergy] did not know any other tent owners.”

Respecting religious customs is very important to most established tents. Almost none serve alcohol or feature racy entertainers like belly dancers. “This is something we can’t joke about; we respect tradition,” said Farhat. It is a notion firmly upheld by the Phoenicia, said Saade. “We respect this month and keep it in high value.”

As for the man who started it all, what is his opinion about the Ramadan tents of today? “I liked the Phoenicia tent; it was very nice,” said Tabbara. “But the problem with tents today is the loud music – you can’t talk to anybody. It would be better if they just lowered the volume.”

Saqi Books, an independent publishing company run by two Lebanese, is making waves in international markets and, perhaps even more importantly, helping to counter misunderstandings between the Arab and Western worlds.

The ethos of the company is radical, progressive and international. “We believe in a cultural dialogue between the Arab and Western worlds, never more needed since the events of September 11,” said managing director Andre Gaspard, who, with his partner Mai Ghoussoub, founded the company as a bookshop in 1979 and now runs the company from offices in a cosmopolitan area of West London. Today, the company has an annual turnover of $3 million and publishes 27 English and 39 Arabic titles a year.

“We don’t think in terms of Arab or Western blocs and we don’t see all Arabs as fanatics and all Americans as imperialists – that’s crude and simplistic. We try to provide an outlet for a variety of individual voices.”

Gaspard cites the example of ADAMA, an autobiographical novel by Saudi writer Turki al-Hamad, which is about a young man growing up in Riyadh in the 1960s, and THE CRUSADES THROUGH ARAB EYES, by Amin Maalouf, which went a long way towards setting the crusades, one of the most distorted episodes in history, in a true light. “This is the sort of book we like to publish,” he said. The book still sells over 5,000 copies annually and is a standard text in schools and colleges.

A major coup was the publication in November 2001 of the first study of 9/11 called, TWO HOURS THAT SHOOK THE WORLD, by Fred Halliday, a Middle East specialist at the London School of Economics. The company began with the bookshop. Gaspard, who studied law at the University of St Joseph, and his friend Ghoussoub who studied math at the American University of Beirut, left the civil war in Lebanon in 1976 and moved to Paris. They found temporary jobs – Gaspard in a bank and Ghoussoub as a journalist with an Arab language weekly newspaper. They were both great book lovers and avid readers. One weekend Ghoussoub, on a visit to London, noticed that the city had no Arab language bookshops although there were three in Paris.

“She came back to Paris and suggested we open a bookshop in London and, being young and crazy, I agreed straight away. After we had opened, I met a prominent Arab bookseller who told me he had been thinking of opening a bookshop in London at the same time. He had a feasibility study done which predicted he would lose £80,000 a year and he decided to drop the idea. Thank heavens I never carried out a feasibility study!”

Before opening in 1979, Gaspard and Ghoussoub drew up a catalogue of 1,600 titles. “We printed 1,000 catalogues and ran out of them within a few months. We didn’t plan it but it proved to be the best way to launch a company specializing in mail order and library supply.” They also built up an address list of universities and colleges with Arabic departments in Europe and America. This mailing list, which began with 80 names and now has over 10,000, is the basis of the core business – mail order and worldwide library supply. This now accounts for some 70% of the shop’s annual sales of about $1 million. Mail order is increasingly overtaking “off the street” sales, as fewer Arabs visit London and more bookshops sell books about the Middle East.

He runs a tight ship. The bookshop employs seven people and is managed by Ghoussoub and Gaspard’s wife Salwa. At any given time the shop stocks some 40,000 titles evenly divided between Arabic and English books and specializes in titles with a long shelf life which often become standard academic texts.

“For a bookshop turnover in time is the key to profitability. If your allocated capital for buying books is, for example, $100,000, then the secret to financial success is how many times you can recoup and reinvest that $100,000 during the year. The average is three times, we achieve three and a half times, and the big chain bookshops aim for five times,” said Gaspard.

“Because of this huge push for profitability by the new supermarket bookshops there is a constant demand for new books, and huge numbers are being produced, the traditional bookshop atmosphere is disappearing, and it’s becoming difficult for the independent bookshop to survive.” But Saqi survives and prospers. The bookshop is “the mother” of the other two departments. The English language publishing department opened in London in 1984 and after “bumpy” progress over the years, picked up dramatically. It has increased sales by $200,000 for each of the last two years and now achieves annual sales of $1 million. All three departments now contribute more or less equally to the company’s present overall annual sales.

“I’m sorry to say that the tragedy of September 11 helped our English language publishing business. Sales increased threefold because many of our books were relevant to the crisis. Our Arabic publishing suffered at first but recovered, and the bookshop, which is a steady, ongoing business, was not affected.”

The English department is a lean and fit operation with an in-house staff of four people. Much of the nitty gritty pre-production work in London is handled by a team of some twelve freelance copy editors, proofreaders, indexers and designers. This system of outsourcing is especially effective in the production of a wide variety of specialized books. Pre-printing work accounts for about one-third, and printing and binding for about two-thirds of costs.

A publisher’s key partner is the representative who sells his books to bookshops, and the distributor who stocks his books in a warehouse, delivers orders to bookshops, collects sales revenues and, after deducting fees and expenses, sends the publisher his money.

“If my representative goes bust I don’t lose much, but if my distributor goes bust, we can suffer badly. The distributor is your money source, and if he runs into trouble, the publisher is the first to suffer – especially in England where in a case of bankruptcy other creditors take precedence over publishers,” explained Gaspard. “Over the last 16 years, four of our distributors have gone into receivership. The last time we lost six month’s sales and suffered a severe disruption of business. With nine books going through the printers we had to rent a temporary warehouse for two months until we found a new distributor and it took us two years to recover from the crisis. But each time we were able to recover because we do not borrow money from banks – that is our golden rule. Publishing and distributing books is unpredictable and risky.” When the company opened an office in Hamra Beirut in 1992, it was initially managed from London and everybody told Gaspard it would fail within a year. “We started slowly and cautiously but we picked up better than most of our competitors after the first Gulf war and our growth has been the fastest ever achieved by a Middle Eastern publisher.”

The office now employs a fulltime staff of 10 and a team of eight freelancers, has its own editorial board, and is becoming increasingly independent of London. It publishes over 50 new titles a year as well as reprints, achieves annual sales of about $1 million, and is the leading independent publisher in the region. It may also generate the company’s strongest growth in the future.

“Our list consists of some 300 writers from Morocco to Iran and everywhere in between. We try to find writers from a broader social spectrum, including women exploring new cultural and social issues, and as always we are keen on ‘new voices.’ We always treat writers fairly and this makes a huge difference in the Middle East. They recommend you to other writers and you are on a roll.”

In London, the company acts as a publisher but in Beirut it not only publishes books, it also does its own representation, distribution and wholesaling. Operations cannot be streamlined by giving exclusivity to one distributor as in Europe and America, and although the company has 40 distributors in the Arab world, some of them are unreliable and it does some distribution itself. The company stores its books in its own warehouse, employs two fulltime representatives constantly visiting bookshops throughout the region, and attends all the main book fairs. It has built its own distribution network and delivers directly to bookshops in all the major Arab cities. So where do Saqi Books go from here?

“We’ll do more of the same. We’ve always worked within our means and invested only from profits and never from borrowing. That makes it difficult to dream up master plans or long term goals,” Gaspard said. “We could open bookshop branches but we’re not going to jump into things. We don’t take easily to the idea of expanding with somebody else’s money and on their terms. We started small, we’ve grown gradually, and we like it that way.”

The violence still plaguing Baghdad has done little to deter a brave band of entrepreneurs – many of whom are Lebanese – to march into the capital and snap up lucrative post-war contracts with the coalition forces. Free trade and privatization, forbidden under Saddam Hussein, has plenty of opportunists biting.

“Before the war there was no chance for foreigners to invest. It was a scary regime. Who would have dared come here and try?” said Lebanese businessman George Chahine, who has a contract to maintain three US military bases with Kellogg Brown & Root (KBR), a subsidiary of Halliburton.

With $18.6 billion pledged by the American government for post-war reconstruction next year, alongside over $13 billion in loans and donations from donor countries secured recently in Madrid, the contracts – worth anywhere between $100,000 to $30 million – have overwhelming appeal. “As long as I’m happy with the contract, I don’t mind doing business in Angola or Afghanistan,” said Michel, who comes from Beirut and has a contract with KBR to supply mobile homes to the American camp at Baghdad International Airport.

Yet he was not so blasé about the dangers involved. American military convoys are often targeted by explosive devices on the road to the airport, which also comes under regular mortar attack. “The biggest risk is getting to the camp and back on the road. Also being at the airport, if the camp is shelled who knows what’s going to happen?” he said.

Despite these risks, Michel considers the contract “worth it,” although he, like most of the other contractors in Iraq has no insurance. “What insurance?” he said incredulously.

“You can get insurance but I don’t think it’s worth much because this is war. Who’s going to cover FORCE MAJEURE?”

While one upside to this is no taxes, the lack of insurance for consignments in a war zone can be costly. Chahine is constantly losing freight on the road from Kuwait to Baghdad, where his goods, accompanied by military vehicles, are inevitably targeted by looters. When a truck comes under fire, the driver detaches his load and keeps on driving.

“If I have a valuable consignment in transit, I’m always worried about it until it reaches its location because it’s my money after all,” he said.

While the security situation across Iraq is far from ideal, Yousif Abdul-Rahman, the senior advisor to the Iraqi trade minister is naturally bullish, predicting that business opportunities will abound when the situation stabilizes.

“When security prevails we expect there will be big opportunities in business in Iraq, whether in construction or in supplying commodities. The sooner companies get here, the better,” he said.

This optimism is underpinned by a burgeoning form of economic liberalization that has taken hold under the neo-liberal policies of the Coalition Provisional Authority (CPA).

“A new investment law will be issued to encourage foreigners to come and invest in Iraq,” said Abdul-Rahman of the new law currently being drafted and soon to be issued by the Iraqi Ruling Council.

Previously, state-owned businesses, from factories to the infamous Al-Rashid hotel in Baghdad – are also under review for privatization. “Each ministry is negotiating which projects need to be privatized and which need to be controlled by the government,” said Abdul-Rahman, touting the example of previously state-owned shopping malls. “We plan that in the future, these shopping centers will be rented to the private sector, renovated and redeveloped [to resemble] major chains, such as Safeways. The private sector can deal better than the government in certain areas.”

Nonetheless Abdul-Rahman acknowledged that privatization must happen slowly to ease the social fallout likely to occur if more Iraqi workers lose their jobs. This is nowhere more sensitive than in the manufacturing sector, where some 200 state-owned companies formed the largest employers outside central government – with more than 500,000 workers on their payrolls. “The unemployment rate exceeds 60%. If we speed up privatization this will have a negative impact,” he said.

With privatization is a key economic goal for the new Iraqi government, and the main focus of the trade ministry is free trade, said Abdul-Rahman. This is a sharp shift for a ministry whose former function was to control the rationing system of the UN oil-for-food-program.

“The outlook for the government is free trade, so there will be a very big support for the private sector to participate in the economy of Iraq,” said Abdul-Rahman, highlighting the ease of registration for foreign companies.

Free trade is nowhere more evident than in Iraq today. When the war ended, the CPA froze customs duties on goods entering Iraq, heralding an unprecedented opportunity for trade with neighboring countries. The streets of once-sanctions ravaged Baghdad are flooded with cheap electrical products from Turkey and food from Iran, distributed through Kurdistan. A fleet of used-cars has also made its way into Iraq through the Jordanian port of Aqaba.

This will change on January 1, 2004, when a reconstruction levy of 5% will be imposed on the total taxable customs value of all goods imported into Iraq, besides medicines, food, clothing and humanitarian goods.

While Jordanians have profited from trade with Iraq, Chahine sees the Kurds as the “biggest winners” of the post-war free market.

“The private sector is being controlled mainly by the Kurds, due to the fact that Northern Iraq wasn’t under any embargo and the Kurds, because of their territorial location on the Turkish and Iranian border, have experience with trading transactions and have already established their contracts with manufacturers abroad,” he said. “They were the first to flood the market with satellite dishes, a day after the liberation.” While most trade is coming through the ports of Aqaba, Tartoos and Um Qasr, some businessmen are choosing to ship their consignments through Beirut to avoid delays. “We have to depend on Beirut, because Aqaba is congested and there is a delay in delivering the consignments in Kuwait,” said Chahine who has a consignment soon to be delivered through Beirut.

While years of sanctions would suggest that Iraqis have poor purchasing power to take advantage of new products, Chahine believes otherwise. “Iraqis are buying. They were thirsty for everything,” he said of the country with a population of over 24 million.

Khalid Al-Helou, an Iraqi businessman agreed: “Under sanctions there was nothing to spend your money on. We couldn’t travel or buy new things, so we just saved it.”

Landlords are also cashing in. Since the end of the war, property prices have risen by 300%. “They are asking $2,000 per square meter for prime locations along the Tigris River,” said Chahine, obviously unimpressed at having to pay $20,000 to rent a home. “The price of land is grossly exaggerated. Why? The Iraqis believe that the price they set now is the one they will realize in the future.”

While trade and real estate present long-term opportunities in Iraq, the best money to be made right now is through American contracts, said Chahine. He said Lebanese businessmen have a clear advantage in doing business in Iraq. “The advantage the Lebanese have is that they are multi-lingual. It makes it easier for them to communicate with the locals and the internationals, and coordinate with the local market and abroad,” he said.

“I also feel at home here,” said Michel, of his experience of doing business in a war zone.

Yet despite the many business opportunities, the dangers of doing business in Iraq cannot be underestimated. Chahine drives a beat-up, dirty Toyota Corolla through the streets of Baghdad to avoid standing out, employs an armed gunman to guard his house – and admits he feels anything but secure. “But no risk, no money,” he smiled, noting the importance of gaining a foothold in Iraq now.

“To be here at this time, to become familiar with the market is very important,” he said. “This is just the beginning.”