Last month, Condoleezza Rice, Bush’s national security advisor, compared the present post-Iraq war situation in the Middle East to post World War II Europe. “America,” wrote Rice in her August 7 editorial published in the Washington Post, “committed itself to the long-term transformation of Europe.” She goes on to say: “…our policymakers set out to work for a Europe where another war was unthinkable.”

Her views – and quite naturally one would assume those of her boss – on the administration’s guidelines upon which to build peace and democracy in the Middle East, contain the thesis of the Bush administration’s manifesto regarding the future of the Middle East. It will most likely not work.

Rice advocates working with those in the Middle East who “seek progress toward greater democracy, tolerance, prosperity and freedom,” and advocates copying the European experiment and applying it to the Middle East.

While indeed a noble concept, Bush’s plan for spoon-feeding democracy and prosperity to the Middle East remains, nevertheless, one with great many shortfalls. The Bush administration may well find many similarities in post-WWII Europe and today’s Levant, but in truth, it’s the dissimilarities that abound.

Undeniably, the United States played an important role in guaranteeing the stability, and particularly the security, of Western Europe all throughout the long years of the Cold War. But one must not ignore the fact that a stable Europe would have never been a possibility without, first and foremost, the strong desire of the Europeans themselves to place conflict behind them. After two devastating world wars and economic disasters that ravaged the continent, the Europeans finally realized it was time to look ahead.

“In an inherently unstable world, only the primacy of law and stable institutions can guarantee co-operation among nations and hence peace,” declared Jacques Delors, a former European Commissioner and finance minister in Francois Mitterrand’s first government in 1981, during a speech delivered in 1997 on the history of building a unified Europe.

Finding leaders who sought progress, democracy and freedom in Europe in 1945 was not difficult. Alas, that is hardly the case in most of the Middle East today. Granted, there are many people of goodwill across the region with a strong desire for peace and who wish to see true democracy implemented. But how many of those in a position of leadership in the Arab world would willingly allow free elections without fear of losing their grip on power?

“Muslim leaders are failing, first, to provide justice (adl) and, second, to create the conditions for the existence of compassion and balance (ihsan) or knowledge (ilm) in their societies,” wrote Akbar S. Ahmed, the Ibn Khaldun Chair of Islamic Studies at the American University in Washington, DC, in his book, Islam Under Siege. The US had hoped that the fall of Saddam would accentuate the drive for democracy. Instead, it appears to have crystallized anti-American feelings across the region. Jihadi Islamist fundamentalists are reported heading to Iraq for a chance to fight American soldiers. Two recent attacks against the Jordanian diplomatic mission and the UN headquarters in Baghdad, which killed representative Sergio Vieira de Mello and at least 20 others, reinforce the belief that the US is far from controlling the situation on the ground.

Following the capitulation of Nazi Germany in 1945, the old continent was ripe for a new start. Realization set in across Europe that war was not about to advance them, but rather regress socio-economic reforms. Western Europe came together in the face of a new threat – communism. “The memory of the failures of the inter-war years was still in the minds of everyone,” said Delors.

In Iraq, however, the enemy – extremist violence – comes from within. Additionally, the reconstruction of Germany was carried out mostly by local contractors, whereas in Iraq, the lucrative business deals are mostly being granted to US corporations.

Leaders such as Winston Churchill, who as early as September 1946 proposed establishing a United States of Europe, and West Germany’s Chancellor Konrad Adenauer emerged to rebuild the continent. But, perhaps, more importantly, visionaries such as Jean Monet and Robert Schuman – the instigators of a united Europe and the fathers of the modern-day European Community – were able to look into the future and envision a united Europe. “That is why the initiators of the community model, which gradually came into being with the treaties of Paris (1950) and Rome (1957) made a point of thinking creatively,” said Delors. “There was a new element at work this time around in that the idea was championed by statesmen. In other words, the ideal of transforming Europe had emerged out of the intellectual arena, as a political necessity of the utmost urgency,” said Delors.

That, regrettably, is far from being the case in the present-day Middle East, a region that until now has only spawned more iron-fisted despots or violent revolutions, than Adenauers or Schumans. Additionally, post-WWII Europe had managed to place aside its past differences, building together in unity. The ongoing Arab-Israeli dispute – seen by many as the nucleus of all continued unsettlement in the area – does not allow for a peaceful building process, yet. Neither does the education system in place in some Arab states, such as the Wahhabi-funded madrassas that fail to establish an educated elite needed to construct a brighter future for the region.

The first logical step, therefore, would be to address the leitmotif of Arab discontent and excuse for continued war footing that persists in some Arab states. It is important to point out that once the Arab-Israeli dispute is peacefully resolved, and the reason for maintaining a war stance dissipated, it will only be a matter of time before the urge for greater democratic reforms begins to be heard.

Which is what Bush hopes the “road map” will achieve by 2005. By then, the plan calls for a Palestinian and Jewish state living side-by-side in peace. It is also what they hoped jump-starting Iraqi democracy would accomplish. But don’t hold your breath. Road bumps such as the massive bus bomb that killed no less than 20 people in Jerusalem in mid-August and wounded another 100 are not about to make things easier for the peace process.

Rice talks about America’s long-term commitment to transform the region, but the Arabs are still far from convinced of two things that remain paramount before they can accept America as a full-fledged partner in the peace-building process. America and Western Europe – despite their differences – saw eye-to-eye on most major issues relating to the defense of the continent in the face of Soviet expansionism. Such is not the case in the Middle East, where the Arabs and the US greatly diverge on the Palestine/Israel issue.

Additionally, America must clearly demonstrate that it is indeed committed and here to stay (at least politically), as was the case in Europe. When the end of hostilities was announced on May 8th, 1945, aggression against US troops ceased. In contrast, in Iraq, over 140 US soldiers have lost their lives since Bush declared the end of major combat operations on May 1st. While no exact figures are available, some estimates place the number of Iraqis killed during the same period in the thousands. Many will argue that the situation for the average Iraqi today is much worse than it was before the war.

US troops were greeted throughout Europe as liberators. That is far from being the case in Iraq today, where anti-American sentiment appears to be on the increase and the security situation getting worse.Iraq, sitting on the world’s second-largest oil reserves, is only producing 750,000 barrels of oil per day, down from a pre-war mark that hovered around a million bpd. And that figure is down from 900,000 in June due to continued power cuts and acts of sabotage. As a result, Iraq is forced to import fuel for domestic consumption. Iraqis consume about 15 million liters (3.9 million gallons) of gasoline a day. The country can barely meet that need with domestic production. They use about 17 million liters of diesel, mostly for trucks. Currently, Iraqi refineries are producing only half that amount, according to U.S. military estimates. Ironically, oil is being imported from Kuwait and other countries to help cover the gap. Meanwhile, Iraqis blame the Americans for their ills. The hearts and minds of the Arab world the US had set out to conquer are being lost.

Yes, quite possibly, Bush, in his heart of hearts, is devoted to pursuing the “road map” to peace. Quite possibly, he believes that he can keep pushing the reluctant participants, prodding some here, coaxing others there, or even threatening some when needed. But, and here is the breaker, how committed would his successor be? Let’s assume the following scenario, just for the sake of argument. The situation in Iraq continues as it is for the next few years with a low-grade war of attrition being waged against US troops, who are forced to remain there. One American killed today, two more wounded tomorrow, another one or two killed the following day. Over two or three years, the casualties begin to add up and the electorate back home starts to get nervous. Not to mention the economic impact the continued occupation weighs on the American economy. (See Executive, August 2003)

Bush père found himself in a quite similar situation at the close of the first Gulf War in 1991. He had won a quick victory over Saddam Hussein, liberated Kuwait, freed the oil wells, defeated the Iraqi military and, for a short while, appeared to be a hero. But the domestic economic situation was suffering and that is what lost him the election to Bill Clinton. Bush junior could well find himself facing a similar conundrum.

Bush, meanwhile, remains committed. But if he looses the election in 2004 and his successor, possibly under electorate pressure, decides to bring the boys home and pull out of Iraq. Then what? American foreign policy has been known to suffer from severe attention deficit disorder in the past. Look at Lebanon; look at Somalia.

Secondly, the United States’ lack of objectivity in the Arab-Israeli conflict is another mark against it in trying to evenly mediate with both sides. There was no thorny issue comparable to the Palestinian-Israel one in post WWII Europe, and this made it easier for the US to be accepted as an equal partner in shaping the continent. Neither was there an issue of religion, which exists in the present context. Most of the Arab world continues to view the US war in Iraq as one of occupation and not as a war of liberation. Not to mention those who see it as a clash of civilization, as pointed out by Samuel Huntington.

This is where Europe (and the United Nations) can play a greater role in the peace building process. Europe is seen by Arabs as being friendlier to their cause, and naturally, they tend to trust Europeans more than they do the US. Rice, in her exposé, stresses the importance of including Europe and all free nations, “working in full partnership with those in the region who share our belief in the power of human freedom.”

But will the US accept to take a back seat now in the rebuilding of Iraq and allow Europe – including France and Germany, who opposed the war and were labeled “old Europe” by Donald Rumsfeld – to become engaged in Iraq? The answer to Bush’s manifesto for peace in the Middle East may lie in the answer to that question. Much as the US may dislike the idea, international participation may be the key to success.

Bashir Bassatne, the 30-year-old co-owner of Mandaloun, Asia and the soon-to-be-relaunched Rai, three of the biggest nightclubs on the Beirut’s nightlife circuit, is in a reflective mood. “I don’t think any clubs really hit their targets this summer. A lot of newcomers have entered the market with no experience in the club scene,” he said. “Some made money and some are going to lose a lot of money. It’s not going to last. It’s just a trend. The club business will go back to the people who know how to run it.”Over the last few years, Beirut’s flourishing but fickle nightclub sector has indeed become a magnet for young, wealthy, often foreign-educated, Lebanese wanting to cash in on an industry high on glamour and where the returns appear tantalizingly quick. Often using family money, these playboys-turned-club owners have pumped as much as $1 million each into a sector worth an estimated $36 million annually. “The money is easier to come by if you go to your family, or the family underwrites the loan,” said one clubber, who is friends with many of the sector’s new brat pack. And let’s face it, few banks will endorse loans in such an unpredictable sector. Unpredictable is a fair appraisal.

Recently, Beirut’s nightlife has been plagued by antiquated by-laws, bribery, reports of increased drug use and, yes, even a conspiracy theory that the government wants to shut them all down. But is Bassatne’s prediction that the bubble will burst reasoned analysis or merely sour grapes? As the nightclub/bar market mushrooms, the heady days of huge takings by a small clique of clubs are over. Bassatne, whose partners include his brothers and five university friends, has seen his profits fall by 50% in the last year alone. Six years ago, in a relatively virgin sector, things were different. “Within a year, I had recouped my investment in Rai and a 30% profit,” he said. Mandaloun, Taj and Asia may currently rule the night, but with over 100 other nightspots plying their trade, the competition is cutthroat. “Whenever one comes up, another must die,” said Bassatne.It is not an easy game, especially in a market that is violently seasonal. Christmas, Adha and summer provide enough revellers to go around, but the remaining eight months of the year offer slim picking for a saturated market. Clubs close at the blink of an eye. “It’s a very tough market,” said Ramzi Adada, a partner of Bassatne, who also has a stake in Zinc in Ashrafieh and Japs in Faraya. The nightclub explosion has, according to one owner, “broken the dynamic” of the established institutions, which have seen revenues diverted as clubbers try out the new places. “It’s fierce and uncontrolled competition,” he said, “and most of them [clubs] are losing.”Another owner, a Paris-educated banker, whose parents stumped up his share of investment, compared the current stampede to invest in Beirut nightclubs to the NASDAQ in early 2000, when anyone with a bit of money and no experience, invested and got burned. “Today in Lebanon, anyone with cash is trying to open either a nightclub or a restaurant,” he said. “It’s not a healthy situation at all.” Fadi Saba, who owns two thirds of Zinc in Ashrafieh, believes it is all down to the perceived revenues. “They have high expectations,” he said. “They think they can make it in four months. But it’s not a game.” Given the unreasonable expectations, petulance is never far from the surface. Saba explains that disputes often arise when the profits fail to materialize. “Investors will accuse their managers of theft and it’s downhill from there on.”The gold rush has however, forced a change in investment strategy. Aware of how quickly a club can fizzle and die, today’s investors are now spreading their risk across multiple venues. “When we only had three or four clubs in town, obviously the risk was less,” said one club owner. “Now no one is going to be crazy enough to put all their eggs in one basket.”“It used to be easy to convince one person to invest $300,000,” recalls 32-year-old Saba. “Now the maximum someone will come in for is around $70,000.”“A new nightclub can have as many as 15 partners, whereas before it was one or two,” said Bassatne, whose personal “spread” involves a stake in the $800,000 Mandaloun, and a joint $325,000 and $800,000 in Rai and Asia, respectively. Another $600,000 to $700,000 will be pumped into the new Rai (Bassatne refutes allegations that the original Rai lost it’s competitive edge, blaming the closure on Rue Monot’s agonizing roadworks), which he admitted will have to wait till the market eventually reverts to its regular rhythm and the fly-by-nights have been spat out. Nonetheless, he has also had to diversify. His new ventures include restaurants and a sandwich bar on Bliss Street.The multiple-investor strategy does however, help market the venues, with each investor “working” his circle of friends and acquaintances to ensure patronage. Bassatne spends much of his time securing the favor of the 500-strong local party animals as well as the sizable, and often wealthy, Lebanese expatriates and Gulf Arabs, who flock to Beirut during the holiday season. It also helps spread the costs of building and renovation, which can run over the $1 million dollar mark, as clubs become bigger and flashier.Greater competition has forced nightclub owners to exploit the Lebanese penchant for conspicuous consumption. “People want to show off,” said Ramzi Adada, with a twinkle in his eye “and we want to help them show off.” Adada and his fellow Rai partners, claim to have introduced the “champagne celebration,” a fanfare of sparklers and a bevy of beauties that accompanied every bottle of champagne purchased. In true Lebanese fashion, another top club got hold of the idea and wrote it large (literally). Today, anyone buying $35,000 worth of Salmanazars (equivalent to 12 regular sized bottles) of champagne is immortalized on the club’s “Wall of Fame” or, as local clubbers call it, liste des cons (list of idiots). So far the wall boasts around 15 names. Ramzi Adada recalled how one Lebanese customer spent $22,000 in two hours in Rai. However, such incidents are rare. The image of wealthy Arabs flocking to Beirut for a marathon session of beaches, babes and booze with checkbook cocked is a myth, said Bassatne’s brother Raed. “We’re not getting the big, big spenders and when they come here, they don’t want to really overdo it because we are such a small society.”Other clubs use more time-honored methods to draw in the crowds, relying on what are know within the industry as mafateeh or “keys,” who provide a small but potent stable of beautiful women, who mingle, cajole, look good and even get up and dance on the bar if there is a lull in the evening. Although their existence is never admitted, their clout is considerable. One thriving nightspot shut down (officially for redecoration) after a “misunderstanding” with the “keys.”“These girls work the clubs that have a reputation for hosting high-maintenance ladies,” said one club owner. “A smile here and a compliment there is sometimes all it takes to make even the ugliest guy feel special, and when that happens, he spends and he comes back. Their handlers aren’t so much pimps as they are our partners.” But it is not just supply, demand and a bit of rented cleavage that dictates the market. Some investors have lost money because of antiquated laws and run-ins with the local authorities. Late last year, 28-year-old Marwan Kazan (he of the once popular FUBAR at Sodeco Square) and seven friends, invested $400,000 in Nabab opposite St. Joseph’s Church in the Monot district. Invoking a law that stipulates a nightclub must be a certain distance from a place of worship, the authorities shut it down two months later, after the priests complained of drunkenness, drug taking and indecent behavior. Kazan, a veteran by local standards, has bounced back and now (along with five other investors) has 20% in the $450,000 Taj, which replaced FUBAR and a 10% percent stake in the $550,000 Moorea beach club (12 investors). Moorea, explains Kazan, is modeled on La Voile Rouge in St Tropez. “It’s practically a night-club during the day,” he said, adding that he plans to open FUBAR II, which he expects to cost around $1 million. He too bemoans the rise of the fly-by-night club culture. “Suddenly anyone with $50,000 in his pocket started opening pubs,” he laments. “It hurt us.”Drugs have also taken their toll. Ecstasy may give a designer high, but it’s a downer for bar takings. “It affects our sales,” said Bassatne. “Instead of coming and having a bottle of vodka, this new generation just pop a pill and drink water all night.” And although not rampant, the proud Lebanese habit of kickbacks has also eaten into the bottom line, but the bosses are philosophical. “You have to bribe here and there,” admits Adada. “I wouldn’t call it a bribe,” said Kazan. “You become friends with these people and you offer them a bottle or something.” Fadi Saba speaks of the need to offer, “a good dinner and a bottle of whisky from time to time.”There is however a flip side and it pays to be well connected in a country rife with red tape. “Everyone has connections,” said Kazan. Asked if he used his to deal with problems in his clubs, “Absolutely. Who doesn’t?”Despite the unregulated market, Kazan believes that with the right degree of public sector assistance the sector could be a gold mine (he said that in Nabab’s short life, he and his partners were able to recoup 25% of the initial investment). “The government should see that and try to help us out,” he said, criticizing the overly aggressive and threatening manner in which some clubs, including BO18 and Acid, were raided by security forces searching for drugs. The sector was flummoxed by such high profile clampdowns and their impact on the tourist trade. It is not surprising therefore that many saw the raids as part of a cynical plot to smear clubland with a reputation of drugs and debauchery and in doing so, boost the cachet of Maarad. “It’s their duty to come in,” said Kazan. “How they come in is the problem. It’s not exactly attractive for the tourist. He might think ten times before coming back.” And “coming back” is what it’s all about.
 

Information and Communications Technology (ICT) stands undisputed as the sector with the greatest importance for any country seeking to position itself at the forefront of the “knowledge” economy. Banking and education are key, but manufacturing automation, health care, hospitality, logistics, media and all other advanced services industries depend on ICT. Modern government and public sector administration are increasingly being defined by ICT. The sector’s eminence in national economies has been thrust into the limelight through fabled cases such as Ireland’s 1990s record rise from European economic backwater to high-growth technology and services hub.

To Lebanon, Ireland’s rise was an oft-quoted example in discussions on the economic and social potential of ICT because the population and labor market in both countries were similar. Subsequent convergent phases of global new economy optimism and Lebanon’s own developmental hopes in the mid to late 90s, led the country and its business elite to revel in the anticipation of becoming a regional ICT hub. Today, while still aspiring to become a center of technology for the Middle East, Lebanon is in some respects even further away from realizing its dream. In other respects, the country has been defending its potential for leadership in Middle Eastern ICT but has yet to claim the ground of real growth.

Luckily, the ICT industry has an immense number of nuances and niches and thus being a center for ICT can mean many things. “Every country wants to be an ICT hub,” said Charbel Fakhoury, Eastern Mediterranean manager for international software manufacturer Microsoft. “Lebanon went through some steps and didn’t take others. I think a hub is an evolution. It doesn’t happen over night.”

From hardware to software to services, telecommunications, mobile data networks, computer training, web design, content provision, e-commerce and online banking, the ICT sector indeed has far too many facets to see a single country take the region’s leadership role in every respect, or even to allow for a wholesale review of the industry in one country.

To quote a case in point, several companies over the past two years have had to exit Lebanon’s computer assembly and retail business or severely reduce the number of outlets, while other local assemblers and their main chip supplier, Intel, confirmed an increase in assembly and sales of PCs. “The Lebanese assembly market has been growing steadily over the past few years,” said Maan Ahmadie, regional channel manager for Intel, the world’s leading chip manufacturer. “We have recorded around 20% to 30% growth in the past three years, and we expect to see this trend continue.”

However, data on the exact size of the local hardware market tends to be inconclusive. As an expert from the International Telecommunication Union (ITU) observed at a Beirut conference earlier this year, no Arab country has yet carried out a detailed ICT survey. “It is difficult to put a dollar value as such on the Lebanese assembly market,” Ahmadie conceded, “but, in terms of channel members, we have around 300 resellers, working in different market sectors, from PC assembly for homes and small offices to servers and mobile computers.”

Estimates on hardware penetration vary. One local company, Computer Echo, claims it assembles some 40,000 PCs annually, supplying about one third of the market. “Business has been growing very fast over the past four years,” said Computer Echo marketing manager Tony Abboud, reporting an annual sales growth of about 20%. Other local assemblers and resellers estimated the figure of personal computers entering the market each year to be slightly lower, at around 60,000. A matter of general agreement is that locally assembled computers hold an 80% share of the market, with units going mostly to home users and small businesses. Larger companies and institutions are said to rely more strongly on imported, brand name equipment that account for the remaining 20%.

Assembly of computers from foreign-made components is a viable business. However, neither profit margins nor local value-added are particularly high, and exports are not necessarily an outstanding perspective. Computer Echo distributes its assembled PCs through large and small local resellers, with only sporadic exports, mostly to West Africa. Regional exports are not on Abboud’s mind, because satisfying local demand is consuming all his time. And although Computer Echo benefits from Intel rebate and promotion programs, assemblers in Jordan and Egypt receive the same advantages, he said. “I don’t see what kind of a market I would have in Jordan.”

For Lebanese software companies, however, exports are a question of sustainable existence. “We will be a really strong industry only if we are exporting,” said Fares Kobeissy, president of the Association of the Lebanese Software Industry. “Our overall strategic objective is to open markets and create a highly exportable software industry,” agreed Ali Shamseddine, vice president of the organization. Like Kobeissy, he is founder and CEO of a Lebanese software company. According to figures from a joint 2003 research paper by Lebanon’s Office of the Minister of State for Administrative Reform (OMSAR) and the UNDP Lebanon office, Lebanon’s ICT industry consists of about 500 computer-related companies, of which “about 200 small and medium sized software companies employ more than 3,000 people, and can play a major role in the development of an information-based national economy.”

The size of the software industry also is a figure of some dispute, though. To Kobeissy and Shamseddine, the realm of viable software development companies extends to dozens rather than hundreds, with hundreds rather than thousands of employees. When their new-founded association approached potential members, they contacted somewhere over 50 companies and succeeded in convincing 15 to join their ranks. The software section of Lebanon’s largest ICT industry association, the Professional Computer Association (PCA), groups less than 10 companies out of roughly 70 PCA member firms. Notable as the size problem is in assessing ICT capabilities here, it is not to say that this industry doesn’t hold some extremely interesting potential. Firms based here have sold their software solutions to major banking and large retail enterprises in Europe, whereas other Lebanese development houses have a stable clientele among small and medium sized enterprises in the Middle East. “While Jordan and Egypt seem to have a higher percentage of projects where they write code under outsourcing contracts for clients abroad, Lebanon seems to have a higher share of own development,” Tony Prince, Intel’s regional business development manager, told Executive.

According to Prince, Intel has become increasingly interested in Lebanon. In July, the firm hired a developer relations manager to closer interact with software companies; Intel also this year participated in numerous public and private sector projects, ranging from installing a high-powered server at a software company to setting up or testing of wireless data technology (WiFi) in hotels, stores and the BCD. Later this year, the company hopes to finalize an agreement over establishing a developer facility at a Lebanese university. “We are in advanced stages of negotiations with AUB for setting up a banking competence center,” Prince said.

Lebanon is no exception to the global ICT evolution whereby services and solutions provision is gaining in economic importance over hardware manufacturing and equipment sales. ICT multinationals thus have come to attach great importance to finding, especially in promising locations, as many partners as possible who work with their technologies. The chipmaker apparently hopes that the banking competence center, with its emphasis on the area where Lebanese software is of highest regional repute, will attract developers to work with Intel tools. While investing into local capacity building and providing technology transfer, the multinational would profit by bringing Lebanese developers into its flock. “Our reward is that the applications are optimized for the Intel platform,” Prince said.

It is within the same logic that other multinational firms confirm their commitment to the Lebanese ICT industry, although the market here is rarely even worth a footnote in their annual reports. Networking equipment manufacturer Cisco Systems thus maintains an active office in Beirut, although business hasn’t been strong. “From a Cisco perspective, the market here has been flat since last year, and we expect another flat year,” said Hussam Kayyal, Cisco general manager Levant.

Waiting out the time until the public and private sector are ready for deploying new data infrastructure makes it all the more important to maintain a good rapport with the market. “We are optimistic,” Kayyal said. “We are looking at the coming couple of years as development years for Cisco in Lebanon, to spend time with partners and educate them, especially government agencies, to use IT in cost cutting.”

The company actively supports the training of ICT students and computer professionals as Cisco certified experts. Kayyal’s team works with agencies and professional associations such as IDAL and PCA but also with non-governmental organizations and educational institutions. The manager said Cisco intends to participate in three community projects before the end of the year. Working together with active NGOs, the multinational would invest $600,000 into these ICT community projects.

However, it is also worth mentioning that Lebanon’s ICT development initiatives not only originate from foreign firms. A project for a new tech zone, called the Beirut Emerging Technology Zone (BETZ), is high up on the list of initiatives managed by the Investment and Development Authority of Lebanon, IDAL. After several years of pondering over terms of reference and proper procedures, a feasibility study for the project was conducted last year (by an American company; the grant financing the study came from USAID). Many in the industry say that a tech zone would be of great importance to improve Lebanon’s chances in the march towards ICT leadership, and yet there seems to be some uncertainty over the BETZ concept. “Any tech park should drive the country to be a producer, moving companies to an environment where production is cheaper. But what is the target of BETZ?” asked Shamseddine and Kobeissy, in comments resonating those of several other industry members. “Our claim is that nobody knows. We have a vision but we know that none of the actors know.” Executive requested an interview with IDAL chairman, Dr. Samih Barbir, to find out about the zone’s concept and the agency’s latest activities in context of Investment Law 360, which rates ICT projects as particularly support-worthy. Unfortunately, Barbir is not currently available for interviews on this topic, the agency responded. Meanwhile, the Lebanese information technology community has been readying itself for the annual Termium exhibition, with statements of growth expectations and fine business tidings. “We are changing Termium to become more of an IT-experience trade show where companies can show products by stating IT success stories,” PCA president Jalal Fawaz told Executive. After two editions of partnership with the Dubai-based Gitex IT expo brand, Termium this September is back to its own devices for attracting exhibitors and visitors. “It will be the same companies and the same people as every year,” said the CEO of a Lebanese software-manufacturing firm between parmesan-laden salad and main dish at the press lunch announcing the conference. “But some companies cannot afford to stay away,” he moaned. Of course, nowhere in the recent past have ICT shows been able to emulate quite the same mix of geeky pleasures and relentless business optimism they were hallmarked for before 2001.

If Nasdaq trends and international industry surveys can be believed, ICT is not only returning to a growth cycle more moderate than the last spurt that ended in 2000/2001, but is also more sustainable. As happened with the ICT industry worldwide, Lebanon’s information economy also felt struck by the bursting of the e-bubble and was shaken by the weakness of business confidence that flooded planet earth over the past 24 months. On top of that, there were the socio and politico-economic troubles of the region to contend with. However, living through these experiences did not fundamentally alter the many concerns and issues the local industry has to confront.

Take violations of intellectual property rights (IPR). “Basically, the level of piracy on all fronts is more or less the same,” said Walid Nasser, a lawyer who locally represents international organizations concerned with IPR protection. IPR is a crucial concern to anyone in the knowledge economy, from software engineers to content providers. Initiated at a global level, software piracy and theft of intellectual property have been exposed. According to the international industry pressure group, Business Software Alliance (BSA), an eight-year high-powered campaign has helped reduce software piracy as a worldwide phenomenon from 49% in 1994 to 39% in 2002. In the Middle East, the BSA reports, the margin of piracy reduction over this period was the highest of all world regions, from 80% to 49%. However, while piracy was reduced in Lebanon, the rate of suppression was much less impressive than in the UAE or Israel. With 74% percent of piracy (down from 83% a few years ago), Lebanon still ranks among the world’s least IPR-enforced countries. The government’s ICT experts at the OMSAR technology unit could vigorously refute recent unfounded claims in a report by the US trade delegate that Lebanese ministries operate on pirated software, but the fact remains that this country is listed among the 25 nations – 13th to be precise – with the highest software piracy rates. To make software piracy non-palatable to corporate offenders – in reality, no one goes after the individual – legal recourse is essential. And here, enforcement is key. “We want court decisions with amounts that really deter,” Nasser said. “The laws are really good, they just lack muscle. We are still dragging our feet and treating this as a minor offense.”

Enforcement is better now than it was immediately after passage of the 1999 IPR law, but not decisively so. Taking a software pirate to court in Lebanon consumes much time and cash, and can take between two to four years and cost between $5,000 and $10,000 in legal expenses, according to Nasser. “At the end of the day, you will get a court decision in your favor if the file is handled properly,” he said. “But if the fine is no deterrent, you’re wasting your money.”

So far, legal battles for IPR protection in Lebanon have been fought and financed by multinational corporations with regional interests. Although they often decried the unfairness of businesses working from unlicensed copies of their products, local software developers have neither joined the BSA (and one couldn’t blame them; the BSA is a costly club for the major players) nor pushed for prosecution of violators. However, an improved economy and greater demand for Lebanese software will see an increase in piracy. “The more the sector will grow, the more piracy will become a problem,” admitted Ali Shamseddine, vice president of the Association of the Lebanese Software Industry (ALSI).

The Lebanese telecommunications infrastructure is as sore a point as it was before the spring 2001 crash of the internet bubble. Bandwidth for connecting to the global data backbone remains limited and expensive, and the country is in danger of losing its edge of having a more advanced mobile network than other countries in the region. In the view of Jalal Fawaz, president of the Professional Computer Association (PCA), next to the general business concerns that relate to the country’s economic environment, the completion of the telecommunications infrastructure through establishment of a public data network tops the list of industry-specific concerns for local ICT companies. The same concern is high on the mind of Intel Corporation’s regional business development manager, Tony Prince. “I would like to see an improved infrastructure,” he said, “better broadband would be a necessary condition for the evolution of the business. People such as ourselves could do business better.” According to Kamal Shehadeh, an economist specialized in regulatory frameworks and telecommunications affairs, the non-development of telecommunications infrastructure in the past few years has had a negative impact on the entire ICT industry by creating technical availability bottlenecks as well as access barriers through high prices. “Access to broadband is a very expensive proposition at current tariffs,” he said. “Prices for regular phone connectivity to the internet have come down, but are still very high, even prohibitive.”

A contributing factor to the problem is that the state-run communications infrastructure network would presently not be able to handle a flood of demand for high-speed internet access, giving the monopoly provider absolutely no incentive to encourage demand for broadband access. This market structure issue reflects how the monopolistic nature of Lebanese telecommunications has negated the chance of establishing a legally licensed private sector data structure, Shehadeh reasoned. The only way to change the situation is to license alternative providers, such as the private sector data network operators. “Is it a realistic and reasonable request? Yes. Can it be done? Yes,” he said. “It has been done in other economies less developed than this one.” But at the end of the day, this is a political decision, he added. Retaining talent is the next headache that Lebanese ICT companies face today just as they did three and four years ago. “A second main concern is the human resources issue,” Fawaz said, “how to create growth to keep people inside the country.”

In a best case scenario, a talented young software engineer or computer science graduate will leave Lebanon in search of the advanced training and experience, which she or he can acquire in the technologically most developed countries. This person will stay abroad for a limited time and at some stage return to Lebanon with the will to put the acquired expertise to work in the local economy.

In practical reality, Lebanese ICT companies, face the daily threat of losing human resources, often because a company cannot offer their best minds the advancement they seek, even if that company wants to keep them. “We have had ten years of ICT brain drain,” Shamseddine said, “and the only way to bring them back is to have proper jobs, properly paid.” In the experience of ALSI president Fares Kobeissy, Lebanon’s narrow ICT career market is a clear impediment. “Our industry has upward mobility as a requirement,” he said. “People need to grow into better positions and better jobs.” What acerbates the problem for the companies in the local ICT industry is that their high share of labor cost translates into extra-heavy additional burdens of National Social Security Funds contributions. Exempting ICT companies from income tax would alleviate the burden, suggested Kobeissy and Shamseddine. “We want labor laws different from the ones existing today,” said Michel Nseir, head of the PCA software committee. He admonished that the inflexibility of regulations (designed to protect professionals in labor contracts) disallows for effective subcontracting and temporary project-based work agreements. Additionally, Nseir asked for adjustments to visa regulations, which would make it easier to bring in tech experts from countries such as India.

Intel’s Prince would wish for people purchasing ICT equipment to receive a break from Value-Added Tax to reduce the cost of ownership. With such a catalogue of needs and concerns, it becomes quite clear that the Lebanese ICT companies must see more than an improvement of conditions in the worldwide climate of their industry. Doubting existing mechanisms for investment promotion, companies are crying out for comprehensive public sector support of this industry, which its members consider as one of the top prospects for Lebanese economic leadership in the region and eventually beyond. For the moment, however, the mood is strained. “The way things are going, the policy of the government is destroying what little we have in IT today,” Nseir said. “New investors in tech are not encouraged, and instead of growing, we are sleeping. IT is suffering terribly. The only firms that were able to make it were those that could keep up in the local market and expand in export markets.”

“It is very hard these days to do business in Lebanon related to information technology,” concurred an investor involved in the sector. A big weeding out is taking its course, and only the strongest companies have any prospects.

E: Senator Dogmoch, your group has recently stepped up its local investments. How do you evaluate the investment climate in Lebanon?

YD: I believe every investor has to see the glass as half full. The Dogmoch Group of companies has a presence in all Arab countries, with activities in different sectors, be it industry, trade, Internet, transportation, shipping and forwarding, airplanes etc. As a mid-sized enterprise with a presence in several countries, we decided to establish the base of our undertakings in Lebanon.

E: Why motivated you to this decision?

YD: Lebanon offers many advantages in terms of taxation, through the flexibility of the banking system, the climate, or the high quality of human resources. You find more human capacities and resources in Lebanon than in other Arab countries. Investment in the Arab countries hinges on the security of capital. This security is provided in Lebanon to no lesser a degree than in other parts of the world. Certainly, Lebanon will be the first country to profit if there is progress in resolving the Middle East problem. These are some reasons why we have opted for Lebanon.

E: You recently acquired a major share in Bartercard Lebanon. Was that your first major investment here?

YD: No. Bartercard is one of over 30 companies in which we have invested in Lebanon. Where do you see the best current investment prospects in Lebanon, and what projects did you find rewarding?

YD: In tourism. This year is the best in a while, and the country still needs many projects in the industry. We are in the hotel business and also have recently established a company called Cruise Med, for the rental of boats. We established it three months ago and now have 11 yachts, measuring between six and 24 meters. This business was a success from the start. Some days all boats are rented.

E: When you started investing here, did you encounter difficulties?

YD: For any project you start in Lebanon, in tourism or industry, you receive support from the authorities. There are no stones thrown in your way. In tourism projects, one can request loans at a very low interest, subsidized by the central bank, and this will be approved.

E: Did you work with IDAL?

YD: We are involved in a project with IDAL in Tripoli involving the construction of a car park and reorganization of the Gamal Abdel Nasser Square in central Tripoli.

E: Overall, then, you would say that as investor you do not find it difficult here?

YD:Lebanon has ideal circumstances for the investor, better than in any European or Arab country. If you want something from the authorities here, it is processed quickly. Even as a German in Germany I have not experienced that. To acquire a construction permit, for instance, it takes a month here, and one year in Germany.

E: What is the size of the Dogmoch Group’s investment portfolio in Lebanon?

YD: I believe that it is a sizeable amount for this country. In comparison to the activities of our group, 50 percent of our investments are in Lebanon, and that is a lot.

E: Is there anything that you would wish for to be different for investors?

YD: If some German or European investors knew the conditions and environment here, they would not hesitate to invest in Arab countries, Lebanon among them. The perspectives here are better than anywhere else.

E: Do you have further plans for major projects in Lebanon?

YD: We want to launch passenger-only sea transportation between Tyre, Sidon, Byblos and Tripoli. It will combine regular transportation and sightseeing. Based on experiences with the boat rental project, I have discussed this program for coastal transport with the transport minister, Najib Mikati. This could take some pressure off the road network. I hope that we will implement it within the next two years.

E: Then it will be related to tourism?

YD: If we use hovercraft it would be a tourism project, but operate year round. There’s a small problem that can be overcome. The sea in these parts is not very calm. But with the latest hovercraft, transport can be quick and reduce disturbances. On a calm sea, it will be a very interesting affair.