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The Buzz

Oriental bull market

by Isabelle De La Bruyere October 1, 2003
written by Isabelle De La Bruyere

Prices for paintings of Middle Eastern subjects, especially those of the so-called Orientalist school, have soared since the 1973 oil boom, escalating from a mere $3,000 to $500,000 for top-quality works. Today, the record price for an Orientalist work is held by Christie’s for the Ludwig Deutsch’s1892 painting The Palace Guard, which they sold for a staggering $3,192,500 in 1999.

Wendy Goldsmith, former head of the 19th Century European Art Department at Christie’s and now an art advisor, noted: “The demand for Orientalist pictures is going from strength to strength but only, however, for a certain segment of the market. More and more new clients from both the Middle East and America are looking for top works by the major artists such as Jean-Léon Gérome, Ludwig Deutsch and John Frederick Lewis, and this is driving prices ever higher. They are very particular in their tastes, and don’t want to “settle” for more medium artists or works, unless they are extremely decorative.”

Indeed, Orientalist art is one of the few areas in which collectors can still find affordable museum-quality pieces, and with more and more of these top works going into private collections – leading to a decrease in supply – we will most likely see prices continue to rise in the coming years.The term Orientalism describes a penchant for the iconography connected with the Near and Middle East, and from the early decades of the 19th century and well into the 20th century, Orientalist art was created with a variety of motifs and collected passionately in the West. Widespread interest in the genre began soon after Napoleon’s abortive 1798 venture into Egypt and started to boom some 40 years later, courtesy of the expanding railway lines and the relaxation of the Ottoman Empire’s travel and trade restrictions.

Indeed, beginning around the end of the 18th century, European travellers set out to explore the East, and set their courses on the established pattern of what has come to be known as “the Grand Tour,” proceeding from the north or the west towards the south and southeast. The Grand Tour was often conducted out of a zeal for archaeology, and many artists, such as the Scottish David Roberts, placed a high value on topographical exactitude and worked from sketches made on the spot. Yet, as the genre became increasingly popular, other followers began to paint Orientalist pictures without ever leaving their studio, and simply used reference books and local models dressed in imported costumes and posed with imported props.

Typical subjects included the horse fair, the slave market, the mosque, the Holy Land landscape, and studies of caliphs, muezzins, Nubian slaves, and soldiers. One of the most favored subjects, however, was undoubtedly the harem, filled with its sensual odalisques and rich interiors. Such images were typically painted in the intensely detailed and realistic academic style, which ruled Europe for several centuries until Impressionism arrived on the scene.

By 1910, however, Orientalism had virtually disappeared from view in the West, not because of its subject matter, but because of its style. Throughout most of the 20th century, academic art was no longer attractive, giving way to a more modern style.

Isabelle de La Bruyère works in the Oriental department of Christies of London. She wrote this column for EXECUTIVE.

October 1, 2003 0 comments
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The Buzz

Fools or angels

by Fay Niewiadomski October 1, 2003
written by Fay Niewiadomski

The deeper I get into the business of managing change, the deeper my conviction becomes that you must have the blindness of a fool or the quiet wisdom of an angel to succeed. That point was powerfully driven home during the two-day Forum organized by TMS Development in Dublin, Ireland, which brought together 20 international change management consultants from different parts of the world to exchange views and share expertise on the challenges we face in the course of our work.

TMS Development International develops and produces a suite of sophisticated instruments designed by Dick McCann and Charles Margerison to assist consultants in change management, organizational development, human resources management and training and development work. With offices in the USA, UK, Australia and Europe, TMS management considers bringing together consultants from around the world in such a forum of utmost importance in promoting the exchange of ideas and the advancement of the systems.

Twenty consultants specializing in managing change around the world and working with both the public and private sectors gathered together. I was the only delegate from the Middle East and the title of my presentation was Managing Change in a Re-emerging Economy: a Case Study from the Lebanese Banking Sector.

The Forum provided the opportunity for us as change management consultants to exchange views and experiences with one another on the diverse projects we have worked on, further strengthen our international network, build stronger bridges for communication and collegial support using the internet or arranging collaborative projects where we can provide complementary expertise. I would like to focus on some of the issues that were raised and that have direct bearing on our current situation in Lebanon. All ‘change’ processes, regardless of the label, (downsizing, upsizing, transforming, restructuring, re-engineering or re-inventing) have one thing in common: they all impact the lives of people in the organization at all levels. The impact may be for the better or the worse, depending on how the issues being tackled are managed. It is certain that change processes require people to behave differently, establish new relationships, acquire new skills and continue learning throughout their professional lives.

Change management consultants also play an important role in facilitating the integration processes vital to the successful conclusion of mergers and acquisitions. They help individuals in the public and private sectors refocus or change careers or even adapt to leaving one kind of job or organization and accepting another, or taking on a completely new role. In brief, change management consultants deal with the human and organizational dimensions of change in all phases and at every level within organizations undergoing developments or transformations.

Public sector issues that were raised during the forum and that are relevant to us in Lebanon are: Making Sense of Your Career in a Changing Environment, Developing Private Sector Management Skills within a Civil Service Culture, and what statistical analysis of work preferences can tell us about Professional Patterns in the Office of National Statistics. The unifying theme was the need for a leaner, more accountable civil service modeled along the lines of private sector productivity. The changes to be integrated are: the need to give up the idea of a job-for-life in the civil service; civil servants now need to think, work and continuously develop themselves to keep jobs that are becoming scarcer and scarcer. Second, managers must work with their staff to develop their skills and empower them to view their roles not as caretakers, but as individuals responsible for the input, output and outcomes – i.e., what they put into their jobs, the results they produce and the effect this has on the people receiving the service.

What was apparent from these presentations is the effort that is being invested in changing the traditional approach to civil service work and civil service expectations so that people now see themselves as ‘servants of the people’ who must deliver quality service to citizens. The civil service employee cannot expect to keep a job unless the results of the work done justify the resources invested in the production. The achievement of this new mind-set is considered a very difficult task in countries like England and Ireland and highly challenging in places like Hungary and Poland.

I asked myself what words could be used to describe the colossal difficulties we face in Lebanon? We not only have to change details but need to leap across a 50-year time gap created by the war and the local mind-set. We need to bring our facilities up to date; we have to rebuild from scratch all that was destroyed; we must bridge the information and technological gulf imposed by years of isolation; we must review our laws and regulations, modify and modernize them, and most difficult of all, we need to work on attitudes and behaviors that hold us back from achieving our full potential individually and collectively.

On the private sector issues, the topics tackled were linked to strategies for handling global competition by forming new professional partnerships; the redefinition of corporate missions and the translation of these into improved performance and greater profits; ways of unlocking a team’s creativity and innovation potential and turning it into competitive advantage for the company; using influencing skills to sell change within organizations and several other issues directly relevant to the needs of our own situation in Lebanon.

Do we need anything like this in Lebanon? Yes, we are hungry for progress, innovation, success, modernization, world-class standards in what we produce and high profit margins to go along with them, but many seem to want to achieve all this without any pain at all. No matter how smart we work there will be a fair dose of pain and hard labor in getting where we want to be in our businesses. Are we ready to accept the things that these changes will impose on us? As we approach the challenges of managing change in our organizations we will face some monumental obstacles. How should we face them? Have the blind optimism of a ‘fool,’ taking the matter lightly and expecting that things will eventually work themselves out without the cost of our full commitment, total focus and unwavering dedication to a crystal clear mission? Or should we approach the management of change with the wisdom, patience and goodwill of an ‘angel’?

My view is that the challenges that stand before us in Lebanon require the intercession of thousands of angels accompanied by carefully considered intelligence and hard work on every aspect of a change project. This is vital if we are to navigate a safe and successful journey through the treacherous waters that lie ahead. We have little choice. The tides of change are so strong that we must prepare our survival strategy and do it quickly.

We must also be prepared to have the agility of adaptation to the unexpected at any moment during our journey. We do need to believe in the power to achieve the seemingly impossible and we need the energy of the incurable optimist to see us through to safe shores as we cross the turbulent waters of change. In Lebanon we need to be both fool and angel to meet the challenges we set for our businesses and ourselves.

Fay Niewiadomski is the Managing Director and Senior Consultant in Change Management at ICTN-International Consulting and Training Network, sarl

October 1, 2003 0 comments
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Society

Money back guarantee

by Michael Karam October 1, 2003
written by Michael Karam

In the first six months of 2003, over $1 million in VAT-refunds have been reimbursed to tourists and non-resident Lebanese. It is estimated that 15,000 tourists, roughly 1.5% of all foreign arrivals, took the time to put their purchases through the Global Refund tax-free shopping system, collecting an average of $66 from new tax-free shopping desks at Lebanon’s main border crossings.

Since 2001, Lebanon has touted itself as a shopping destination to eventually challenge Dubai. This claim has been strengthened by the evolution of the BCD, the arrival of modern, well-specified shopping centers and the long-overdue appearance of high-profile international consumer brands have proved a popular complement to Lebanon’s established tourist attractions. When it is eventually built, the long awaited Souks project will be the jewel in Lebanon’s retail crown and the center of tourist shopping.

Retailers can now point to defined shopping periods: summer, Eid el Adha and Eid el Fitr. ”Our boom periods are dictated by the Islamic calendar and, to a lesser degree, Christmas,” explains Khalil Achkar, Global Refund’s general manger in Lebanon. The company works in collaboration with the ministry of finance to refund VAT in return for a 1.85% handling fee. Global Refund operates VAT refund services in 35 countries in four continents. “We service over 210,000 outlets and deliver 10 million refunds globally,” boasts Achkar.

The profile of tourists’ spending habits is still far from comprehensive, but a survey of those who chose to collect on their VAT shows that 74% of purchases took place in Beirut – mainly in the BCD and Verdun – with 18% of shopping activity taking place in the Metn – mainly from the ABC, GS and Sports et Loisirs branches in Dbayeh.

Saudi Arabians make up the bulk of Lebanon’s tax free shoppers (a shopper qualifies for tax rebates if he or she is a foreign national or Lebanese who spends less than three months a year in the country) with Kuwaitis and Egyptians coming second and third respectively, ahead of those nationals from the UAE, Jordan, the US and the “rest of the Arab world.” Clothes (62%) and jewelry and watches (12%) are the most popular purchases, according to global refund statistics. “When it comes to clothes, Lebanon is surprisingly competitive compared to Dubai, but the emirate still has the edge on us in terms of electronic goods,” says Achkar According to Achkar, Arabs are very discreet shoppers. “They show off at home but they shop abroad,” he explains. “Ever since September 11, many have chosen to do their major shopping in Lebanon. There isn’t the stigma towards Arabs that has developed in the West, there are cultural similarities and now many international brands are available here. It is the ideal destination.” Nonetheless, Lebanon’s is still very much a fledgling culture when it comes to international retail. To attract the big rollers, Beirut would have to market itself to the big three international spenders: the Japanese, the Russians and the Americans (not Lebanese Americans). China’s dormant spending power is stirring. The world’s most populated country, which is becoming richer through a modern industrial revolution, recently overtook Hong Kong on its way to becoming the fourth in the top spending nationalities table. Saudi nationals are the world’s eighth biggest spenders.

Global Refund began operating in Lebanon in June 2002, five months after the controversial introduction of VAT. Over 1,000 stores have signed up to offer the service. Achkar says that the more sophisticated retailers are enthusiastic. “They have been quick to understand that offering rebates is an asset to the overall shopping experience,” he says. “Others are fairly ambivalent or just assume that it’s a service that solely benefits the shopper.”

Shops that wish to offer tax-free shopping pay an annual fee of LL75,900, which gives them an unlimited supply of refund checks, technical support, training and, most importantly, monthly data on what is being bought by whom.

Data is a dirty word in Lebanon. Those who do give out statistics often inflate their figures, convinced that the other guy is doing the same. Global Refund’s reports are allaying this national paranoia and setting a new benchmark in transparency.

Although the company can only chart the shopping habits of those customers who choose to use the tax-free shopping process, Achkar believes it paints a valuable picture of what tourists are spending. “The feedback tells the retailers who their customers are and where they come from,” say’s Achkar. “Based on these reports, a retailer might then want to recruit sales staff who speak a certain language (shops in Europe have sent their staff on a basic Japanese course) or who may be more sensitive to the needs of gulf Arabs. Retailers can also plan ahead better if they can identify the trends.” However, Achkar believes there is still more that can be done to get a better profile of the tourist shopper. “Most of those shoppers who are listed as American are in fact Lebanese and many of those who come in on Kuwaiti and other GCC passports are also originally Lebanese. If we could know who are Kuwaiti and who are Lebanese-Kuwaiti we would be able to get a better idea of shopping trends. Lebanese and Gulf Arabs have different shopping habits.” Achkar says that although training seminars (the cost of which is included in the annual fee) are held regularly, retailers have been slow to take advantage of the service. “We do our best to make it attractive by holding the sessions at hotels, but the invitations require a lot of follow up,” he said. “You can just send an invitation the week before and expect them to come. You have to remind them and even pick them up from work and take them to the venue.” The need to train staff may put a strain on main of the smaller retailers but the big players – Aïshti, BHV and GS stable of outlets – have embraced the new system and say they are reaping the benefits of offering the service.

Aïshti was unavailable for comment, but Achkar hinted that the up-market clothing store, which sells Gucci, Burberry and other designer labels and which has three outlets in the BCD, was among the most popular outlets for tax-free shopping. Fadi Rayess of Hamra shopping, which owns the GS brand and sells Timberland, Springfield, Hugo Boss and Ralph Lauren Polo, among others, believes that the system is putting Beirut on the retail map. “Our foreign customers are satisfied with the VAT refund process,” he says. “This is a good step towards placing Beirut among the [region’s] top shopping destinations.” Gerard L’Hotel handles the tax-free shopping at BHV, the appliance-driven department store in Jnah. “We had a very good summer especially with those customers from Saudi Arabia,” he says. “We trained our staff in June in anticipation of the rush. It was a good move as we were dealing with purchases made in all departments of the store.” Achkar says it is too early to give accurate measurements of year-on-year growth for tax-free tourist shopping. “Last year we were not at cruising speed,” he says, “so it is difficult to say how we compared year-on-year. Next year’s results will give a clearer picture. This year, there has been greater awareness and this can only increase.”

October 1, 2003 0 comments
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Finance

Tough sell

by Tony Hchaime October 1, 2003
written by Tony Hchaime

Recent data suggests that commercial banks and financial institutions in Lebanon are increasingly shying away from corporate lending. In fact, most major banks remain wary of the Lebanese corporate environment, as they still attempt to mend their existing portfolios of corporate debt, to the extent of actually reducing the size of their portfolio of commercial loans. BLOM Bank, Banque Audi, and Banque Saradar saw their portfolios of commercial loans shrink anywhere between 1% and 8% over the past year. Typically, and perhaps oddly, the bulk of non-performing loans held by most banks fall into the corporate lending category, as opposed to retail lending to consumers. Corporate banking – including corporate loans and financial assistance – thrived in the mid 1990s as the economy was perceived to accelerate its post-war recovery with a GDP growth of 8.8% per year. Banks were typically more eager to help finance business ventures in Lebanon, coupled with equity capital being contributed by domestic and regional investors alike. New companies were being established, consumption was high, real estate prices were soaring, and the overall outlook for the economy was rosy, to say the least.

In 1996, as banks continuously enlarged their portfolios of corporate debt – typically of a long-term nature – things rapidly took a turn for the worse. Economic growth slipped into reverse, consumer confidence, and consequently consumption, toppled. As businesses saw their margins squeezed by high interest rates on their financing and lower revenues, bankruptcies thrived, creating a substantial burden to anyone and everyone with any kind of exposure to the Lebanese corporate environment. Despite the promising signs of an economic recovery observed over the past few months, and the increased consumer and investor confidence pursuant to Paris II, Lebanese banks are not likely to expose themselves to additional corporate debt until they improve the status of their existing portfolio to a point where they can take on additional exposure, a task typically of a high risk nature considering the unpredictability of the Lebanese economic and business environments.

While no bank has categorically ruled out any form of lending, credit assessment is stringent at most institutions, and conditions for acceptance are as such because only large, well-established businesses are eligible to apply. Many Alpha group banks are extending corporate loans, albeit on a very conservative basis, requiring substantial due diligence and a number of guarantees.

Smaller banks, on the other hand, seem perhaps more eager to venture into corporate lending. Typically, smaller banks have less balance sheet exposure to corporate loans from their past activities. This, coupled with an increasingly competitive environment in retail lending, has prompted a number of medium sized banks to draft strategies that would focus on business loans. As such, conditions are less stringent, interest rates are more flexible, and leniency is more commonplace.

However, the major factors behind the reluctance of banks to finance businesses in Lebanon are being exacerbated by their own policies on the matter. Small and medium sized enterprises have always been the backbone of the Lebanese economy. In fact, SMEs represent around 95% of total industrial enterprises, and employ up to 65% of the total industry labor force. Moreover, SMEs contribute over 40% of the country’s industrial output. Unfortunately however, most SMEs are foregoing profitable business opportunities and are operating below full potential. Production is being limited by the overall reluctance of major banks to provide fairly priced financing facilities to expand production.

While the Lebanese government is attempting to nurture this appetite for small enterprises through subsidies, it does not do so for all sectors, as many promising entrepreneurs are facing difficulty in obtaining debt financing for their projects.

A significant level of risk is typically inherent of small businesses, whose operations are of a typically high volatility. Such a factor is deterring banks from extending to them the much-needed facilities, to the benefit of large and well-established institutions. Such an attitude is somewhat detrimental to the overall growth of businesses in Lebanon, since large institutions typically make use of credit facilities to maintain their operations; whereas small businesses make use of funds made available to them to open up to new markets, increase their product lines, and focus on promotion and advertising.

It should be noted, however, that banks are not the only ones shying away from corporate lending. While Lebanese banks are typically reluctant to offer financing services to local companies, such companies themselves often find it detrimental to make use of such services if and when they are provided. In fact, the cost of debt on corporate loans is so high that it significantly eats into profit margins and forces companies to forego promising investment opportunities. According to Central Bank statistics, interest rates typically charged by Lebanese banks do not fall below 10% p.a. on average, a drastically excessive figure given the typical returns on investments in the country.

A high cost of equity resulting from the geo-political and economic risks associated with the country, coupled with a high cost of debt, are severely undermining appetite for investments in Lebanon. Sought after investments should currently achieve returns in excess of 15% in order to marginally exceed their cost of capital. The issue has been raised numerous times recently, namely in the industrial sector. A number of Lebanese industrialists are reducing output, moving production to other countries, or outright shutting down their operations due to – among other reasons – the high cost of financing their working capital.

It appears then that would-be entrepreneurs should shift their focus towards a perhaps more expensive source of financing: equity capital. Equity capital for new innovative businesses often comes in the form of venture capital, especially in the West. A solid equity base would provide a newly established company with a solid base to launch and expand its operations. Moreover, the ability of a company to attract regional strategic partners would assist in expanding across borders, a critical factor given the limited size of the domestic market in Lebanon.

In addition, a well-capitalized company offers an added incentive to banks to provide debt financing, as the perceived risk to the banking institutions is reduced by the availability of a solid capital base.

It appears then as though the Lebanese business environment suffers from a basic flaw, which severely reduces its ability to promote investments and attract foreign investment capital. Bank’s preferences towards government bonds instead of loans severely limits the sector’s ability to play its basic role of channeling funds from depositors into investments. Several steps should be undertaken, and promptly so, to remedy the situation. It surely does not suffice to attract Arab funds into Lebanese banks if their primary use is lending to the government, and consequently crowding out the private sector. In fact, the government itself should promote corporate lending by reducing interest rates to spur investments, offering subsidies, and encouraging banks to open up their vaults.

October 1, 2003 0 comments
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Society

It’s all in the name

by Toby Stevens October 1, 2003
written by Toby Stevens

Did it ever occur to you that your email address could be presenting you in a bad light?

Last year, 31 million emails were sent each day. According to the International Data Corporation, by 2006, this number is expected to reach 60 billion, while the number of worldwide email addresses is expected to increase from 505 million in 2000 to 1.2 billion in 2005. Subscribers to email providers such as Yahoo! and AOL are also increasing, with Hotmail the market leader with over three million members. With all the spam (electronic junk mail) received daily in most in-boxes, many email users are growing tired of using the popular, and free, hotmail, yahoo, or AOL services. In fact, in the corporate arena, employees assess how important a company, or individual, is from their email address. More attention is likely to be given to emails using a company’s domain name ([email protected]) rather than an email using an ISP’s domain name ([email protected]). Even riskier is using free email services ([email protected]). “I consider an email message more credible when it has a corporate domain name, rather than a hotmail domain, which I usually discard,” said Rami Majzoub, account director for Levant and Egypt at Reuters Middle East. “ Unfortunately, some Lebanese companies, even well known banks, still use their ISP’s domain name, which shows a lack of seriousness and awareness on their part,” he added. According to Michel Kilzi, general manager at Internet Facilities Group, the reason most corporate employees in the Arab world still use their personal emails for work related issues is because of the lack of awareness and widespread internet penetration. “Whether it is a small, medium sized or huge corporation, all the emails I receive from Europe and the US use the domain address of the corporation,” said Kilzi. “Since most companies have a certain amount of control and restrictions on their corporate emails, every employee separates between their business and personal email accounts. But this is not the case when it comes to the Arab countries. Sometimes I receive an email from Saudi Arabia, Syria or Kuwait from a CEO using his hotmail or yahoo account and I don’t take them as seriously – it’s as if they don’t have a company profile or business card,” added Kilzi.

One thing is for sure, the lack of corporate domain usage is not due to financial or economic constraints. Most companies can register a domain name on the net for as low as $25 per year, and with hosting fees, the cost could reach a maximum of $100. “In Lebanon, 60% of companies have their own domain name, 5% still use hotmail and yahoo, and the rest use their ISP’s domain,” said Rita Hayek, sales and marketing manager at Terravision. “Lebanese companies understand the importance of having their own domain name. It is usually students or small companies that usually use hotmail and yahoo, and they are probably unaware of the importance of a domain name.” Lebanese companies can also register a .lb domain for about LL900,000, or $600. However, some find the procedure too complicated, as they need to register their company trademark with the government before receiving their domain registration. “We have seen many Lebanese companies register .com because they don’t want to go through the lengthy process of registering for the .lb,” said Rim El Kady, IT unit manager at AUB. Companies should especially take care about the email addresses of its employees because, according to analysts, a domain name speaks volumes. For example, it can determine how a corporation treats its employees. If a company uses the full name of the employee in the email address (like, [email protected]), it shows that the organization views its employees as independent entities that provide added value to the company, and as such, respects their individuality. If only the position is used (as in [email protected]), the company is considered more impersonal and viewed as valuing company divisions and apparatuses over personnel. “Sometimes, it is easier for the IT department to create an impersonal address so that when an employee leaves they don’t have to go through the hassle of changing names, adding new ones and deleting old ones,” one IT administer explained. A third method adopted by companies is incorporating the initials of an employee followed by numbers (e.g., [email protected]). In such a case, analysts say the company views its personnel objectively and in a hierarchical manner, while recognizing that they are in charge of services and activities.

But for those of you not wanting to be pigeon holed by a company domain name, or wanting to stand out from the hoards of millions using hotmail and yahoo accounts, do not fear – there is a domain out there for everyone. If you want to show you have a funny bone, you could try [email protected]. Not really in a social mood? Well then [email protected] is just right for you. Whoever said ‘what’s in name’ obviously never had email.

(Box) Revealing messages: Is your position affecting the way you write your emails?

According to an article in The Guardian, your position in a company could influence the way you write your emails. For example, did you know that the higher up you are, the more likely your emails are full of informalities. Since, big honchos have already made it, so to speak, they don’t feel the need to impress through meticulous email writing. In fact, senior executives rarely use corporate jargon and are more likely to talk to a person face to face. Furthermore, the powers that be are less like to use the cc option.

For the middlemen, the story is a bit different because they have a lot to lose or gain. If you’re only half way up the corporate ladder, you probably write lengthy emails to try and impress the higher ups. Middle management also like to sign off with signatures, which include name, position and sometimes a quote even. At the entry level? Well, in that case, according to the Guardian, you like to crowd messages with emoticons, like smiley (?), sad (?), or anxious faces (:S) that MSN or Yahoo messenger have made so popular. Being at the lower end of the corporate food chain also means that you have time to send conversational emails to colleagues, mainly not work related of course. Low status employees are, not surprisingly, more likely to send all those annoying jokes and forwards.

Who knew an email could say so much?

October 1, 2003 0 comments
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Business

So just how much trouble is Bush in?

by Claude Salhani October 1, 2003
written by Claude Salhani

Events in the Middle East are not exactly turning out the way President George W. Bush would have liked, and this is particularly bad with an election year just around the corner.

The situation in Iraq is not progressing nearly as fast or as successfully as was initially hoped for. Rather, resistance to the continued US occupation is escalating. There are approximately 10 to 15 attacks carried out every day against American troops, though the military only reports them when a death occurs.

“There has been a dramatic worsening in the security situation in Baghdad, with attacks against the coalition forces remaining a daily occurrence,” stated a September 8 report from Baghdad issued by Centurion Risk Assessment Services, a firm specializing in providing protection services to many media and non-governmental organizations operating in Iraq. “Many parts of the city are out of bounds due to the increase in violence,” added the report.

So, understandably, the president is asking for help. Bush has requested from Congress an additional $87 billion (above what has already been allocated) to help support military operations in Iraq and Afghanistan and to combat ongoing threats of terrorism, which have also not abated. In fact, since September 11, 2001, rumblings of a possible new al-Qaeda attack on America are louder than ever. In a recently released message, al-Qaeda vowed to hurt the US in a way that would make them forget the attacks on Manhattan and the Pentagon.

Interestingly, the president is now seeking help from the United Nations, as well as from the Europeans, two groups his administration cold-shouldered in launching the invasion of Iraq earlier this year that got the Bush administration in the Iraqi mess in the first place. Bush is beginning to feel the pressure. Since June, his approval ratings, according to a Zogby International Polls survey, have dropped by 13 points, while his disapproval ratings have risen by 12 points.

Consider the following: in mid-June the president commanded a 58% approval rating. That number went down five points to 53% by July 1. The president then lost another point by August 19th and ultimately sank to a low of 45% by September 6.

So, just how badly does the president need a successful turn in the Middle East to win the next election? Why is he spending that astronomical amount on Iraq? If a price tag could be placed on that question, the answer would be $87 billion.

Eighty-seven billion dollars buys a lot, particularly when compared to what has been earmarked in the Fiscal Year 2004 Budget for Discretionary Programs.

As rumblings over the increased war spending begin to gather momentum, Democratic presidential hopeful Joe Lieberman called Bush “the most fiscally irresponsible president in the history of America.”

But in the reverse sense, how much does the Middle East need Bush? With American casualties in Iraq surpassing the number of killed during the actual offensive, a debate is beginning to brew in Washington whether there is a need to dispatch more troops to Iraq or not. Some say yes, while others, such as Secretary of Defense Donald Rumsfeld, say no, the current numbers can adequately do the job. Others in the administration, such as Karl Rove, the president’s senior advisor and Richard Pearl, the former chairman of the Pentagon’s Policy Advisory Board, are now advocating leaving Iraq altogether. The reality, however, lies somewhere in between.

Following the horrific blast at the Najaf Imam Ali mosque on August 29, which killed Ayatollah Syed Bakr al-Hakim and some 100 others, the bombing of the UN headquarters in Baghdad on August 19 that killed its representative, Sergio Vieira de Mello, and another 20 people, some voices argued for reinforcing “boots on the ground.”

The Najaf and UN attacks, which came on the heels of a similar attack on the Jordanian embassy and the sabotage of major water and oil conduits, as well as another car bomb outside a Baghdad police station on September 2, reinforce the belief that the current level of troops is simply not enough for the task at hand. There are currently about 130,000 US, 11,000 Brits and some 8,000 soldiers made up from the rest of the coalition.

Others argued for more international troops from Europe, India and other friendly nations, particularly Muslim countries, that would allow American soldiers to be less visible, thus less prone to attack. The counter argument opined that more troops would simply offer those targeting coalition troops greater opportunities to kill American (and other allied) soldiers. The attack on the UN, after all, was not aimed at American troops. There is, indeed, something to be said for that.

In truth, it’s not more American troops that are needed in Iraq, but rather, speeding up of the process required in order to replace coalition troops with autochthonous forces.

In terms of simple numbers, Iraq had the largest army in the Middle East before the US-led invasion abolished it last April. According to a 2003 CIA estimate, Iraq had about 3.5 million men fit for military service. Deduct from that number those who were killed and disabled in the war and those who were too closely linked to the old regime in one way or another. Filtered down, you should easily come up with at least 100,000 able men. Why not mobilize them? And if you really want to revolutionize the country, allow Iraqi women into the armed forces, too. That should easily provide an additional 5,000 to 10,000 troops.

By now, more than five months into the occupation of Iraq, coalition commanders – with assistance from their friends in the Iraqi National Council, Kurds and others – should have no trouble identifying a cadre of friendly Iraqi officers able to lead a reformed military to take over control of much of the country’s security. At least as far as high-profile assignments go, such as the guarding of government buildings, major intersections, bridges and other sensitive installations. Let the Iraqi people feel they have direct involvement in the rebuilding of their nation, instead of appearing as bystanders with little or no say. The current situation in Iraq leaves little room for doubt; something needs to be done to prevent the country from becoming a refuge for Islamist militants and other groups opposed to democratic reform. And it needs to be done quickly. Every day that goes by draws more and more anti-American (as well as anti-democracy) forces to the region. So much has been acknowledged by American intelligence agencies. Note to those who opposed the United States’ unilateral policy or who might regard US policy in the Middle East as neo-colonialist imperialism: before you begin to applaud America’s headaches in Iraq, be advised that continued unrest in Iraq will also weaken the rest of the region. An unstable Iraq will only endanger the whole Middle East. The attack on the UN has changed the face of this war.

“If the Americans pull out now, it will open the area to the forces of darkness, the nihilists, the (Osama) bin Laden supporters, and others who will regress the area into the dark ages,” said a seasoned Middle East observer. Or, as President Bush pointed out to an American Legion convention in St. Louis on August 26, “Retreat in the face of terror would only invite further and bolder attacks.”

What we are seeing in Iraq in many ways is a repeat performance of what happened in Lebanon in 1982 to 1983, when a multinational force was dispatched to restore order to the war-ravaged country. Lebanon, at the time, was torn apart along sectarian lines with Christian militias opposed to a fractured Muslim-Leftist-Palestinian alliance. Much as the Shiites, Sunnis, Assyrians, Kurds and Turkmen are in Iraq. The difference in Iraq is that the various factions are not fighting each other at the level the Lebanese were, at least not yet.

Following the bombing of the US marines and the French army barrack attacks in Beirut 20 years ago this month, the multinational force decided to cut its losses and leave, abandoning Lebanon to its own predicament. The Bush administration, however, does not have that luxury in Iraq (particularly if he is looking towards the 2004 elections). Abandonment in its current state is not an option. Which is why two things need to happen with haste.

First, more international troops should be brought in, because security is a concern. The attack on the UN building demonstrated that this was not simply an assault on US forces, but also on the international community. And second, Iraqis should be given a more direct role in the running of their country sooner rather than later. Only at that point will the US be able to withdraw without dire consequences and begin to save taxpayers’ dollars. Until then, Bush needs Iraq as much as they need him, although both would like a quick divorce.

Claude Salhani is a senior editor and a political news analyst with United Press International in Washington, DC.

October 1, 2003 0 comments
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Business

The wedding planners

by Anissa Rafeh October 1, 2003
written by Anissa Rafeh

This year, roughly 1,000 couples, spending between $25,000 and $35,000 each, retained the services of wedding planners, those hardy souls who organize, advise, coordinate and offer a shoulder to cry on. Essentially an American import, wedding planning has evolved from a few scattered operators into a lucrative $7 million niche sector, serviced by a dozen established names.

Planners argue that what they do is not a fad. Whether you are opting for a grand marriage or something a bit more restrained, hiring a wedding planner can often make sound financial sense. One of the main advantages of hiring a wedding planner is that they can provide their clients with discounts on everything from entertainment to flowers. “We can save our clients up to 20% in discounts on high quality items,” says Raya Zahlan, manager of Weddings 4 Life. “People are learning more and more that it is very hard to organize weddings and to remove the stress from the bride,” says Vivianne Ajini of Weddings “R” Us, “it a huge, huge thing.”

Nathalie Rahal Abou-Jaoudé, general manager and owner of Amareyn, another leading wedding planner, agrees. “Weddings for Lebanese people are very important,” she says, “they will spend money on a wedding, even if it means taking out a loan.”

Abou-Jaoudé estimates that about 40% of couples (or in 95% of the time their parents) spend more than they can actually afford. And with amounts of up to $35,000 being doled out, it’s no wonder that they have to go cap in hand to the bank. “But,” Abou-Jaoudé points out, “a small budget doesn’t mean that you can’t have a nice wedding.” Some planners see themselves as artists and Zahlan insists that planning a wedding is “not about the money” – well, not only about money. She and her business partner and cousin, Maya Zahlan, take into consideration a client’s background as well as their budget. “We prefer to plan weddings for clientele from a certain background so that our work is appreciated.”

It is an industry that attracts people from all professional backgrounds. Zahlan admits she fell into the job. “I majored in psychology and education, and my business partner studied interior design.” She points out that the paramount skill is the ability to communicate with people. But how much does good communication cost these days? Ajini explains that it is often difficult to give a clear picture of fees simply because they vary according to each wedding. “We could charge anywhere from $5,000 to $50,000, depending on the client.” However, most charge either a fixed fee or take commission based on the client’s budget (the Weddings 4 Life team charges a fixed fee, while Amareyn’s costs range from $2,000 to $15,000 for what she calls ‘big’ weddings with budgets of $400,000 plus, which represent 10% to 15% of the high-end market).

According to Abou-Jaoudé, there are four main variables that affect the cost of any wedding: the number of people, the season, decorations and entertainment (music, dancers, fireworks, special effects etc.). When deciding on the venue, Abou-Jaoudé says that most halls and major hotels charge similar fees. Cocktail receptions can cost from $15 to $30 per person, whereas seated, or buffet dinners, about $30 to $150, depending on the quality of the menu (traditional Lebanese cuisine, for example, is cheaper than an all seafood menu). Bridal gowns, invitations, flowers and invitations all combine to send the bill into the stratosphere. Not surprisingly, it’s big business and this is good news for the fledgling sector. Abou-Jaoudé says that since starting Amareyn five years ago, her clientele has doubled so that her company now plans about 80 events per year. Weddings 4 Life boasts even higher figures, with 150 weddings per year, 70 to 80 of which are in the high season (May 15 to end of September and the entire month of December). Still, to survive, wedding planners have to be up to speed with current trends and ideas if they are to sell themselves as cutting edge. “We are here to create something new and different for every wedding,” says Abou-Jaoudé. “Our job equals details.” Some of the big trends hitting Lebanon’s weddings this year were splashes of big color and the use of special effects. According Zahlan, weddings no longer stick to a specific color theme, with vibrant hues making their way onto the scene in the form of flowers, tablecloths and other decorations. Becoming increasingly common is the not-so-white wedding gown, with champagne shades making the most waves. Special effects are also no longer limited to fireworks displays – which are not exactly unique here. Now even the first dance sequence can feature a fog machine, complete with falling confetti spread with the use of a giant fan. The end result is much like the couple’s very own music video.

In order to stay on top of her game, Abou-Jaoudé employs a team of 22 – interior and graphic designers and technicians etc – during the high season and admits annual operating costs of over $200,000 a year. “Our telephone expenses alone are a catastrophe!” she moans.

Removing stress was the key factor that prompted Nada Afeiche-Shehadi to hire a wedding planner for her 2002 nuptials at Sursock. “I only had a little time [two months] to plan everything and needed someone who could have everything done at short notice,” she says. She was especially pleased with the party favors suggested by Zahlan – a little cedar tree to represent Lebanon since many of the guests were coming from the United States. Afeiche-Shehadi was also comforted by the fact that the Weddings 4 Life team would be present at her wedding to orchestrate everything at the church and the reception. “For me, it was more about having peace of mind than anything else,” she says, adding that little unexpected perks from the planners, like a guest book and special decorations on her table were a nice touch. So, was it all worth it in the end? For Afeiche-Shehadi it certainly was but she was quick to point out that hiring a wedding planner is not necessarily the best route for everyone. “At the end, it’s really the couple that makes the wedding.”

October 1, 2003 0 comments
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Economics & Policy

New dawn of the internet age

by Thomas Schellen September 8, 2003
written by Thomas Schellen

Since the dawn of the personal computer, Lebanon has been on the information technology map. Now as the age of the internet and new economy create business opportunities and bring international ICT companies to Beirut, the potential is there for Lebanon to establish itself as a Levantine hub. Executive checked how four Lebanese companies are gearing up for the challenge.

Computer Information Systems

Growth is steady for Computer Information Systems (CIS), which is shifting from distribution of hardware to providing implementation services and turnkey solutions for corporate clients. “Things are picking up again,” said sales manager Michel Nassif. “We are still recruiting people.”

According to figures the company published for its overall activities, normal is rather good. Together with sister company, Unidist, CIS realized consolidated IT sales revenue that increased from $100 million in 2001 to $125 million in 2002, with 55% coming from project integration and 45% from product distribution revenue from activities in some 30 countries in the Middle East, Africa, and Europe.

For 20 years, CIS and its affiliate companies have been the distributors for information technology firm Hewlett Packard and other manufacturers, first in Lebanon, and from 1993 in African and Middle Eastern countries. With 26% of its consolidated IT sales revenue in the Middle East, this region is the largest of seven geographic markets for the group, followed by North Africa. As the market for computers and peripherals has seen margins shrink, the firm’s growth orientation is now in project integration and turnkey solutions. “The integration business has sustainable margins compared to distribution, which is based on volume at low margins,” Nassif said.

A recent example was a contract won by CIS in collaboration with an international partner to install Lebanon’s new passport issuing system. From input stations to the production of computer-readable passports, the complete solution covered all hardware components and software for the highly secure system delivered to the Lebanese state. While the group set up three hardware distribution hubs in France, South Africa and Dubai, CIS based their know-how for project implementation in France and Lebanon. Focal competency realms are in platforms, networking and solutions based on the products of leading global software and hardware providers, from Oracle and Microsoft to Nortel and Cisco, with technicians and IT experts dispatched from Beirut to various projects in the group’s areas of operations. In the domestic market, CIS is looking for annual double-digit growth. “It is our base market – we have a strong presence here,” Nassif said. “We want to do business and remain preferred vendor of IT.”

The HP product lines dominate the field clearly in some office peripherals. For desktop and portable computers, Compaq and HP are part of the international manufacturer segment competing for individual, institutional and corporate buyers of brand products. Nassif assesses brand computers as holding about one third of the overall PC sales, which in his estimate total around 60,000 units per year.

Plans by the government to facilitate e-business and plans by the Ministry of Post and Telecommunications to implement a public data network would boost the IT industry, the manager said. “E-services and e-banking and e-commerce are what is going to come. It will take some time but it will happen.”

Software Design

Software Design has practiced the art of programming in Lebanon since 1986, and its core product, the Visual Dolphin suite of financial and office management software, is a leader in the local market. “In one sentence: Things are going great,” said company founder and CEO Michel Nseir. “We are in a real expansion phase. Visual Dolphin is doing beautifully well and we are competing quite easily with international products.”

According to Nseir, the advantages Visual Dolphin offers to local and regional clients are that it compiles the same features available from international products but is localized to the profile of companies in the Middle East, and at a total cost of ownership that is four times less than for the big names in office management solutions. The company has kept its development capacities centrally focused in Beirut, although it grew regionally over the past few years, opening offices in the UAE and Saudi Arabia. Out of its team of over 50 employees, one third are consultants and one third are working in administration and sales. The remaining 19 are developers and all but two are based in Beirut.

“In Lebanon, we feel modestly that we continue to be leaders. In the region, we are still too small – I would even say extremely small – but we have enough to keep our company busy,” Nseir said.

Only in the domestic arena, the company decided to maintain its strong position of direct contact and sales to customers. In addressing regional markets, Software Design is betting more and more on relationships with resellers and partners. Software Design recently partnered with new resellers in Kuwait and Jordan but its most significant directional moves point to Germany and Canada. In both countries, the firm has appointed consultants in search for business partners, and Nseir is particularly looking to outsource some of the company’s work to Canada. Outsourcing from Lebanon to Canada? The development cost wouldn’t be higher in Canada, Nseir claimed, because from day one of operations, the Canadian government would extend grants and financial benefits to the firm – such as footing 40% of salary costs – that one could only dream of in Lebanon. If a partnership with a Canadian firm and manufacturer of a compatible software product line can be reached, finding customers and opening the North American market are considerations that play a role in Software Design’s planning. But a further very important – and not entirely comforting – need behind the strategy is that for a new identifier. “A Lebanese brand name is not appreciated,” Nseir lamented. “Europe and Canada have a better perception among Middle Eastern customers than a Lebanese product.” For example, Indian decision makers in companies in the Gulf would be willing to consider non-Indian products but not Lebanese ones, and in pitching to those decision makers, Software Design would have to hide their Lebanese identity, the manager said. Apart from Great Plains, a US supplier of business solutions that is part of the Microsoft realm and the fiercest competitor for business management software in the Middle East, the market for these products is divided among a good number of regional and smaller international providers. With turnover in the range of $1.5 to $1.6 million and claiming about 12% year-on-year growth between June 2002 and June 2003, Software Design is a well-established member of the Lebanese software industry. But in the absence of real promotion of the national ICT industry and image, Nseir is incensed about the lack of prospects and support for his industry. “Why do I have to go to Canada today, just to change my Lebanese identity? Three years ago, we were proud to be a Lebanese company,” he said.

Microsoft

For multinationals that choose to appear on the Beirut market, development and education seems to be a more of a priority that racking up the sales figures. Microsoft has made such a commitment to the Lebanese market by opening a representative office here in 1999. The software giant sees the country as a “potential market,” said Microsoft Eastern Mediterranean general manager Charbel Fakhoury. “Lebanon has always been a leader in ideas. But it has been slow on executing a unified vision. This is how I see where we are today.” “If we look back over the past four years, things have changed,” Fakhoury said. “Early on, we had issues on software imports with customs. It caused costs, created delays and a lot of efficiency issues. This has been resolved.”

Less beneficial to the firm were the slowdown of growth in telecommunications, internet penetration and adoption of e-services. High costs of PC ownership and connectivity, along with leisurely progress of legislation on things ‘e’ and Intellectual Property Rights discouraged faster development and kept Microsoft’s revenue growth in Lebanon lagging behind other countries in the region. But the company has been working closely with important sectors, Fakhoury said. ICT industry and private sector businesses, governmental entities and education institutions from schools to universities have all been the partners Microsoft sought out successfully over the past years. Over the period, the company brought to Beirut a good number of road show conferences and events aiming to win both developers and business decision makers to view their respective enterprises the Microsoft way. But it also supported dot-net clubs for students at five universities and sponsored a “smart bus” to expand IT awareness in rural Lebanon. Organizationally, Microsoft has structured its Middle Eastern presence into five sub-regions, namely southern Gulf, northern Gulf, Saudi Arabia, Egypt, and Eastern Mediterranean. The Beirut office, where 36 employees are based, is entrusted with the Eastern Mediterranean region comprising Lebanon, Jordan, Cyprus, Malta, and – as far as the restrictions of US embargo and export control regulations allow – Syria. A win-win business message of local and international synergies is key in the concept professed by Microsoft. “Our role is being a catalyst of IT in the economy,” Fakhoury said. “We want to increase the number of our partners and their level of skills.”

Without maintaining a large global services structure, Microsoft banks on partners and professionals certified under its software engineering qualifications to work with its tools and enhance the value of the entire business proposition of using Microsoft products. In Lebanon, the firm was an “early comer, early investor, and early supporter of the market,” Fakhoury said. In acknowledging the need to see things moving in all segments here, he classified the country as a potential market. “The effort we have to put in to drive things in Lebanon is higher than the effort needed in other countries. The market requires a lot of convincing and is decentralized. At the same time it is very demanding.”

In October, Mircosoft will launch a new set of its market-

dominant programs the likes of Word, Excel, Outlook, PowerPoint et al, together with further programs, server platforms and services solutions under the new label Microsoft Office Systems. The main launch event for the Middle East will be at the Gitex IT show and trade fair in Dubai. But the company is also preparing something for Lebanon although details are not yet available.

Terranet

The world of chatting and information sharing would be naught without the net. Internet service provider Terranet came to the Lebanese market in 1999, with the handicap of being a late starter who wanted to deploy the best technology while complying with international industry standards. The company’s start-up goal was to rise to one of the top five or six ISPs in a local market characterized by rapid growth environment and exciting (by local standards) subscriber pool of well over 100,000.

“From being number 17, it took us one-and-a-half years to rise to one of the top three ISPs in Lebanon, gaining a very good reputation as the number one contender for customer satisfaction,” boasted Joseph Saade, Terranet’s deputy general manager. It was to the firm’s advantage that most customers had not been locked into loyalty contracts and were ready to experiment with new providers. But as Saade also said, the path to becoming really a major player in the Lebanese market was paved with hardship. Within a matter of a few weeks and months after large-scale introduction and marketing of its service as provider of an integrated internet access and portal, Terranet saw its cash flow model thrown in jeopardy when a ruinous local price war among Lebanese providers slashed profit margins for the whole industry to the point that ISPs sold access far below cost. Following this irrational phase of price aggression, a wave of non-licensed internet-over-cable operators took most of the new home user market with 24/7 services. Furthermore, the revenue theory of the portal concept, which aimed to bind customers to their provider by offering content and directory services and then cash in on that loyal customer base by selling (mostly banner) advertising space, flopped globally. “We made the same mistake in saying we want to provide the AOL of Lebanon and make enough money from ads to cover the cost of the portal,” Saade said, admitting that this never happened. Nonetheless, Terranet today claims that its some 22,000 true clients, who provide a steady stream of dial-up subscription revenue, represent about 40% of the country’s regular dial-up customers. The firm is a contender in both corporate and dial-up markets. About one third of subscribers use the faster – and more expensive – 56k service, which is the top of what an internet user can draw on in this country. Terranet undertook an investment into the much speedier ADSL (asynchronous digital subscriber line) service, which started to dominate developed communication markets about at the time when Lebanon’s public sector decision makers moved towards deliberating the pricing structure for the 56k ISDN service. Terranet’s two-year old ADSL equipment is ready to run but could not be introduced, due to another lack of pricing regulation.

Outside of Lebanon, Terranet succeeded in several Middle Eastern ISP projects either as subcontractor to set up a network or as full partner in a new service. While the company is bound to maintain its portal and design capabilities in the sister company, TerraVision, Saade said the corporate emphasis will be on providing access services. Overall, Saade is very optimistic. The haunting possibilities of further price wars have been resolved and the termination of the non-licensed cable-internet business through the government will bring a flood of new subscribers, he said. “The market now has four to five ISPs and the public is very intelligent in that concern, knowing what each company is capable of providing.”

Saade claimed that his corporate customers trust Terranet as an advanced provider of technology and reliable customer support even if the ISP is not out to offer bargain rates. He is also confident of securing a good market share of the expected boom in new dial-up subscriptions over the next two years.

September 8, 2003 0 comments
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Business

The tortoise and the hare

by Michael Karam September 3, 2003
written by Michael Karam

After a two-year hiatus, Admic, the $100 million retailer that brought us BHV and Monoprix, is making its next move. This month sees the opening of a third 2,250m2 Monoprix in Zouk, while in November, Monoprix number four, with 3,600m2, will open its doors for business in Hazmieh’s Baabda Plaza. But why the wait, especially with its main competitor Spinneys opening roughly 18,000m2 in Beirut, Tripoli and Sidon? A case of the tortoise and the hare, maybe?

“We have been conservative in our expansion strategy,” explains Michel Abchee sitting in his Jnah office. “We wanted to make sure it was underpinned with a solid financial plan.” With Lebanon’s supermarket sector shaping up like a chess game, it is easy to see the strategic reasons behind Admic’s latest moves. Firstly neither Monoprix nor Spinneys have ventured into the Zouk, Kaslik, Jounieh area, and although Spinneys’ flagship is located in nearby Dbayeh, retailers admit that Keserwan shoppers cannot be counted on to venture beyond the Nahr el Kelb tunnel. Secondly, Admic’s presence in Hazmieh will pre-empt a 15,000 m2 Spinneys in the same area, slated for Spring 2004. The big guns however, remain in reserve. This month also sees the beginning of a marketing campaign for Admic’s $70 million, 175,000m2 indoor shopping mall at Nahr el Mott near Dora, which is due to open at the end of 2004. Furthermore, Admic still intends to bring French department store Les Galeries Lafayette to Beirut, where it is hoped it will eventually anchor the long-awaited Souks project in the BCD. Potentially the jewel in the Admic crown, Les Galeries Lafayette should have opened, had the Souks shopping mall not stalled over the issuing of building permits. “It is a shame, but these things are out of our hands,” shrugs Abchee. With 60,000m2 of gross lettable area (GLA), the Nahr el Mott mall is the biggest retail project in Lebanon, outstripping the Souks, which is expected to have around 55,000m2 of net retail space and dwarfing ABC’s 30,000m2 Ashrafieh mall and the Metropolitan City Center, which has allocated 25,000m2 for shopping. Admic’s Nahr el Mott mall will house an 11,000m2 Geant Casino hypermarket and an 18,000m2 BHV department store as well as 90 other retail units.

“It will be a genuine regional mall,” says Abchee, who insists that the issue of location has been thoroughly studied. “Look at the map and tell me that all roads do not lead to Dora,” he says, pointing to an architect’s model of the project. “The immediate catchment area is still Beirut, as the mall’s sheer size should ensure that it generates traffic from outside the immediate and primary catchment zones.”

Theoretically, his choice of location makes sense. According to what figures are available from the Lebanese statistics bureau, Greater Beirut and its northern suburbs represent Lebanon’s biggest spenders with 45% of the nation’s residents earning 60% of its income. Still, Abchee is used to flying in the face of conventional wisdom. The original pitch for the Jnah complex was met with skepticism. “No one believed people would travel to Jnah to shop, but it has become one of the most accessible areas in Beirut.” At $70 million, the project has gone over budget by around 10%, but Abchee is philosophical. “It is unfortunate that we got caught by the strengthening Euro, the introduction of VAT and a load of other new laws that have levied us at every turn.”

Admic began revolutionizing Lebanese retail in December 1998, when it opened BHV, the home furnishing and appliance-driven department store in Jnah. The store was the first phase of the one-stop-shop formula envisioned by Abchee and his two brothers Pascal and Gaby. Monoprix opened upstairs in early 1999 and the rest is history. “We used to come here on holidays and notice that there was no organized shopping,” says Abchee. “We felt we could change all that.”

It was a bold assumption, but the “BHV effect” has changed the way the Lebanese shop and the three stores – a Monoprix branch opened in Ashrafieh at the end of 2000 – turn over $100 million annually.

“We wanted to create Lebanon’s first one-stop-shop and in doing so, we also tapped into latent or unconscious demand,” says Abchee. “People suddenly decided they liked to spend on DIY and this led them to look at shopping in terms of lifestyle.”
 

More significantly, however, is that the BHV/Monoprix alliance in Jnah has seen the area begin to develop into a thriving – albeit shambolic – retail hub. “One of the main problems is the lack of planning,” says Abchee. “Jnah is evolving. Tahan and Homeline are here and soon Spinneys will open, but the planning is non-existent. It will be a while before we meet the international norms but this is what is needed.”

Nonetheless, Abchee is determined to bring new standards to a market that he sees as brimming with potential. “There is a shortage in quality retail units,” he says. “We have to respect certain trends and standards of the international retail market if more global brands are going to open here. This is what Admic is trying to do with the Dora mall.”

He has a point. For years the consultants have been preaching larger developments, increased car-borne shopping, better designs, scientific tenant mix, longer and more uniform opening hours, accessibility and parking. Despite the numerous malls that have sprung up over the last decade, only the BHV/Monoprix stores, Dunes in Verdun, the Spinneys (and presumably the new ABC mall in Ashrafieh) outlets currently come close to meeting these criteria.

One area where international standards are being met is the $350 million supermarket sector, where Monoprix, along with Spinneys, are consistently setting new benchmarks in service, professionalism and, most importantly, pricing.

“We [Monoprix and Spinneys] have spearheaded a revolution that has seen the price of fresh food come down,” says Abchee. “The consumer price index has seen prices increase by up to 5% in recent years but food has not even hit 1%.”

Supermarkets make up around 35% of the food spend in Lebanon. However, in most major European countries and the US and Canada it is around 70%, so there is room for a bit more growth. Abchee concedes that Lebanon will probably not hit the 70% mark any time soon and compares it to Italy, which has not embraced supermarkets with quite the same enthusiasm as its northern neighbors. He also scoffs at those who claim that the little (and not so little guys like Bou Khalil) are being squeezed by the big two. “Yes, others have suffered,” he says. “But if you don’t invest or reinvest in your companies, then you will face difficulties.”

As the tortoise might say.

September 3, 2003 0 comments
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Business

Bush’s flawed Middle East manifesto

by Claude Salhani September 3, 2003
written by Claude Salhani

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.

September 3, 2003 0 comments
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