Money Matters

Global research Highlights

by Bruce Steinberg
written by Bruce Steinberg

Investors seem to fear a hard landing, but the evidence for

one is close to nonexistent. Although the tech-dominated NASDAQ

has had some rough going, orders for computers were up

by 34% from August 1999 to August 2000, and telecom-equipment

orders advanced by 19%. That isn’t the image of a tech

sector that’s falling apart. Meanwhile, consumer spending appears

to have grown at a 5% rate in the third quarter. The economy

has lost some momentum, but remains healthy, in our

view. We still expect GDP to increase by nearly 4% for 2001.

• Our benign view of the world is based on the belief that the

New Economy is putting down ever-deeper and broader roots.

Specially, we believe that productivity gains will remain

strong, leading to rapid non-inflationary growth and decent

profit margins. We will be wrong if productivity gains suddenly

start to flag. Third-quarter productivity probably grew at

about a 3.5% rate, faster than GDP.

• Technology spending is at the center of the productivity revolution.

Our work shows that an acceleration in tech spending

now tends to lead to an acceleration in productivity within years.

Because tech spending is up by 27% on a year-to-year basis –

fastest pace of the expansion – we believe that structural

productivity gains are pretty much a certainty for 2001 and even

2002. What’s our 200 I forecast for tech spending? A somewhat-

slower but brisk increase of 22% in real terms.

• One thing that’s worrying tech-sector observers is the

euro. Tech has the highest European exposure of any S&P sec-

tor. Currency translations reduced S&P 500 EPS growth by

about three percentage points in the third quarter; logic

suggests that the figure was larger for tech companies. Based on

the assumption that the euro will stabilize, the adverse

currency effect will probably be only half as strong in the fourth

quarter; it should be neutral by the first quarter of 2001.

• The job market shows neither excessive weakness nor

strength. Stripping away special factors, September payrolls rose

by 204,000 jobs, in line with the performance so far this year. The

unemployment rate fell to 3.9%, but only because the labor force

temporarily shrank. Wage pressures are contained: hourly wages

were up by only 0.2% for September and by 3.6% on a year-to-

year basis, in line with their rate for the past five years.

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Money Matters

Regional Markets

by Executive Contributor
written by Executive Contributor

MOROCCO

The Casablanca Stock Exchange ended lower driven

by losses in leading shares as investors failed to

react to the announcements of first-half corporate results

that were somewhat in line with expectations. A

wait-and-see mood dominated the market as investors

kept to the sidelines awaiting the announcement

of promised reforms, including new incentives

for companies to list their shares on the stock market

and a series of tax breaks. Year-to-date losses now

stand at almost 17%.

EGYPT

The rising political tension in the region and the continued

liquidity crisis combined to deal a heavy blow to

Egyptian equities, which shed almost 20% since early

October and are down more than 50% since the beginning

of the year. This was heightened by news that foreign reserves

retreated to $14.64 billion in July 2000, down from

$15.13 billion a month earlier, while the Egyptian pound

has been traded at almost EGP4 to the dollar. In an effort

to contain the foreign currency crisis, the Central Bank issued

directives limiting daily cash withdrawals of foreign

currency to $20,000.

JORDAN

A cautious mood continued to dominate the Amman

Stock Exchange following weeks of Israeli atrocities

in the Palestinian Territories, bringing year-to-date

losses to 21 %. The banking sector led the decline as a

result of a drop in Arab Bank, which is one of the market’s

largest blue chips in terms of capitalization. Nevertheless,

statistics show that around 150 foreign mutual

funds have been operating in the Amman Bourse

over the past three years. Net non-Jordanian investment

at the bourse between August 1996 and the end

of August this year amounted to $281 million, or

around 6% of total market capitalization.

The performance of the largest 100 Arab banks in 1999

The positive effects on Arab

economies of higher oil prices

from mid-1999 onward and the

ongoing structural adjustment programs

in the non-oil countries saw

Arab banks recording healthy returns in

1999, with few exceptions. The combined

net income of the 100 largest

Arab banks rose by 10.2% to $8.3 billion,

while their combined assets

increased by 4.2% on their 1998 level to

$526.3 billion. However, these assets

remain smaller than the assets of any of

the largest ten banks in the world. For

example, the assets of HSBC Group

alone were $569 billion last year.

Average return on equity for Arab

banks stood at 13.9%, with return on

assets and capital-to-asset ratios at

1.58% and J 1.3% respectively. The top

Arab bank in the region in terms of

equity, the Arab Banking Corporation in

Bahrain, ranked as number 161 among

the world’s largest l000 banks in 1999,

followed by Saudi American Bank,

which ranked as number 166.

According to Euromoney’s Top 100

Arab Banks survey, the seven largest

Tunisian banks recorded the highest

increase in combined net income in

1999, up 84%, followed by the top

Bahraini and Egyptian banks with earning

growth of30.5% and 25.2% respectively.

ln the Gulf, the banking sectors of Kuwait and Qatar fared

well, with the top banks in

each country posting profit

increases of I 0.8% and

5.7% respectively. In

Saudi Arabia, the combined

pretax profits of the

nine banks (excluding

National Commercial

Bank, which had not yet

released 1999 results) rose

by a modest 1.5%.

A comparison of return on equity ratios, a key measure of profitability,

places the five top Qatari banks

in the lead with 17.7% average return

on capital in I 999, followed closely by the

largest 14 Egyptian banks, which saw

their average return on capital rise from

16.2% in 1998 to 17.5% in 1999. Return

on equity for the seven Lebanese banks

fell to I 6.9% in I 999, from 18.1 % the

year before.

The banking sector ‘s concentration

ratio measured by the market share of the

top five banks in the region is relatively

high. In Saudi Arabia, two banks, the

Saudi American Bank and the National

Commercial Bank, hold almost 50% of

the sector’s assets. The National Bank of

Kuwait and the National Bank of

Bahrain each holds 30% of their country’s

respective banking assets. Egypt’s

four state banks have 50% of total

assets and control most of the retail network,

while in Jordan, the top five

banks control 80% of the assets.

Management of Arab banks has so far

been emphasizing mainly asset size and

market share, believing that the large balance

sheet on the long haul would guarantee

competitive advantage. Instead,

management objective in the new millennium

should be to maximize shareholders’

value. This necessitates shedding

off businesses where the returns do

not cover cost of capital and allocating

more resources to those activities that

add value over time. Enhanced profitability

could also be achieved by

reducing operating expenses through

the effective use of modem technology

such as the Internet, and seeking consolidation

with banks in the domestic

market or abroad.

Arab banks will have to understand

their products and their customers’

needs much better and invest more in

technology if they are to survive the

onslaught of new competition. And if

they were too slow to adapt, the consequences

could be detrimental. Look at

what had happened in just four years to

stock trading on the World Wide Web,

and note that the stock market with the

highest proportion of Internet trading is

not in New York but in Seoul.

Consolidation would reduce operation

cost, minimize duplication, boost efficiency,

spread the huge technology costs

over a bigger base and cross market products

on a larger scale. However, consolidation

has to be planned carefully and

motivated strategically to be effective.

Despite the few consolidation deals carried

out in the region in the last two years,

mergers and acquisition activity remains

sporadic. It seems Arab banks are unlikely

to pursue serious consolidation activity

unless they are forced to do so by their

respective monetary authorities.

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Money Matters

SOLIDERE

by Executive Contributor
written by Executive Contributor

The political stagnation resulting

from the long break between the

end of the parliamentary elections

on September 3, and the appointment

of a new government by the

end of October, is taking its toll on

the market. Solidere’s GDR fell

2.41 % to $7 .075 (22/9), then fell

another 1.06% to $7 with the

materialization of S&P’s downgrades. International investors continued

trading cautiously as uncertainty surrounding the identity of the new

prime minister was still in question, though sentiment is leaning toward

Rafic Hariri. Solidere’s GDR lost 1.07% to finish the first week of

October at $6.925 (6/10). The escalating tensions in the Middle East

alarmed international investors who registered their concern by exiting

Lebanese GDRs. Solidere lost 2.17% to $6.775 (13/10).

AUDI

Two downgrades from international 25

agencies negatively affected Audi ‘s

GDR, first S&P credit downgrade of ~

Lebanon’s sovereign rating, as well as 20

Bank Audi and two other banks, citing

concerns on the deteriorating public

finances. Audi’s GDR fell 1.06% to

18.65 (22/9). Rating agency Fitch

IBCA then downgraded Bank Audi’s individual

rating, voicing concerns that asset quality will be affected by the

ongoing economic recession. Audi tumbled 4.83% to $17.75 (29/9). It then

fell another 2.37% to $17.33 (6/10) as international investors saw the political

stagnation, resulting from the transition of power, as negative and persistent

to Audi’s outlook. The increasing political instability in the occupied territories

crossed the border into Lebanon, driving Lebanese GDRs south, with

Audi’s GDR losing the most and dropping from 6.64% to $16.18 (13/10).

BLOM

S&P lowered its rating for BLOM

in line with the sovereign downgrade

as concerns mounted about

asset quality during the economic

recession. BLOM lost 0.72% to

$24. 125 (22/9), then plummeted

4.04% lo $23.15 after a volatile

week that saw its, price fall to

$22.85, but rebounded by the end

of the week on rumored foreign

buying. The economic and political freeze did not impress investors, but

BLOM attracted some buying leaving its price at $23 (6/10), a 0.65%

weekly decrease. The rising troubles across the border were immediately

seen by wary investors as the first signs of political instability in the

region. They sent BLOM’s GDR down 4.78% to $21.9 (13/10).

BLC

Going along with the market

sentiment, BLC’s GDR edged back

slightly, 0.36%, to $6.95 (22/9), as

the vacuum in the political arena

started 10 weigh on the economy.

BLC was not specifically affected

By the downgrade by S&P. The rating agency cited the overall

economic recession as the main reason for

the downgrade, while investors

believed that the old news was already reflected in the price. BLC held

its ground two weeks in a row (29/9) lo remain at $6.95 (6/10).

However, investors did not ignore the escalating tensions in the Middle

East that resulted in the halt of the peace process. BLC lost 1.08% to

$6.875 ( 13/10).

MOROCCO

The Casablanca Stock Exchange ended lower driven

by losses in leading shares as investors failed to

react to the announcements of first-half corporate results

that were somewhat in line with expectations. A

wait-and-see mood dominated the market as investors

kept to the sidelines awaiting the announcement

of promised reforms, including new incentives

for companies to list their shares on the stock market

and a series of tax breaks. Year-to-date losses now

stand at almost 17%.

EGYPT

The rising political tension in the region and the continued

liquidity crisis combined to deal a heavy blow to

Egyptian equities, which shed almost 20% since early

October and are down more than 50% since the beginning

of the year. This was heightened by news that foreign reserves

retreated to $14.64 billion in July 2000, down from

$15.13 billion a month earlier, while the Egyptian pound

has been traded at almost EGP4 to the dollar. In an effort

to contain the foreign currency crisis, the Central Bank issued

directives limiting daily cash withdrawals of foreign

currency to $20,000.

JORDAN

A cautious mood continued to dominate the Amman

Stock Exchange following weeks of Israeli atrocities

in the Palestinian Territories, bringing year-to-date

losses to 21 %. The banking sector led the decline as a

result of a drop in Arab Bank, which is one of the market’s

largest blue chips in terms of capitalization. Nevertheless,

statistics show that around 150 foreign mutual

funds have been operating in the Amman Bourse

over the past three years. Net non-Jordanian investment

at the bourse between August 1996 and the end

of August this year amounted to $281 million, or

around 6% of total market capitalization.

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Money Matters

Syria bound

by Executive Contributor
written by Executive Contributor

Banque du Liban et d’Outre-Mer

(BLOM), Lebanon’s largest bank in

terms of assets and deposits, has become the

fourth local bank to be granted a license to

open a branch in the Damascus free zone.

Fransabank, Societe Generale· Libano Europeenne

de Banque and Banque

Europeenne pour le Moyen Orient (BEMO)

have already been given permission to operate

in the free zone. The banks are required

to have no Jess than $10 million in capital at

their main branch in the Damascus free

zone. Each additional branch in other free

zones must have $1 million in capital.

“Most Syrian clients already deal with

BLOM in Lebanon and lots of other banks on

the border. This is just a foot in the door,” says

Bassam Yammine, corporate finance manager

at Lebanon Invest.

Another low blow

In its semi-annual survey on creditworthiness,

the American magazine

Institutional Investor ranked Lebanon 77th

out of 145 countries, down from the 74th position

it was ranked in the last survey. Out of 17

countries in the Middle East and North

Africa (MENA), Lebanon placed 12th. On a

scale of 0-100, with 100 representing the

least chance of debt default, Lebanon scored

36.8 points, below the regional and global

averages of 45.7 and 43.4 respectively.

Lebanon was ranked ahead of Libya, Iran,

Algeria, Syria and Iraq, but fell immediately

behind Namibia, Bulgaria, Guatemala

and the Dominican Republic. “Although

Lebanon has never defaulted on a loan, this

ranking is not surprising given the ongoing

increase in public debt,” says Nassib

Ghobril, analyst at Lebanon invest. In the

MENA region, UAE had the best credit worthiness.

Switzerland held its ground as the

country with the lowest chance of default

worldwide. The survey indicated that the

MENA region showed significant improvement

and noted that emerging markets have

made substantial progress in their willingness

to undertake financial reforms, boosting

investor confidence.

Good news … for a change

Foreign direct investment (FDI) in Lebanon

totaled $250 million in 1999, a 25%

increase from 1998, according to the World

Investment Report 2000, published by the

United Nations Conference on Trade and

Development (UNCTAD). The increase parallels

a 27% increase in investments worldwide

during the same period. The report added that

Lebanon will likely continue to enjoy an

increase in FDI due to it5 free economic policies

and the recent Israeli withdrawal. The privatization

plans were a prime factor contributing to

the increase. “In nominal terms, the flow of FD I

is modest compared to East Asia or other

emerging markets,” says Ziad Maalouf, vice

president at Middle East Capital Group

(MECG), adding that Lebanon needs to create

an attractive environment to lure more foreign

investment. Lebanon absorbed 2.26% of the

total FDI in the Middle East and North Africa

in 1999 and 2.87% of FDI in Arab countries.

BOB keeps growing,

but barely

Bank of Beirut (BOB), one of five listed

banks on the Beirut Stock

Exchange, registered profits of $14 million

during the first three quarters of 2000, a

1.5% increase over the same period last

year, according to the bank’s unaudited

results. BOB pulled in net profits of $4.3

million in the first quarter, $5.2 million in

the second quarter and $4.5 million in the

third. Assets increased 15.3% to $1.9 billion,

loans were up 10.25% to $50 I million and

deposits jumped 16.84% to $1.46 billion.

BOB was ranked ninth in terms of deposits

At the end of 1999 with $1.33 billion.

BOB has also launched its Beirut income

Fund. “The fund’s objective is to provide

existing and potential customers with a new

investment vehicle for their asset relocation

and secure for them a steady and superior

return,” says Michel Chikhani, manager of

BOB’s asset management department. The

fund will invest in Lebanese fixed income

securities, such as eurobonds and certificates

of deposit. BOB will be managing this

open-ended fund and has put a minimum

subscription requirement of $10,000.

Recession sensitive

Rating agency Fitch JBCA downgraded

Banque Audi’s individual rating from

B/C to C, citing the recession as the main culprit_

for the deterioration in the bank’s asset

quality. The agency also assigned a negative

outlook to the bank’s long-term rating of BB in

correlation to the outlook of Lebanon’s

long-term sovereign rating. The agency said

that higher levels of doubtful debt negatively

affected Audi’s profitability in 1999, with

reserve coverage lower than that of its peers.

In recent years, the bank’s high cost base has

depressed earnings, while the increase in revenue

expected from network expansion has

been delayed due to the difficult economic

environment. At the end of 1999, 9% of the

bank’s total loan book was classified as nonperforming.

“The bank has been negatively

affected by the recession. It has expanded in

a way that will benefit in the long run but the

economy is not helping,” says one analyst.

Eurobonds in,

government out

The outgoing Lebanese government issued

its last sovereign eurobonds worth 250

million euros ($230 million).

The four-year issue, which is lead-managed by

Germany’s Commerzbank, included a further sale of

bonds that were originally issued in 1999. Over

70% of the issue went to local banks. The rest

went to Arab and European investors. The

euro-denominated bonds carry a coupon rate of

8.25% and a spread of 320 basis points over

German government bonds. The government

has sold about $1 billion in net foreign debt so

far th.is year and has been mandated to issue up

to$ l.5 billion by year-end. In 1998 and 1999,

the government issued $2.7 billion worth of

eurobonds in a bid to replace short-term local

debt – two-year Lebanese treasury bills with a

14.14% interest rate-with foreign debt. “The

new issue is in line with parliament’s mandate.

It’s also a precautionary step for maintaining a

good reserve of foreign currency in the central

bank,” says Nabil Chaya, head of capital markets

at Banque Audi.

Still in the wash

Lebanon is one of seven countries that has

taken concrete steps to combat the flow

of dirty money through its banking system,

according to the 29-nation Financial Action

Task Force (FATF). But the country remains

on the organization’s list of 15 nations considered

to be non-cooperative in the fight

against money laundering. ”There is no

exchange regulation in Lebanon,” says one

banker. “But banks are watchful for questionable

transactions.” In the corning months,

the FATF will evaluate the progress of countries

to determine whether they should be

removed from the list. “We have less than a

year to show we’ve taken positive action

against such activities,” says another banker.

Dead on arrival

The outgoing cabinet has passed a draft

budget for 2001, but analysts say it is

unlikely to be adopted by the new government.

“Members of Hariri’s block criticized

the budget. They are unlikely to adopt

it without changes,” says one analyst.

The budget is considered to be unrealistic,

with revenues forecast at $3.73 billion,

expenses at $6 billion and a 38.15% deficit

The revenue figures are rather optimistic,”

says the analyst. “I don’t know where they are

going to get that money from. And debt servicing

is on the low side. Obviously, they fiddled

with the books.” By the end of August

the cumulative deficit had reached 51 %.

Despite a deficit of just 38% for the month of

September, finance minister Georges

Corm’s initial forecast of 37% for the year is

expected to be overshot by a wide margin.

Landslide

Solidere has reported its worst performance

ever. Due to the economic slowdown

and a freeze on permits under the

Hoss regime, the real estate giant came out

with $2.7 million in losses in the first half of

2000. Net revenues from land and real

estate sales were only $1.8 million, while

rental income produced $2.5 million.

Interest income, $9.1 million, was the company’s

biggest earner. There is some sort of

good news, however. Just before the previous

government left, it passed a decree

allowing Solidere to develop the souks.

Unfortunately, a Solidere official predicts that

it will take three to six months for the plans

to be approved by the Beirut municipality.

Merrill Lynch recently released a report

with a neutral recommendation for Solidere’s

GDRs. The investment firm claims that

despite the positive implications of Rafic

Hariri ‘s ascension to the premiership – which

will likely smooth the real estate company’s

relations with the government –

Lebanon’s recession will continue to hinder Solidere’s

growth. Merrill Lynch calculates net asset

value at $9.2, while the GDRs are hovering

just under $7. A number of local analysts are

also neutral about Solidere’s shares. “lf Rafic

Hariri becomes prime minister, I think we’ll

see limited appreciation of Solidere shares,”

says Ali Ayache, head of trading at Lebanon

Invest. “We’ll have to wait for the economic

plan of the new government. Foreign

investors will buy shares only if they’re convinced

that the economy is doing well.”

Getting a hold on things

The net asset value (NAY) of Lebanon

Holdings, the only closed- ended fund on

the Beirut Stock Exchange, has risen 0.5%

since June to $7.76. That’s below what was

registered at the end of 1999, when it reached

$7.94. But it is above the fund’s share price on

the Beirut Stock Exchange of$5.75.

The fund’s holdings of Banque du Li ban et

d’Outre-Mer (BLOM) increased from

265,000 to 273,000 shares, putting BLOM’s

weight in the fund at the maximum allowable

20%, up from 16.62%. “We still believe that

BLOM is a solid bank. It has proven its stability,

especially during the recession,” says

Khalil el-Khoury, asset management associate

at Lebanon Invest. A I 0% share buyback

was completed in September, bringing the total

outstanding shares down to 4.5 million.

Another buyback of 500,000 shares is

planned, says el-Khoury. That would represent

an unrealized profit of $2 per share.

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Tech Knowledge

High net worth ?

by Carl Gebeily
written by Carl Gebeily

Prepare for the next Internet feeding

frenzy. Sharks from several industries

are already circling the

nascent market for banking products and

services that will enable consumers to

receive account information and pay their

monthly bills online.

Amid a flurry of high-profile advertising

to boost online banking, Credit Libanais

rolled out its Internet service at the end of

July. More than 2,500 of a customer base of

around 90,000, or 3%, are already using that

service today, says Tony Zarifeh, the

bank’s manager of alternative distribution

channels. “Above all, consumers want

speed and the key benefit of always knowing

in real time where their finances

stand,” says Zarifeh. “That’s the initial

attraction of online banking.”

Michel Kilsey, general manager of

Internet Facilities, whose key area of interest

lies in e-banking security and online

payment, believes that the shift away from

the traditional brick-and-mortar neighborhood

bank may be inevitable. “Banks are

not all that different from other retail businesses,”

he says. “Unless they change, they

are likely to see continued erosion in all of

their markets.” Kilsey believes that technology

presents opportunities for growth in

new areas. ‘The future of banking lies in the

proliferation of systems that provide consumers

with online bill presentment by

merchants and utility companies, enabling

them to use the Internet to make payments

with a click of a mouse.”

Banks have long been looking to the web

to help them reach customers. Similar to

automatic cash machines, computers allow

 customers to bank without taking up

expensive bank teller time. But so far –

and unlike online stock trading that is practiced

by a growing core of private

Lebanese entrepreneurs – online banking

has not been a killer application.

Consumers have been just as slow as the

banks to accept the Internet as a medium for

managing everyday money matters. This

isn’t just a local syndrome. Even in the

US, the Internet backbone and trailblazer for

e-models, of the 37% of US homes that have

Internet access, less than 20% of that figure

actually bank online.

Lebanese banks are starting to approach

the Internet and online banking as, globally,

clients become more secure with online

financial transactions and e-business models.

“This shift in focus on access methods

reflects the fact that banks are aware of the

rapidly increasing interest in the Internet by

consumers,” says Michel Sarofim, head of

retail division at Byblos Bank, who plan to

go online before the end of the year.

“Banks are hoping to capitalize on this

trend by making their offerings accessible

over the Web. We hope that while surfing

the Web, customers will check out the

bank’s website and what it has to offer and

begin making transactions via the Net.”

Banks could even play a leading role in

transforming e-commerce in the region from

a curiosity to a mass phenomenon. However,

according to Kilsey, the banking industry

doesn’t understand well enough how to sell

technology. “Within the next few years, we’ll

see applications that are so compelling for digital

consumers and merchants that eventually

the light bulb will go on for the banks,” he

says. At the moment, most banks have a

wait-and-see strategy for the age of digital

commerce and they remain reluctant to follow

initiatives taken by Western banks and international

credit card associations.

This may change soon because of pressure

from new commercial interests establishing

themselves on the Internet. “Until about a

year ago, people from the Internet community

said: ‘Why do we need banks?'” says

Kilsey. “But now, many of the merchants,

especially those selling digital content like

software, have come back to the banks saying:

‘OK, we need your help to prevent

fraud and expensive losses.”‘

According to Kilsey, banks have been slow to see the

huge potential. “The marketplace is showing

that the banks can provide tangible

value also in cyberspace,” he says. “The

banks should be very happy with that.”

While most prophets of e-commerce predict

enormous growth rates within the next

few years, Kilsey is more cautious. “In the

West, online banking is really taking off

because banks are the trusted brands that can

guarantee consumers and merchants a safe

environment on the Internet without the

risk of fraud,” he says. “The smaller

Lebanese banks need to get a system so

secure that they are willing to cover losses

on the merchants’ side.” Because of consumer

skepticism payment over the

Internet will remain a curiosity -or at best,

a business-to-business province.

“Security remains the chief hurdle to the growth of

online structures.”

Internationally, high-tech security

already exists under the guise of the Secure

Electronic Transactions (SET) standard

that was developed by Visa and

MasterCard to extend the high security of

traditional banking to the Internet. SET

uses complex cryptography to transmit

credit card numbers over the internet, and

digital signatures to ensure that both customer

and merchant are authentic. The digital

signatures are issued by banks and used

by customers and merchants for identification

in the virtual world. The other leading

security protocol is the Secure Sockets

Layer (SSL), which is an open, non-proprietary

standard used in most browsers today,

such as Netscape and Internet Explorer.

Credit Libanais, with sensitive online

services that include money transfers and

treasury and capital markets, are firm

adepts of SSL. “The conservative buyers

and sellers – which is most of the mass

market- need this kind of assurance before

they accept payment over the Internet,”

says Zarifeh. “If it’s not provided by the

banks with the SSL standard, it has to be

done by something very similar to it. And

card holders can be assured that they don’t

have to worry about abuse of their card

numbers on the Internet.”

Even as a strong believer in the SSL standard,

Zarifeh readily admits that a lot of

other solutions to e-commerce safety will be

developed. And he said that banks will not

be able to force through a top security standard

like SET if they aren’t able to convince

the market of its advantages. A major problem

is that SET, as a completely new standard,

needs its own software, which currently

is not built into Internet browsers.

Also, a consumer who installs SET can do

so on one computer only and then must do

all Internet shopping from that machine.

Kilsey thinks that a new, enhanced version

of the widespread SSL standard will

improve security and could become attractive

because it will be distributed with all

new Internet browsers. For most merchants

and consumers, the enhanced SSL

standard will provide sufficient security.

Given adequate security, will all our

banking turn on line one day? Probably not.

“The advent of Net-only banks may seem

exciting,” says Kilsey. “The reality is, there

aren’t many customers who want to do

everything only over the Net.” When it

comes to their savings, most people

demand that there be some vault somewhere

in the physical world where their

physical money may be stashed.

And while electronic banks may offer

better interest rates on deposits and loans

because they have virtually no overhead

compared with traditional banks, the costly

clusters of branches are still valuable

assets, analysts say. ‘The fact that a bank has

a physical branch in the vicinity of a client

is an enormous advantage and will remain

an enormous advantage,” says Sarofim. “A

local presence implies solidity, whereas

anybody can set up a website.”

 The faith that most consumers place in traditional banks

is a powerful competitive advantage to

offline banks. “The problem Lebanese

banks have had historically is that they rely

on that loyalty and so they could take their

sweet time to get electronic,” says Kilsey.

On paper, at least, Credit Libanais’ on line

adventure has the stamp of success. Without

divulging any exact figures as to the number

of new accounts and the extra deposits that

their e-bank has brought them, Zarifeh

insists that they are pleased by the results in

these first two months. But there are a number

of financial institutions and banks that

have yet to get to first base, and many have

had to put off their Internet ambitions until

they update their computer systems.

It’s still very much the first round of the

online banking competition, but it’s apparent

that Lebanese banks are already finetuning

their strategies to capitalize on the

booming demand for accessing information

from anywhere. Having already cut into

the computer market with special PC-purchasing

plans that were launched last year,

the banking world now wants more than just

a piece of the Internet action.

In the West there has been a convergence

of the PC, Internet and banking industries,

a convergence that Lebanon is likely to emulate.

“We feel the time is ripe for

online banking, and for banks to take an

active role on the Internet,” says Suzanne

Saad of Banque Audi’s electronic banking

and card services. “The computer industry

needs connectivity to survive, and the

Internet industry wants to reach people on

the go, supplying information such as the

status of their bank accounts.”

Making account information available

electronically is certainly a step toward

offering what customers really want: a single

on line source of up-to-date information

about their finances, including savings and

checking accounts, credit cards and other

investments. “The Internet does offer

great opportunities for banks,” adds

Kilsey. ” But if they are to get the greatest

benefits from e-business, they must ensure

that their brands stand out in cyberspace –

not just that their sites are well-built and

easy to use.”

The power of Internet brands such as

Yahoo! and Amazon is evident. With most

major banks rushing to perfect online services,

use of the Internet as a key channel for

financial transactions is expected to grow

dramatically over the next several years.

Banks must therefore take steps to establish

their identity if they are to develop a strong

presence and thrive in a digital environment.

Only then may they hope to become medium-

sized fish in the global e-pond.

Questions to ask yourself when you consider banking online

Where do you pay your bills? If it’s at home on the kitchen table,

can you just as easily get to a computer? If you have computer

access only at the office, you may not feel comfortable having bills

scattered all over your desk. Are most of your bills to the same businesses

or people every month? If so, banking online would enable

you to set up repeat payments that would automatically pay out on

a particular day each month, saving a lot of time. If you tend to do business

with different people, stores and companies and don’t mind

addressing envelopes, you might want to hang on to your checkbook.

Do you foresee paying bills and transferring funds online? Or would

you use the service primarily to check your balances? If the latter is

true, your bank’s automated phone service will give you the information

much faster than you’ll be able to retrieve it by going online.

When you sign up for an Internet checking or savings account, have

your password sent to your local branch for you to pick up, rather

than having it emailed to you. Keep a hard copy of documentation

on your accounts from the bank in case any discrepancies occur.

If you regularly receive more than one bill from the same company

(for example, electricity bills for two different residences or two

different phone bills), be sure to enter the number for each account

on your recipient list in such a way that you’ll be able to tell them apart.

Otherwise, you might pay the wrong amounts to the wrong

accounts – mistakes that could take you hours to rectify.

Avoid installing or downloading online banking software or setting

up an online account outside normal business hours. Although some

Western banks have technical support around the clock, Lebanese

banks do not.

You may want to wait a few weeks before downloading or

installing upgraded software from your bank to avoid any early

glitches. When you do download or install an upgrade, keep a

backup of the program and your financial data on a storage disk

or a separate computer.

Last and perhaps most importantly, reconcile your accounts as frequently

as you would with paper-based banking

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Feature

Port of problems

by Marwan Naaman
written by Marwan Naaman

I t was just over a year ago that Paul

Kimberley, the e-commerce consultant

commissioned by the ministry of economy

and trade to streamline procedures at the

Port of Beirut, stood before an assembly of

government officials and leveled with them.

“Lebanon,” he said at a trade efficiency

workshop, “has absolutely no choice – it

must reform its trade process.”

He was given a firm pat on the back by the

government. The ministry of economy and

trade promised to completely overhaul the

Port of Beirut’s antiquated trading procedures.

Already much had been done to try and

speed-up the movement of goods in and out

of the country. In the mid-l 990s, customs procedures

were streamlined. The antiquated

Brussels Tariff was replaced with the modem

Harmonized Tariff. Twenty-three customs

declaration forms were scrapped in favor of

the internationally recognized Single

Administrative Document. And, in 1997, a

computerized custom’s clearance system

called NAJM was introduced, which when

fully operational in 2001, will electronically

link together customs, the Port of Beirut and

individual traders. But despite Kimberley’s

strong words of encouragement and all that

has been done to tum the Port of Beirut into

a transport hub, formalities at the port

remain as difficult as ever. Red tape and

bureaucracy are still a vivid nightmare and

corruption remains the one staple that merchants

and traders can always count on when

doing business.

If the government is to be believed, it

should take no more than three to four days

to clear goods at the port. But, says Fadi

Abboud, chairman of the North Metn

Industrialists Association, it takes an average

of 17 days. Businesses continue to pay a

range of fees such as the Free-In-Out (FIO)

charge of $175 and the $100 container fee.

What’s more, each ministry has its own

officials at the port checking for those

items that are forbidden from entering the

country. But there is virtually no coordination

between them. More than 20 signatures

are required to clear a container and officials

often become confused about what can and

cannot be brought into the country. A trader

is only allowed to start clearing his merchandise

once all original documents have

been presented and the merchandise

almost always arrives at the port long

before the original documents. This results

in costly delays because traders are only

allowed to keep their goods at the port for

two weeks free of charge. To speed-up the

process, says Abboud, huge bribes must

often be paid to port officials.

Exporting merchandise is just as tedious.

“The cost of shipping a 20-foot container

from Beirut to Marseilles, France, is $1 SO,

while the cost of putting the container on a

vessel originating from a factory ten miles

away is $600,” says Abboud. Government

and port taxes amount to $200, the FIO is

$150 and the clearing agent’s fee is $200.

“The clearing agent needs three days of

hard work just to get the container out of the

country,” says Abboud. “And this is in a

country where the minister of finance says

we should export or die.”

Not everyone is as critical of the system

as Abboud. Abdel Wadoud Nsouli, a member

of the Beirut Merchants Association,

says there have been some isolated

improvements at the port in the last couple

of years: “It used to take three hours to pay

import duties and get a receipt. Now it

takes a mere 15 minutes.” But he too is not

happy. The sluggishness of customs is one

of the biggest problems. “They still

observe antiquated, obsolete laws that date

back to the 1960s,” says Nsouli. Customs

authorities are given a free hand inside the

Port of Beirut to conduct inspections

whenever they deem it necessary, much

like policemen. “Customs should be at the

door, like in any other country, and not

enter the port,” says Gaby Moukarzel, the

trade efficiency project director at the

 ministry of trade and economy. “All

transgressions can be dealt with later – after the

merchandise has gone through the gate.”

Currently, there are four phases in clearing

merchandise. First, a trader must

declare his goods. Then comes the inspection

phase, in which all of the business person’s

documents are checked for accuracy

and customs officials search his merchandise.

In the third phase, customs officials

calculate the amount the trader owes the

state. And in the fourth and final phase,

the trader pays for his goods and the merchandise

is released.

Salim Balaa, NAJM project manager at

the ministry of finance, acknowledges that

the current system is cumbersome. But, he

says, once the electronic customs system is

fully operational next year, traders will be

able to bypass some of these steps. “If the

trader places an electronic declaration and

the government is satisfied, he automatically

jumps to phase three, skipping the inspection

phase,” he says. “The trader will gain

speed, efficiency and time, and it will be

much harder for individuals to cheat or

rely on personal connections.”

Balaa’s scenario sounds wonderful on

paper, but odds are that it will take more

than high tech gizmotry to overhaul the current

system. Balaa himself is not 100% sure

that the NAJM system will end ~e red tape,

bureaucracy and corruption. “Even if customs

authorities and individual traders accept the

NAJM system and all transactions run

smoothly,” he says, “they still have to coordinate

their moves with the Port of Beirut.

This is where problems may arise.” If the port

does not follow the same rules and regulations

as the two other parties, the reforms will not be effective. Dubai serves as a

model of a well-functioning port, says

Balaa. There, a single body called the

cargo community, oversees the whole

trading process from A to Z. As a

result, shipments to Dubai are cleared

within 24 hours.

Many local traders are placing their

hopes on the Port Development

Group (PDG). This Lebanese-owned

company, operating as a joint venture

with the Dubai Port Authority, was

awarded a 20-year build-operate-and-transfer

(BOT) contract to manage

the facility back in 1998.

According to Henri Nammour, the company’s Assistant

General Manager, PDG is scheduled to take

over management of the port next year. But

some traders are doubtful that the situation

will improve. Moukarzel believes that the

PDG’s impact will be limited at best. He

fears that the company, sooner or later, will

run into the same government roadblocks

that LibanPost- the company charged with

revamping Lebanon’s postal service – and

the two cellular operators Cellis and

LibanCell are currently facing. PDG, he

says, wants to tum the Port of Beirut into a

trans-shipment hub. And since the firm will

be paid for each shipment that passes

through the port, its interest will be to move

goods as quickly as possible. The problem

is that the sluggish, free wielding customs

authorities could easily throw a spanker

into PDG’s system of operation – slowing

the flow of merchandise and cutting into the

company’s revenues.

Already, business at the port is facing a

slowdown. A weak economy and the gradual

increase in customs duties over the last few

years have slowed the movement of goods

into and out of the facility. Since 1996, the

number of imports coming through the Port

of Beirut has fallen from $7 .5 billion to a projected

$6 billion by the end of this year. The

port’s future is, in many ways, tied to that of

the country. According to Abboud, that

leaves little reason for hope. “Investors are

running away from Lebanon because it has

gained a reputation as an anti-investor country,”

he says. “Things need to change quickly.

There is no time left, the entire country is

going bankrupt.

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Tech Knowledge

Government’s business will go online

by Executive Contributor
written by Executive Contributor

Government officials are starting to

take a much closer look at the

World Wide Web. Thanks in part to the

widespread appeal of the Net, the government

is becoming much smarter about

information technology systems and

processes, and it is now directing that

knowledge to Internet efforts.

The Lebanese government is still far

from having its computer systems set up.

“Our research indicates we should

spend at least $100 million a year for the

next three to four years to establish a

functioning e-government system,”

says Raymond Khoury, IT strategy

advisor for the government. The initiative

seeks to create a virtual government

field office that would serve as a

single resource for citizens to search for

information and eliminate the need to

stand in lines. Moreover, once up and

running, the system would enable the

public to conduct government business

online, such as applying for a passport or

paying a fine.

Ideally, the government would also

streamline the payment clearing process

so that businesses seeking licenses from

various ministries could clear payments

electronically through one source

instead of several. But there are several

obstacles that could slow such initiatives

– the biggest of which is lack of

money. “We have so far received

between $10-$12 million toward the

development of e-government,” admits

Khoury, adding that the venture would

have to be highly integrated with the

private business sector.

But finding appropriate private-sector

partners and changing the business culture

within the government so that e-commerce

can be adopted may be just as difficult

as raising the necessary money.

Companies – especially dot-corns – may

find that doing business with the government

will require two things Internet

companies Jack: time and patience.

Blueprint tor

a gov.lb, anyone?

I]or those companies that have the r patience to work with the government,

the benefits can be substantial. The

announcement that the government is

serious about going online has been greeted

with enthusiasm from the private sector.

Hewlett Packard, the US-based global

IT company, has responded with a

grant valued at $ 150,000 for the most

creative business plan for Lebanon’s e-government.

The competition, which is

organized by Lebanon’s Higher

Committee for Information Technology

in collaboration with Hewlett Packard,

addresses entrepreneurs from throughout

the Middle East. Competitors will be

invited to submit a summary of their

proposal, and, if accepted, to present a

complete business plan to an international

jury.

Nasser Saidi, the minister of economy

and trade, welcomed the private scholarship

adding that it was “the first time that

competition was geared toward e-government.”

After an evaluation by an

expert committee, the companies with

the best plans will be selected to receive

professional coaching and matchmaking

sessions with venture capitalists.

The winners, to be announced in

January 2001, will walk away with the

Hewlett Packard prize money, having

drawn up more than just a blueprint for a

red-tape mainframe and an unhappy website

of parliamentary eloquence.

Gateway to tree

speech?

In the West, it takes a mixture of modem

technology, strategic planning and

entrepreneurial nerve to make it in the

volatile Internet market. la the Middle

East, it takes al I of the above pl us – more

often than not – political guts.

Arabs might get in trouble for criticizing

their leaders on the streets of many

Middle Eastern capitals, but now they

can get on the Internet and join in with

“Mock the Governments.”

That’s one offering of an Arabic satire

page on AI-Bawaba (www.albawaba.com),

a new Internet portal not unlike the more

familiar Yahoo!.

AI-Bawaba, meaning “The Gateway,”

opened over the summer as the latest of

several major Arab websites, such as

Arabia.com and Planet Arabia, providing

mostly unfettered news, chat and

links to sites around the Arab world.

AI-Bawaba users can also go to the

relationships English bulletin board to

discuss taboo subjects in Arab society such

as, “Why are men in the Arab world

allowed premarital relations and women

not?” or “Should an Arab and an Israeli be

allowed to marry?”

In addition to the satire page, Al-Bawaba

intends to publish literature and articles that

have been banned in some countries in a bid

to push the limits of free speech. Local portal

contenders, Yalla! and Cyberia (see

cover story) should maybe consider taking

a leaf out of Al-Bawaba’s website.

A natural right

to a cyber homeland

Some battles are just easier in cyberspace.

After years of lobbying for its

own piece of cyber real estate, Palestine was

granted official status on the Internet with

the designation of its own two-letter

addressing suffix or top-level domain.

The ‘.ps’ domain – an addition to the list

of 244 country code designations – is open

to companies, organizations and people in

the Palestinian territories.

The action was taken with the endorsement

of the US government, which still

oversees the Web and must approve any

changes to the root files of the Internet – as

the instigator and prime mover of the Net,

the US is dispensed from country codes

and deemed the global webmaster.

“The ‘.ps’ domain is a top-level domain

just like any other,” says Yasser Dolah,

who is listed as the technical contact for the

domain. “Now Palestinian companies and

organizations will be able to register

under ‘.ps’ if they exist in that part of the

world, and people will know it is in that

part of the world.”

While the granting of the ‘.ps’ domain

was relatively straightforward – a limitless

cyberspace does away with the need

for street battles and bullets – the implication

of giving Palestine a long-sought

spot on the Net is more subtle: The

Palestinian Authority has been granted the

political standing of a full -fledged

nation. In a virtual sense, Palestine is

already a reality.

When the world is

in your hand

For years the industry has been promising

·’Internet appliances” – stripped down

devices designed to make getting

on line as easy as making toast. As the pundits

see it, businesspeople on the move as

well as households that have so far resisted

the siren song of the personal computer

would take the plunge once offered something

smaller, cheaper and less intimidating

than full-blown PCs.

Enter Compaq’s iPAQ Pocket PC, the

palm-sized wonder-chip which, if the hype

is to be believed, will be the product that

finally brings the appliance concept into

the mainstream. “The iPAQ Pocket PC

combines the functions of a mobile phone,

a pager and a handheld organizer, which

means customers only need to carry one

slim, powerful device,” says Compaq’s

Amr Salem, area manager for the Levant

region. “Compaq’s iPAQ Pocket PC is

small enough to fit in your hand and it connects

you to any information you need,

including email and Web browsing.”

With 206MHz and 32MB of standard

memory, the iPAQ – to be launched in the

Middle East in November at an undisclosed

retail price – packs a veritable punch and

should allow surfers to see the cyber-world

pretty much as they currently view the Web

from a PC or a Mac.

But a word of warning to prospective buyers:

Don’t bundle out your computer just

yet. Since the device has no hard drive, floppy

drive or CD-ROM, there’s no way you can

install or run additional software or even

load browser plug-ins. All it can handle is Web

browsing, email and instant messaging. The

iPAQ tries to make Internet access easy in the

same way toasters make toasting easy: by not

doing much else.

Going out without

leaving home

These days, Internet companies are trying

to make it even easier to stay at

home. A natural progression from auction

houses and e-tailers are the food-delivery

sites where you just boot up, surf to your

favorite restaurant, place the orders, then

wait for the grub to arrive.

Beirut Delivery (www.beirutdelivery.com),

run by a group of young graduates, contains

more than 80 restaurant menus from

around Beirut (other cities are in the

works). Click the appropriate neighborhood

on the home page, and you get links to

a list of nearby dining establishments.

Each restaurant has its own page, listing its

full menu.

There’s no extra cost for the service,

since Beirut Delivery earns a $30 monthly

subscription from restaurants that leave

their menus with them.

For now, ordering a sushi or a pizza via the

Net is a work in progress. Beirut Delivery

is not yet able to deliver to your doorstep you

still have to resort to the old-fashioned

phone to actually place your order. But at

least the service does mean that you no

longer need to rummage through the junk

drawer for a half-dozen tom menus.

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Best Sellers

Shakin’ things up

by Tania Avoukdjian
written by Tania Avoukdjian

C hange is slow in the Lebanese

business world, where family owned

companies are king

and the boss is the boss. Modem concepts

like stock options for employees

and even layoffs are an anathema to

most local firms. But NuSkills, a local

company that does printing on promotional

materials such as beach bags,

pens, posters and desktop omarnents, is

learning that in today’s business world

old taboos often need to be broken if a

company is to survive.

NI’\

Between 1997 and 1999, NuSkills

revenues dropped from $850,000 to

$500,000, profits shrank from

$500,000 to$ 130,000 and three key

employees left to form rival firms.

Salim Moujaess, NuSkill’s founder, knew it was time for action. One of his first items of business was

the most drastic. To bolster employee loyalty, he offered Nasri

Haddad, his most valued remaining employee, a 47% stake in the

company. He gave a 4% share to Danielle Marie Moujaess, a new

employee, and a 2% share to Joelle Ramy, also new.

He also laid off three under-performing workers, replacing them

with qualified professionals and hired seven new staff members to

boost his team of employees to 12. In an effort to increase efficiency,

Moujaess paid Urban Professionals, a human resource development

firm, $45,000 to train NuSkill’s employees.

The company also began reducing its variety and concentrating on

items that were selling well. For example, he dropped multicolored

matchboxes, keeping only two-colored ones as standard items.

“Sales from colored matches used to be our strong point, but we

stopped when competition caught on to our idea,” explains Haddad.

In order to increase profit margins, NuSkills reduced the number

of items being purchased from local distributors and began

importing directly from the Far East and Europe. Local purchases

went from around 50% down to 10%, cutting costs by about 12%.

In addition, the firm started eliminating non-paying clients.

“We handed out higher prices to our clients who were very tardy with

payments so they would stop working with us,” says Haddad. As

a result, the company’s client base shrank from 120 to just 45 large

customers. Among the biggest are such major brand names as

Canderel and Dunkin’ Donuts.

The company also tried to boost the quality of its products by

investing in over $35,000 worth of new machinery, including silk

screens, ovens and printing machines for T-shirts and badges.

Mistakes in printing were reduced from around 10% to just 2%.

Another $7,000 was spent on computers, printers and a new network

system, and $24,000 went to redecorate the company’s

offices and create a more professional image. “We wanted to

make a good impression on our clients. One way was to change and

improve the image of the offices,” says Haddad.

Last March NuSkills opened a wholesale shop at a cost of

$22,000. The store sells to retail outlets as well as to individual customers,

which helps offload excess stock. In the first six months of

operation, the shop has sold a modest $50,000 worth of merchandise.

But, according to Haddad, “60% to 70% of that amount is profit.”

The firm has also started exporting to Lagos in Africa and to

countries in the Middle East. Today, 30% of  NuSkills total revenues

come from exports, says Haddad.

The results of the firm’s restructuring have been tremendous.

Revenues for the first eight months of this year have jumped to

$900,000 compared to $200,000 for the same period of 1999. Profits

totaled $315,000 at the end of August 2000. Nonetheless this is a

highly competitive market. There are many firms in the same

field, and most are also doing well. Garff Group, which was established

in 1981 and includes Nestle among its clients, is the largest

such company in Lebanon and the Middle East and one of

NuSkill’s biggest competitors. “We stick to our word, and deliver

on a specified date,” says Fuad Abi Chakra, Garff Group’s marketing

sales manager. “This is the reason why we have gained the trust of

the market.” Mass Line, another local competitor with such major

clients as LibanCell and Cellis, has its own strategy: “We deliver

the right product at the right time and at the right price,” says Jean

Paul Massoud, ‘Mass Line’s managing director. Its sales reached

about$ I million last year, with profits around $75,000 to $80,000.

Garff Group and Mass Line also import most of their products and

offer a similar line of items as NuSkills. Both companies sell at small

profit margins and rely on high-volume sales. “We have a very low

markup of around 5% to 7% on average,” says Massoud, whose revenues

have been increasing by l0% yearly. Mass Line sells its merchandise

throughout the Middle East, particularly in Gulf countries.

According to Massoud, the reason for the success of so many companies

making promotional materials is the poor economy.

“Demand is increasing due to the economic situation,” he says,

adding that companies are becoming increasingly interested in using

promotional materials to advertise their products because it is less

expensive than advertising on television. ”The elections also

helped sales to increase during the past two months,” says Haddad,

who raised prices on some products during the campaign season.

NuSkills restructuring came at just the right time: It saved the company

and turned its fortunes around. The firm is expecting revenues

to reach $1.4 million by the end of the year, with profits of $490,000

– its highest ever. NuSkills’ revival is proof that the key to saving a stagnant

company is a willingness to change, sometimes dramatically. The

question is: When will other Lebanese firms learn this lesson?

 

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For your information

Out With the old

by Executive Editors
written by Executive Editors

Among the newcomers to win in the recent elections, Ghinwa

Jalloul, 38, is just one of ~three female members of parliament.

Running on Rafic Hariri’s ticket, she beat out prime minister

Salim Hoss with more than double the votes. With a PhD in

computer science from the University of Technology in

Australia, Jalloul has taught at the American University of

Beirut and worked with the ministry of administrative reform to

introduce computer technology. ExecuT1ve recently spoke to

Jalloul about her plans as an MP

You won against the first Lebanese prime minister in history to lose

his seat. How does that feel?

JALLOUL I feel that I’ve achieved something, not only for myself,

but also, for women in general and for professionals who would like to

participate in recreating Lebanon, but have always felt alienated. The

responsibility in this respect is enormous.

As far as Dr Hoss is concerned, I never considered my running for elections

as something against him or his seat. There were other candidates

in the running and we were all competing for the same seat. I look at

it as my right to run for a seat, like every Lebanese.

Do you Intend on working to Improve the legal status of women?

JALLOUL Supporting women is on my agenda and on that of the

group I belong to in parliament. There is legislation that can be

changed to support women. When a Lebanese woman marries a foreigner

she can’t give him citizenship; the citizenship issue I think is a

fair right for women. There are women and organizations that have been

working on these issues for a very long time. I don’t intend to take their

role; I appreciate what they’ve done and would like to cooperate.

One part is related to the legal aspect of marriage and other issues.

Lebanon is a group of many sects and personal status laws have to take

into consideration specific issues related to the different sects and religious

groups. I don’t think that we should address this independent of

the whole situation of political confessionalism. Change should start

there, and there should be dialogue among the different groups in order

to reach solutions that would satisfy all Lebanese.

How do you plan to promote IT and e-commerce?

JALLOUL First we can use IT to reform the administration and we

need to make our laws consistent with using IT as a basis for our work.

This would improve efficiency so that people feel that there are institutions

supporting them and this would reflect on the economy positively.

With reform, business would flow in a smoother manner. This

is a long-term thing and it needs to be worked out with care.

There needs to be a plan to provide better infrastructure and improve regulations

in relation to telecommunications and e-commerce, by providing

government support so that IT can flourish at the private sector level.

can IT become as vibrant a sector here as It Is elsewhere In the world?

JALLOUL This is indeed a possibility, but we have to give it the proper

platform. We have the most important component – the human

resources, here and abroad. If you provide the proper support from the

government in terms of regulations and probably taxes, we can make

it happen.

Are you Interested In a post as minister, and If so which would Interest you?

J ALL OU L Why not? Being a woman doesn’t mean that I’m not interested

or that I’m not capable of getting such a position. As for what position,

I’ll leave that. If anything comes through then we’ll see.

What should be the priorities of the new government and parliament?

J A LL OU L First there should be a new vision of what is needed to get out

of this economic crisis. I think this is priority number one for both – full

cooperation to agree on a vision and for all parties involved to look forward.

can a new prime minister and government make a difference?

JALLOUL Yes. When I decided to run my choice was Hariri, because

l saw how he operated as prime minister. I believe in the vision he was

implementing. I could see it would lead Lebanon in a positive direction.

I believe Hariri could make a difference, because he’s a successful person,

he has contacts outside and being in that position gives confidence.

But the debt grew and the recession began under Hariri.

JALLOUL When we came out of the civil war, Lebanon was devastated.

A major plan was needed to move the country forward. So there

was money spent on reconstruction, on education, on medical care. A

lot of money was spent, which is where part of the large debt came from.

But the economic situation was bad when Hariri came to power.

The criticism is that he was borrowing money all the time. This government

borrowed more money but never invested in projects, and this

is why the economy went into recession. Hariri was borrowing money

and investing. The economy was growing; now growth is negative. If

Hariri’s approach was given the chance to continue we would have its

positive results. With him back in office, we would be able to get out

of the recession.

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For your information

Feeling the squeeze

by Executive Contributor
written by Executive Contributor

The recession is making itself felt in the number of new businesses starting

up and capital investments. According to the latest statistics published

by the ministry of industry, the number of newly established industrial

firms by the start of August this year totaled 276. That’s down 17%

from the 333 firms that were started up during the same period of 1999.

Capital investments declined by 16.5% from $63.5 million during the first

seven months of last year to $53 million during the same period of 2000.

“Considering the discouraging recession Lebanon is facing, a lot of

entrepreneurs and businesses hesitate before investing and setting up ventures

locally,” says Nassib Ghobril, analyst at Lebanon Invest.

Signing on

A Canadian delegation

that was

in Beirut during the

first week of October

signed agreements worth$ I 0.5 million. The

objective of the visit was to

boost trade links between

Lebanon and Quebec, where an estimated

100,000 Lebanese reside. One of the deals, worth $10 million, consists

of building and equipping a research center for cancer, which

will employ up to 50 people in Lebanon. The delegation was headed

by Guy Julien, Quebec’s minister of industry and commerce, and

included representatives from 22 businesses. Several Quebec based

companies are already present in Lebanon, including the

National Bank of Canada and Techni-Serv. And Liban Post is two thirds

owned by a Canadian consortium that includes SNC-Lavalin

and Canada Post Systems Management. During 1998 and 1999,

annual exports from Quebec to Lebanon totaled $16.7 million, of

which pharmaceutical products and automobiles accounted for

20%. Exports from Lebanon to Quebec were just $6.7 million, half

of which was accounted for by cement.

Southern discomfort

The International Labor Organization (ILO) has earmarked over

$16 million in aid for the former occupied zone and plans to

start work in the region immediately. Few other donor agencies have

sent any kind of assistance to the South, an area that is facing its

worst financial crisis ever. The international donor conference for

the South that was scheduled to take place in October was postponed

due to a lack of interest on the part of donor nations, who wanted

first to see Lebanon send its army to secure the border with Israel.

The Lebanese government has since turned to non-governmental

organizations in search of financial aid. ZeinaAli-Ahmad, from the

United Nations Development Program (UNDP), says that so far, $2

million has been sent to the South. This sum, which was sent by the

UNDP and the council for development and reconstruction

(CDR), was mostly for the execution of small projects, job training

and local mobilization. Ali-Ahmad says that additional aid from

the Kuwaiti Fund and the Islamic Fund is on the way.

A boost for Bekaa

A $300 million agro-industrial project has been announced for the

Bekaa. Financed by the Egypt-based Arab Brothers Group, the venture

will include a flourmill, a sugar production plant, a sunflower and soybean

oil press, a water-bottling plant and a pasta plant and will take four years

to complete. Middle East Food Industries, which will be in charge of

implementing and managing the project, plans to build a warehouse with

a 50,000-ton capacity and a cargo dock at Tripoli port that can handle 20,000

tons a day. While 20% of production will meet Lebanon’s need, about 80%

will be exported to the Arab world.

But the local milling industry view the development as a threat to their

operations. “Investing in a sector that is already so saturated will eventually

cause the project to fail, pulling other milling industries down with

them,” predicts Arslan Sinno, CEO of Dora Flour Mills, adding: “They’re

here to take advantage of the subsidy system.”

Oil from Saddam

Lebanon is exploring future possibilities of oil cooperation with

Iraq, according to the ministry of hydroelectric resources. The

sanction-riddled nation has a similar agreement with Jordan, whereby

Iraq provides the Hashemite kingdom with oil and oil byproducts

in return for concessions that ease Iraq’s crippling debt. Samih al Rayess,

general director of oil at the ministry, says that although the

agreement is still pending, there is great probability that Lebanon will

adopt a policy that closely resembles Jordan’s. “Oil will be imported

from Iraq,” he says, “and either used for domestic consumption or

exported to other nations, using the Port of Tripoli as a transit point.”

Iraq has been under UN sanctions since it invaded Kuwait in I 990.

Taxi on the runway

S yria’s official news agency SANA reported that Syria and

Lebanon are working on a joint airline to service cities in both

nations and in neighboring countries. Called Air Taxi, the company

will operate much like a cab service, flying businesspeople from

Beirut, Damascus and other cities to such destinations as Amman,

Limassol, Larnaca and Cairo or to virtually anywhere requested by

potential customers. Air Taxi will consist of several modem business

jets and has a reported capital base of $80 million. Arab businessman

Yassin Doghmosh is the company’s major shareholder.

High hub hopes

Can Beirut become a transport hub for the region? A task force created

by the Beirut international shipping chamber, Trans

Mediterranean Airways (TMA) and the syndicate of Lebanese ship

owners certainly hopes so. “We are trying to form a working group

to tackle issues such as multimodal transport,” says Roula Hamadeh,

TMA’s marketing manager. “We are cooperating with other representatives

of the sea and land transport sectors in order to establish an

integrated transport network to, from and through Lebanon.”

The goal is to facilitate and coordinate air, land and sea shipping to bring cost

and time savings to companies. The group also plans to work with government

authorities to amend laws and create strategies to help

Lebanon regain its role as a regional transit hub. That won’t be an easy

task considering Lebanon’s cumbersome bureaucracy – and most

notably the outdated and snail-paced customs procedures.

Dial away

The ministry of post and telecommunications is offering new fixed

line services to Lebanese consumers. Khaled Ghazal, from

Ogero (the phone company operating under the ministry’s umbrella),

explains that a variety of services are now available, including

call forwarding, wake-up calls, and conference calls. Each option costs

LL25,000 for the first month; subsequently the price drops to

LL5,000 a month per service. Ogero is also offering two new hotlines

for both customer service and repairs, and will soon have a website

to provide users with phone bill information. These options are expected

to help the MPT better compete with the cell phone industry.

Deal, what deal?

Minister of information Anwar Khalil recently

announced that the government had sold 49% of

Tele Liban to Arab Radio and

Television (ART), which is

owned by a Saudi company.

Although Tele-Liban’s president

of the board Ibrahim

Khoury refused to comment

about the sale, sources close to

him have revealed that the

shares were sold for about $7

million – an extremely low figure,

since the station is worth an

estimated $50 million. The

government and ART have also

supposedly agreed to lay off all

station employees and to limit

the government’s share of airtime

to a maximum of 30 hours

a week. Elias Abu Rizk, head

of the General Labor

Confederation, denied any

knowledge about the deal, saying that the news was nothing

more than unfounded rumors and that the government hadn’t

concluded a signed agreement with ART or any other company.

Workers of Bata unite

The closure of Bata’s shoe factory in Dekwaneh has created a flurry

of controversy and negotiations over the 120 employees who

lost their jobs. Bata officials claim to have offered its former long-term

employees generous severance packages that go beyond its legal obligations.

But after workers staged protests in front of store outlets,

demanding their jobs back or better compensation, Bata revised its offer.

The new package included a month’s payment for each year

worked plus an extra four months paid notice, five months for those

who worked for the company for 20 years and six months for those who

have worked longer. But that still wasn’t good enough for laid-off workers,

who found support from the ministry of labor in their demands for

double the original compensation package. Bata accepted to pay in

installments but is still being pressured to pay the full amount upfront.

Although taking the matter to court may be financially better for

Bata, the company says it hopes not to use that option. “Most of the

employees have been working with us for years, and we prefer to

solve the problem in a reasonable manner,” claims Rafic Saloum,

industrial manager at Bata, adding: “We are close to reaching an

agreement on the matter.”

Both the retail and manufacturing division of Bata have been present

in Lebanon, and the former will continue its operations.

Bata’s local manufacturing division was shut down due to an

accumulation of $10 million in debt.

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