Cisco Systems, one of the world leaders in networking

solutions for the lnterqet with $18.9 billion in revenues,

decided to open a regional office in Lebanon. The office

will manage the Levant as well as Armenia, Georgia,

Azerbaijan, Uzbekistan and Tajikistan. Even though Cisco

claims to have over 70% of the local market, its office will

operate in a country that has often been unfriendly toward

investors. EXECUTIVE spoke with Mohamad Abdul-Malak,

Cisco’s area manager, about its reasons for choosing

Lebanon and the company’s plans for the future

Several foreign companies have ongoing disputes with the

Lebanese government. Wouldn’t H have been better to set up your

office in another country?

ABDUL–MALAK We see Lebanon as more dynamic compared to

neighboring countries. Lebanon has a better business climate, which

is due to private investors. When you look at Jordan and Syria, most

of the projects are government-related. We cannot depend mostly on

government projects. It takes too long and the process is not IT-related.

People who buy from us are those looking for value. I always use

an example based on cars. The Koreans make good low-budget cars.

But if you want to buy a BMW and you are basing your budget on a

Korean car, you cannot match it. This is the problem we have with

governments. They want all the values, all the features, but they want

to pay for the product that is not within the budget.

Lebanon also has more talent and more people exposed to technologies.

All expatriates that come back to the country bring a

wealth of experience, ideas and visions that we’d like to implement.

Have you faced problems operating In Lebanon?

ABD UL–MALAK The main concern is on a day-to-day basis. We

have, for example, IP telephony. This is definitely not voice-over IP. It’s

just to enhance the application internally. When you hook it to the outside,

you’re still using the PTT 100%. From the PTT point of view, it’s

the same. We needed a demo for one of the biggest Lebanese banks

moving into its new headquarters. We wanted to import an IP telephone;

a telephone that can be connected to a network, like any other PC. We

could not import a single telephone at the airport, because what they saw was voice-over IP. It was a lot of effort for our partner. It even got to the point that he had to talk to the presidential office to have it cleared.

This raises a question: How are we going to import our equipment? We receive equipment on a daily basis for internal use, not for commercial.

Is creating a Silicon Valley In Lebanon feasible?

ABDUL–MALAK The problem here is legislation. If! go to Jordan or

Dubai, I would receive import/export tax exemptions, and there are

other facilities provided by the government. We need a leader in the government who

says, ‘Where are

we taking Lebanon?’ I don’t think Lebanon will gain on banking services

like it used to. The answer to an IT initiative for a country like

this should be “yes.” If the Indians can do it, why can’t we?

However, you need a leader who can drive it. What is required is to

change the administration, so that when I import a single CD from

the Cisco office in Dubai to the Cisco office in Lebanon, I don’t

have to pay LL200,000 per CD every time. This is ridiculous.

Does the Lebanese market have a lot of potential?

ABDUL-MALAK To look at the market, I have to compare it to

Jordan. Lebanon is still ahead of Jordan when it comes to Cisco, mostly

because of the banking sector. It has pioneers in technology; it’s capable,

it performs well and our partners have supported them well. The

market has more potential. Here I have more opportunities for external

projects with Lebanese firms. I’m about to sign a project that includes a

regional ISP network. It happens that those in the firm are Lebanese. So

we benefit from being here, and that’s what we look at. We’re more

aware in this market than elsewhere, and this is due to the buying power.

There’s more money here than elsewhere.

What growth are you forecasting In the Levant?

ABDUL–MALAK Our growth in the Middle East is following the

company’s worldwide growth, which is about 45% to 50% in revenues

annually. In Lebanon growth is above that in the region and worldwide.

How will you maintain or increase your market share?

ABDUL-MALAK Number one is focus – providing enough technical resources in the region. We want to focus on how to gain the services in the market. This is how Cisco will maintain its edge and market share.

You also differentiate yourself from your competitors. We’re not box

pushers; we’re not the cheapest. I don’t like the word cheapest, because

it can’t buy anything. If someone is looking for a minimum investment,

we can talk. We can adjust the solution; we can adjust the service to fit

his needs. These are the differences that we want to maintain.

E-businesses are mushrooming in Lebanon. From

Elmazad to SoukLebanon, everything from

microwaves to CDs to medical chairs are being sold

over the Internet. But e-commerce is still in its embryonic stage.

Only 2% of the population is online. E-commerce sales are estimated

to be around $20 million, most of which is business to

business. But e-commerce is more than just buying goods at the

click of a mouse. It is changing the way we live, work and do

business. The sooner we unlock its power, the faster we can reap

the benefits.

E-commerce reduces the price of goods and service. In our

physical world, goods move from manufacturers to wholesalers

to distributors and finally to consumers. E-commerce gives consumers

the opportunity to buy goods straight from the manufacturer,

avoiding the markups charged by intermediaries.

Consumers are the winners. With the Internet, they are armed with more options

and information to find lower prices.

E-commerce provides consumers with

customized goods and services. In our physical

world, suppliers produce product lines

that they believe will appeal to buyers and

buyers make do with what they are offered.

Thanks to e-commerce, customers can

design their own products by selecting from

a menu of attributes, components, prices

and delivery options. With this power, companies can secure the loyalty of their customers like never

before. More importantly, with each transaction, a company

becomes more aware of the customer’s wants and needs.

Hence it is better able to anticipate and fulfill them.

E-commerce also gives people access to the global marketplace.

Businesses are no longer restricted to geographic locations.

In Sri Lanka, businesses have capitalized on this by creating

Cybertrader – an electronic e-mall for traditional and nontraditional

exports. This service groups the products of small

businesses together, increasing the chances that a buyer will find

what he needs.

But the government must foster an environment that

encourages the use of the Internet. It must ensure that the

telecommunications infrastructure is high quality, reasonably

priced and up-to-date. Since the end of the civil war, the government

has rehabilitated and expanded its telephone network.

Today there are more than 976,000 phone lines. The number

of Internet service providers (ISPs) has increased from two

in 1996 to 15 in 2000. Intense competition has brought monthly connection fees down from $250 in 1996 to $10 today.

But there are still only 84,000 Internet users in Lebanon.

Access must be increased and prices must decline further. In

order to maintain and improve technology, it may be best to privatize

telecommunications. A strategy for this has been prepared

but will not be addressed until a new government is

formed. Beyond privatization, the government must build

Internet access capabilities. The governments of Malaysia and

the UAE are financing business incubators and constructing

technology investment parks. South Korea’s Cyber Korea 21

Project will create a countrywide high-speed network by

2001 so that anyone, anywhere can receive multimedia services.

At the same time, the financial sector must be able to handle

online transactions, by providing easy-to-use payment tools that

permit the rapid transfer of electronic funds across borders. The security and authentication of those funds

must also be ensured. Lebanon’s dynamic

banking sector should have little trouble

meeting this challenge. But bottlenecks

remain. Although credit and debit cards

are spreading, people are reluctant to make

purchases over the net because they fear

fraud and abuse.

An efficient distribution and delivery system

must also be assured. Without this, all the benefits

of e-commerce will erode. These include transportation, customs and postal

infrastructure. Lebanon’s record has been dismal in this regard.

Transportation into Lebanon is relatively expensive. LibanPost,

which took charge of the postal services two years ago, is suffering

from a number of problems including excessive bureaucracy.

More recently, it was forced to re-negotiate its contract with the

government. Long delays and exorbitant costs plague the customs

authorities. Despite reforms, it still takes up to 17 days for an

importer to clear goods. It takes seven days to export goods. For

each container entering or leaving the country, bribes and baksheesh

represent between $350 and $450 in extra costs. There are

49 agencies that can effectively prohibit or restrict imports and

exports. Add to this the costs incurred from trade professionals,

customs brokers and shipping agents, all of whom have an

interest in keeping the current compl~xities in place.

E-commerce is here to stay. Its benefits are immense. We need

to get everyone connected to the Internet and use it to its full potential,

not simply for sending emails and browsing websites.

I was shocked by Mr. Walid Khoury’s article. His total lack of objectivity,

insulting remarks about France’s victory in the European football

cup and generally twisted analysis are unworthy of a professional

publication like EXECUTIVE. His article denotes such a manifest antagonism

toward France, and such an inferiority complex toward his fellow

francophone Lebanese countrymen, that even his few correct observations

lose credibility. I’d like to offer some counter-arguments to the cultural,

political and economic issues he raises throughout his piece.

Lebanon’s most important wealth is its cultural pluralism, especially its openness

to the West. I find it fortunate that most educated Lebanese speak French

and English-we need both, if only to counterbalance the negative cultural

influence of our “sisterly” eastern neighbor. (Maybe Mr. Khoury would have

done better to direct his criticism to this invasive neighbor instead.)

As for the respective weight and role of French and English in Lebanon

they are, of course, quite different: An estimated 69% of primary and secondary

school students choose French as a second language, while only

31 % opt for English. More importantly, while English is primarily used as a communication and

business language,

French is part of our

country’s cultural identity .

In an era tom by globalization

between “Jihad

and Macworld” (to quote

Benjamin Barber’s

book), this multicultural

identity, and Lebanon’s

continued fight to be different from neighboring countries. have become

its raison d’être.

The US has proved time and again that it has no particular geopolitical

interest in the survival of Lebanon, using the nation as a mere

pawn in its regional strategy. On the other hand, France’s historical ties

and friendship toward Lebanon are an invaluable asset, especially at

a time when our independence, our identity and our very existence continue

to be threatened.

I find it strange that while both Time and Newsweek have just published

special issues on France’s economic revival, EXECUTIVE, or rather Mr.

Khoury, should remain so completely out of touch. For example, the March

cover of Newsweek read: ”The French Revolution: how high tech and the

pursuit of wealth are driving Europe’s leading economy.” Noting the fact

that France enjoys sustained growth rates since 1998 that are well ahead

of the other big European economies (Germany, the UK and Italy), the magazine

describes today’s France as an appealing mixture of tech startups,

soaring markets, falling unemployment, cultural flexibility and openness

to the world. I’d like to quote a standing joke, circulating from large corporate

boardrooms to tiny startups, to further illustrate my point: ·’I like

the 35-hour work week so much, I do it twice a week.”

As for Lebanon’s lack of competitiveness and the excessive weight of

the state in our country, it is on our government and not on the “‘French

economic model” (which has become more neo-liberal) that we should

lay the blame. Indeed, French influence did not prevent Lebanon from

having a lightweight public sector before the war, and it is only since 1990

that the state apparatus grew out of control.

In any case, there is no ideal economic model that can be replicated everywhere.

Rather, each country should determine a distinct path to development,

based on its own history, resources and culture. The US certainly

has the most dynamic economy, but also the highest rate of income disparities.

Instead of pitting the American model against the French one, we

should take the best of both worlds, confront the challenges of globalization,

and reach for the hopefully forthcoming regional peace. Ill

Ibrahim Tabet is the director of the Association des Publicitaires  Fra11copl,011es

and the general secretary of the Forum Fra11copl1011e des Affaires

Air liquid under new management

A handover ceremony took place at the end of

July at the Palm Beach hotel between the ex –

m•n•11er of AIR LIQUlDE/SOAL Nr. Didier Cuny

and the new manager Nr. Fouad Haddad.

Participants Included several Industrialists, hospital

 managers doctors, representatives of the

French embassy and French community members.

Nr Fouad Haddad thanked Nr. Cuny for his successful accomplishments

since 1996 at SOAL and asked

the guests to join him In wishing Nr Cuny great

~ In his new career In France.

It is Important to mention that SOAL Is a

subsidiary of AIR LIQUlDE Group, the worldwide

leader in the production of 11a• es, med/a,/ and

Industrial equipment.

AIR LIQUlDE/SOAL has been active In Lebanon

since 1928 and continues to offer the best service

to Its clients In the various field of Industry,

hospitalization and environment.

A year and a half ago, Lebanon’s contractors were locked

in a rough-and-tumble wrestling match with the government

over roughly $400 million worth of unpaid

bills for public sector construction projects, some of which

extended back three years. When the government finally agreed to

pay up, it did so with three-year treasury bills that carried a 5.6%

interest rate. In order to pay back their creditors, contractors were

forced to sell the T-bills to banks at discount rates – the rate that

banks charge to buy T-bills before maturity – that ranged from 8%

to 10%. Couple that with the interest lost while they waited for their

money and some contractors were lucky to walk away with just

three-quarters of the original money owed to them.

The situation is a bit better now – a bit. There remains about $50 million

in unpaid bills, says Hayyan Haidar, counselor to the contractors’

association. Most of that amount should be paid in the coming

months, he adds. Bureaucratic government procedures continue to slow

the processing of bills. “Most projects are not paid on time,” says Fouad

Khazen, president of the contractors’ association. “This has caused a

lot of inconvenience.” But government red tape is nothing new.

What’s hurting contractors today is the same thing that’s hurting

everyone – the recession. But when Israel pulled out of the South

last May, a bright light suddenly appeared. The government

devised a five-year rehabilitation plan for the region, which calls for

spending close to $900 million on infrastructure. Coming at a

time when cement deliveries and the number of construction permits

issued are at a five-year low, the news was greeted as something

of a miracle.

There was just one problem: “They don’t have any money,” says

Khazen. They, in this case, is the government and the money refers

to foreign donations. So far there’s been just a trickling of funds,

including a $20 million grant from the Kuwaiti government, a $10

million grant from the Arab Fund and a $9 million reallocated loan

from the World Bank. The Lebanese government has given $50 million

to the Council of the South for the rebuilding of homes. The

Islamic Development Bank has proposed a $100 million soft

loan, but the offer hasn’t been finalized.

The government organized a donor’s conference last month to

attract foreign assistance. At about the same time, it permitted Unifil

to deploy in the area and, more recently, the internal security forces

and the army – fulfilling a condition that many donor nations

required before the funding tap would be turned on.

But no contributions came out of the conference. No need to worry,

says Wafa Sharaf al-Din, program administrator at the council for

development and reconstruction, the conference was intended to give

an idea of the government’s development plans and the area’s needs.

“We are receiving lots of missions and they’re reviewing the projects.

In October, the picture should be clearer.” That’s when a second

conference is scheduled. But even if the money starts flowing

then, projects will not be tendered before next year at the earliest.

And there’s a lot that could derail the whole project before then. A

resurgence of violence would leave a nasty taste in the mouths of

even the boldest of donors. Despite the presence of Unifil, the ISF

and Army units in the area, there’s a continuous exchange of rocks

and occasionally bullets between Israeli soldiers and Lebanese civilians

– a potentially explosive situation.

If the South remains calm and donations come through, some contractors

aren’t so confident that projects will be awarded to the most

qualified companies. In July, representatives of the contractors’ association

met with prime minister Selim Hoss, demanding that projects

be handled by the ministry of public works and awarded through open

tenders. “We hope that it will be done through proper channels,” says

Khazen. Some contractors say privately that political considerations,

rather than competence, will probably decide who gets what.

The ministry of public works will not handle all the projects. There

is a range of government offices and ministries charged with

awarding contracts, including the ministry of electricity and water

resources and the CDR. The Council of the South, which has been

charged with overseeing some of the infrastructure work, is an

agency that many contractors particularly dread. Ablan Ablan,

the council’s president, assures that contracts will be handled in a

professional manner. But one contractor, who claims that he waited

nearly five years to be paid by the council, says: “They have a

funny way of dealing with people. Whoever works with them

does so at their own risk.”

What would help contractors now, says Haider, are more lenient

credit facilities from banks. Projects need to be thoroughly studied

before work begins so that no surprise expenses pop up later. The ministry

of finance needs to streamline payment procedures.

Contractors, says Haider, represent a valuable asset to the country,

but many are on the verge of bankruptcy: “I would consider it a pity to loose such potential

“These people have been forced

to grow hash and be outlaws,

because this region has been

abandoned by the Lebanese

state and the regional and

international community,”

says Hamadan Dandash,

farmer from the Hermel district,

referring to those who

continue to grow illicit crops

despite the government’s

decade-long crackdown.

“If there weren’t patrols

everyone would grow it

because they are,

prisoners; the crisis

taken hold of them

more and more.” (,

Though still minute compared to what was grown during the war,

the last couple of years has seen an increasing number of farmers

in the Baalbek-Hermel region plant illicit crops, according

to the Internal Security Forces (ISF). “Each year the farmers try to

go back to planting hashish and poppies,” says colonel Michel

Chakkour, head of the ISF’s drug control unit, at his office in Ras

Beirut’s notorious Hobeiche building. “But we believe we destroy more

than 95% of the plantation.” Eradication of hashish crops this year was

slated to begin on July 24, but the plan was still delayed when

EXECUTIVE went to print. In mid-August there was a confrontation

between farmers and police on patrols to locate the fields. That’s not

an uncommon event, according to Chakkour, who estimates this

year has brought an increase in hash plantation. Last year the ISF

destroyed almost 8.2 million m2 (~18 hectares) of hashish and

24,520m’ of poppies. That’s up from 1998 figures of 3.3 million m’ and

2,000m’, respectively.

High on the Hermel plateau, much of which has been abandoned

and lies fallow, plots of swaying green cannabis dot the landscape.

On top of the high profits, the appeal of hashish is that it literally

grows like a weed with little care and no irrigation, while a market

is virtually guaranteed. And lines of credit are readily available

through dealers at better terms than the rare bank loans that are provided

for legitimate crops. That’s a pretty attractive combination

for an impoverished, underdeveloped region where water is scarce

and large swaths of land are not irrigated.

Emerging from the civil war, Lebanon came under intense US and

international pressure to crack down on what had become a highly

organized system of drug production and trafficking under militias,

although hashish plantation does predate the war. The eradication

program resulted in the area cultivated with illicit crops being

reduced from about 800 million m’ to 3 million m’ and Lebanon

being removed from the blacklist.

But the tragedy is that almost nothing has been done to help the region

and its farmers substitute what had been a lucrative source of income

despite this country’s success in curbing drug cultivation. It is estimated

that drug cultivation brought $80-100 million a year to the Baalbek Hermel

region and $500 million to the nation as a whole. “Lebanon

after the war was a very very weak country and state,” says Riad Saade,

agronomist and director of the Lebanese Center for Agricultural

Research and Studies (CREAL). ‘Those who wanted at that time to

eradicate prohibited crops should have simultaneously considered how

this weak and unorganized country should be structurally helped.”

What should have been done was the installation of mass irrigation

and other agricultural infrastructure, the creation of a proper marketing

system along with training and the encouragement of

agroindustry. All that should have come within the framework of a

comprehensive development program that would also aim to diversify

the region’s economy.

But the planning stage of projects intended to develop the region didn’t

even begin until after eradication. The main project aimed at the

development of the Hermel-Baalbek region was launched by the

United Nations Development Program (UNDP). The United States,

Europe and Japan were expected to be major donors to the program,

which was initially projected at about $55 million. But the money was

not forthcoming. So far just $12 million has been scrimped together

– eight years since the planning stage began. And more than two-thirds

of that amount was supplied by the Lebanese government. The UN

funding is declining and threatens to scupper the project, according

to Ghassan Seblani, the CDR representative to the program.

Though the UNDP says no concrete promises were made, it undertook

the project at the request of both the Lebanese government and

the international community. ‘There were implicit promises for the

rehabilitation of the area as has been the case in other countries that

made attempts to eradicate illicit crops,” says Christian De Clercq,

senior advisor to the UN resident coordinator in Lebanon, who was

involved in the project from the start. “Other countries may not have

succeeded but received large-scale assistance,” he explains. But Zena

Ali-Ahmad, who heads the program, says the attitude off armers must

also change: “Nothing will compare to what they made from drug cultivation.

If this is what’s expected nothing will ever be done.”

Government initiatives were meant to compliment the UN project

and would be aimed at large-scale infrastructure development

in Baalbek-Herrnel. Hariri’s Horizon 2000 plan included promises

of $300 million in funds, while the current government allocated

about $200 million, according to Seblani. But the outlying areas

have yet to become a real priority and the bulk of that money never

materialized. The largest government plan being implemented –

only to include irrigation infrastructure – is the $57 million development

project of 12 villages in the Yammoune area.

With such limited funds the projects have had almost no impact

on a region that covers about 28% of the Lebanese territory and has

a population of 250,000. “All projects to compensate or treat the

eradication of prohibited crops are folkloric and not serious,”

says Saade. “Up to now they’ve been wasting their time.” Oddly

the ISF has taken up the reigns of crop substitution – such as saffron

and pistachios – but with little thought on finding markets or

when these new plants will produce.

Not surprisingly, Dandash and other farmers are feeling disillusioned

and deceived by both the government and the international

community. “I’m not waiting for them to do anything,” he says. “I

don’t believe they will.” He has given up on the government’s

promises to install an irrigation system in the Henne! district,

spending about $8,000 to build his own well with plans for a second.

But that’s a hefty investment most locals simply cannot afford.

All this at a time when the agricultural sector is already in crisis.

Farmers in the region largely switched to common crops, but the

lack of proper regulations, norms or marketing bodies means

farmers get Little in return for their efforts, according to Saade. The

ministry of agriculture’s resources – under 0.4% of the total budget

– underscores the sector’s neglect. Improving the lot of the

inhabitants of Baalbek-Herrnel will require greater funds, which

the government doesn’t have. And many believe that significant aid

from the international community is an unlikely prospect without

a comprehensive peace settlement. In the meantime, without alternatives

for desperate farmers, the ISF may find itself with a lot more

work to do.