CommentEconomics & Policy

Financial barriers stand in the way of breast cancer screening

by Grace Azar
written by Grace Azar

“If I am diagnosed with breast cancer, my husband would need to sell our house to pay the medical expenses,” says Hanaa, a 52-year-old woman from Abba, south Lebanon.

Hanaa worries about not being able to afford the cost of breast cancer-related tests and treatment. Likewise, Zeina, a 45-year-old from Mina, north Lebanon, says, “We barely make it until the end of the month with the money that we get. We know that we have to do a mammogram, but we cannot afford it.” Many women, from regions across Lebanon, feel that they are struggling economically. A household income below minimum wage barely covers their essential needs, let alone pays for medical services.

Hanaa and Zenia’s views, along with the other findings of this article, are based on research for my PhD thesis into the barriers to and facilitators of Lebanese women’s participation in breast cancer screening services. This research included a survey administered to 231 Lebanese women, as well as 17 focus group discussions with 163 woman over the age of 40 living across all eight governorates in Lebanon.

My research found that affordability, as well as availability, were important factors that influence a woman’s decision to seek medical care and breast cancer screening. During the past few years, many awareness campaigns have been launched in Asian and Middle Eastern countries that share similar cultural and religious characteristics, but the majority of women with breast cancer in developing countries are still being diagnosed in late stages. This is reflected in the overall five-year survival rate ranging between 10 to 40 percent in developing countries compared to 80 percent in developed ones.   

In 2002, the Lebanese Ministry of Public Health (MoPH) launched an annual breast cancer awareness campaign that ran throughout October. The ministry specifies 40 as the recommended starting age for screening, advising women who have reached or surpassed that age to undertake annual mammograms. Most western countries recommend screening from age 50, but in Lebanon breast cancer is regularly diagnosed among a slightly younger demographic.

For the past two years, this awareness campaign has been extended by three months. During this period, mammograms are offered for free at governmental hospitals and for the reduced price of up to LL40,000 ($26.66) at private ones. An ultrasound is also offered at the reduced price of LL30,000 ($20) at governmental hospitals and LL40,000 ($26.66) at private ones.

An evaluation of the first three years of this program found that women are less likely to go in for repeated mammograms year after year than they are to go in for an initial screening. By 2013, the proportion of women who had had a mammogram at least once was 43 percent, while the proportion of women who had had a recent mammogram was just 20 percent.

Financial barriers to treatment

Financial concerns may influence whether a woman chooses to get a mammogram on a yearly basis, or when required by her doctor. In Lebanon, where 51.7 percent of the population does not have medical coverage, access to such services is already limited. Even if the mammogram or the screening tests are covered by the MoPH, additional perceived costs—future follow-ups or additional tests—may discourage many women from seeking one in the first place.

Sometimes physicians ask patients to undergo multiple mammograms within a single year. In the absence of social security or any other type of medical coverage, a woman might choose to skip or postpone the initial mammogram for fear of being asked to pay for multiple tests. Even in public hospitals, where the majority of women choose to go due to cheap or even free appointments, some of the tests required after the first visit could be costly. Many women go for a free mammogram without having the funds on hand for any additional tests, such as an ultrasound, which costs a further LL30,000 ($20). Even if a woman is covered under the NSSF, they still might not be able to afford the outstanding 15 percent of the medical expense, or the cost of further required tests or medical procedures.

Outside of the awareness-raising months, these services are offered at full prices. At private medical centers and hospitals, a mammogram and an ultrasound each cost LL60,000 ($40). In public hospitals, a mammogram costs LL50,000 ($33) and an ultrasound LL60,000 ($40). For those earning Lebanon’s minimum wage of just LL675,000 ($450), these tests would consume 16 or 18 percent of a monthly salary at public or private hospitals respectively.

Women are also concerned about the affordability of breast cancer treatment, if they happen to receive a positive diagnosis. They worry that they would not be able to afford the costs of drugs, chemotherapy, radiotherapy, or medical procedures that were not covered by the MoPH. The economic burden on breast cancer patients is real. Many patients even stop their treatment once they can no longer afford the price of chemotherapy.

Currently, the ministry does not cover outpatient services, doctors’ fees, or other diagnostic tests for breast cancer. It is extremely difficult to change this, since such an alteration would require a legal modification, as well as resources that the MoPH does not have. Between 2014-2016, the MoPH spent around $140 million dispensing free cancer drugs. Complete coverage remains a challenge; the average cost of drugs per patient per year—measured across all cancer types—increased from $7,000 in 2014 to $8,400 in 2016, according to a study on oncology costs in Lebanon.

The cost of transportation from home to hospitals or medical centers also acts as a barrier to women’s participation in breast cancer screening activities. There are women residing in rural areas who struggle to afford the cost of a taxi to reach the closest hospital.

When economic resources are limited, many women prefer to go without medical screening in favor of spending what little money there is on their families. They prioritize their family’s needs and household expenses over their own health and access to medical services.

How can we change this?

There are several avenues to increase the take up of breast cancer screening among Lebanese women. These include:

Tailoring awareness campaigns: National and other campaigns around breast cancer screening seek to increase awareness and target women from various backgrounds. It is important to tailor awareness-raising campaigns and messages to the women that the campaign needs to reach (taking into account, for example, their location, age, socioeconomic status, and religion).

Placing more attention on women in rural areas: Women residing in rural areas face greater barriers to medical screening than their peers in urban areas. This is not only due to the limited availability of services, but also to the level of trust in service providers, and cultural as well as financial barriers. Increasing participation in screening activities in Lebanon’s rural areas would require a structural approach that addresses the different barriers identified. 

Increasing personalized communication with women: The current campaigns adopt a mass population approach and place less attention on direct communication and cues to action. Direct targeting is more likely to prompt women to take positive actions toward screening. Women could start getting direct phone calls, emails, or messages from their hospitals or doctors reminding them of follow-up visits and mammograms, as well as counselling if diagnosed.

Such a program could also include a free, designated hotline run by the MoPH, in collaboration with the Ministry of Telecommunications, for women to call with any question on breast cancer. Peer to peer education built around positive word-of-mouth communication, could be promoted through household visits, which are widely acceptable according to Lebanese cultural norms and traditions.     

Increasing the engagement of community-based organizations: The engagement and support of local community-based organizations, especially in rural areas, can address different barriers to screening. Entities such as municipalities and NGOs can spread awareness on breast cancer as well as access to healthcare institutions by providing transportation.

Religious representatives can provide support by tackling beliefs and misconceptions perceived to be founded in religion. This can also help to emphasize the role of religion as a facilitator rather than a barrier.    

Working on prevention in addition to early detection: Framing awareness raising campaigns and efforts to increase screening for breast cancer could be included in a more comprehensive initiative toward the prevention, not only detection, of the disease. Women need to know more about preventative measures and changes required. The latter would include more attention to risk factors, environmental determinants, and healthier lifestyle choices.

Encouraging breast self-examination: The level of information and attention given to self-examination of breasts should be increased via doctors or national campaigns, as this is an easy, affordable, and acceptable method of primary screening for all women, regardless of their socioeconomic backgrounds and health coverage.

0 comments
0 FacebookTwitterPinterestEmail
Blood transfusion servicesEconomics & Policy

Blood donation in Lebanon

by Executive Editors
written by Executive Editors

Anyone active in the Lebanese social media bubble will have seen the all too frequent posts, shared on behalf of family or friends, urgently calling for volunteers to donate a specific blood type at a specific hospital. What people may not realize is that the blood they are being desperately asked to donate might not actually go to the patient who is asking for it. Lebanon’s blood transfusion system runs on what is called family/replacement donation—hospitals give the needed blood units, if they have them, to the patient, provided that these are replaced by the patient’s network of family and friends. If a patient needs six units of A+ blood, then they will be responsible for replacing these six units in the hospital’s blood bank.

Replacement donation is not unique to Lebanon; 71 countries are still dependent on replacement or paid donors for over 50 percent of their blood supply, according to the World Health Organization (WHO). Since 2010, the WHO has had a global framework for action to help countries achieve 100 percent voluntary non-remunerated donors (VNRDs) by 2020, with this deadline since extended to 2025 for countries in the Eastern Mediterranean. But even with the extra five years, Lebanon still lags far behind. Replacement donors account for around 80 percent of all blood donations in Lebanon, and without a national impetus to encourage voluntary donation, and a shift in public mentality, this is unlikely to change anytime soon.

Voluntary, not replacement

What reliance on replacement donation means in practice is that while the blood transfusion system in Lebanon is arguably effective, each actor on the supply side (including patients, their relatives, and hospital staff) is placed under pressure to procure blood when needed—rather than being able to rely on a national blood bank. Hospitals, keen to keep an emergency stock of blood, are unwilling to use their own supply unless it is guaranteed to be replaced. And while those who do donate are of course doing so voluntarily and without pay (it is illegal to pay donors in Lebanon), they still fall under the banner of replacement donors because they are making this donation on behalf of a specific patient.

What makes replacement donation problematic is that statistically these kinds of donors are not the safest to work with. Knowing the person involved and being under pressure to donate from friends and family can make it more likely that these donors will not be entirely honest in the screening process—increasing the risk for the blood’s recipient. All blood products in the country are legally obligated to be screened for HIV, Hepatitus B, Hepatitus C, Syphilis, and irregular antibodies, but certain diseases, such as HIV, have a window period in which an affected donor could transmit the disease without any detectable antibodies during the screening process. This is why the national questionnaire—prepared by a committee of experts to check the eligibility of donors and available, along with other information for prospective blood donors, on the Ministry of Public Health (MoPH) website since 2015—is a vital part of the process to ensure the safety of patients.

To add more stress to an already stressful situation, there have been recent reports in local media, as well as personal accounts shared with Executive, of potential donors being turned away for reasons that, when posed to specialists in blood transfusion, do not stand up to scrutiny. These include female donors being rejected on the basis of their gender and potential donors being turned away for having engaged in safe sex. The national questionnaire does ask donors several questions on sexual activity to screen for those at a higher risk of having contracted a sexually transmitted disease, and women are asked specific questions related to pregnancy, and whether they have had sexual contact with a man who has had sexual contact with another man. But to be turned away for having had protected sex in general, or simply for being a woman, has no scientific basis. The only real difference between men and women when it comes to blood donation is that men can donate six times a year compared to four times for women, due to the latter’s slightly lower levels of haemoglobin. Asked why hospitals might turn away potential donors on criteria not addressed in the national questionnaire, the specialists Executive spoke with cited a lack of training as a possible reason.

Procuring the necessary blood units is also complicated by hospitals’ differing standards. Some, for example, will accept donations of blood units, while others require these donations to be made in person at the hospital. Abdo Saad, head of communications at Donner Sang Compter, an NGO set up in 2009 to help connect patients with willing donors, argues that hospitals are the most difficult part of the supply chain. He cites different standards and criteria between hospitals as leading to a lack of trust that makes hospitals insist that people donate in person.

This desire of hospitals to receive donations on site also comes with several drawbacks. In an article titled “Can a decentralized blood supply system reach 100% voluntary non-remunerated donation?” published in the International Journal of Health Planning and Management (IJHPM) earlier this year, the authors noted that most hospital blood banks in Lebanon are clustered in overcrowded urban areas, making them hard to access, given the lack of parking and traffic congestion. Most also stop accepting donors after 5 p.m., except in emergency cases, meaning that potential donors often must take  time off work to donate, thus incurring discouraging out-of-pocket expenses.

The pressure to secure donors can also take a heavy toll on patients and their families. Executive spoke with a woman whose father had recently needed regular donations of blood while being treated for leukemia over a seven-month period. The responsibility to find donors was immense. “It’s one of the unforgettable periods in my life. It was super, super exhausting; it really sucks energy and life out of you … and you sometimes feel you really need to beg people [to donate],” the woman, who prefers to remain anonymous, tells Executive.

The Lebanese system

For Saad, blood donation in Lebanon is so fragmented due to a lack of involvement at the governmental level. “Here we have each hospital relying on itself, or on the Lebanese Red Cross (LRC). So [it is a] decentralized system which jeopardizes everything, and there is no one to control it,” he says.

Blood transfusion services in Lebanon are indeed highly decentralized, in line with the healthcare system overall. The IJHPM article says that healthcare facilities carry out 85 percent of national transfusion activities, while the remaining 15 percent is carried out by the LRC. Law 766 (2006) states that authorization to operate a blood transfusion center must come from the MoPH, and the center must be run by a physician who, among other requirements, has a degree specialization in hematology. In reality, however, the situation is more complex. The article estimated that of Lebanon’s healthcare facilities less than half are licensed by the MoPH to practice transfusion services, with the remainder running unlicensed blood bank activities. Dr. Rita Feghali, who coordinates the Lebanese National Committee of Blood Transfusion (LNCBT), an advisory body to the MoPH, says, “All hospitals can transfuse. So if you have a patient needing a blood unit, you will have to transfuse them even if you don’t have a license for a blood transfusion center, which is the case for more than half of the hospitals in Lebanon.”

Since 2010, the MoPH has made efforts to improve the quality and standardization of blood transfusion services, starting with an advisory relationship between the ministry and Établissement Français du Sang (ESF), the national blood bank of France. In 2011, the LNCBT was formed, composed of eight members all working in the field of blood transfusion at Lebanese hospitals. This committee was tasked with advising the ministry on the organization of blood policy, the promotion of VNRD, and the improvement and sharing of blood transfusion practices, among other goals.

In the past seven years, the committee has authored guidelines on good transfusion practice (released in 2012), and developed a hemovigilance program (in 2015) that included the national blood donor questionnaire. They are now in the process of producing an all-encompassing national strategy for blood transfusion in Lebanon. However, enforcement of these guidelines remains an issue. Feghali explains: “It should be mandatory because this is our national questionnaire, and in the new accreditation standards put [in place] by the MoPH there is a grade for using the national questionnaire—because you know in Lebanon we cannot always do these things by force—but there is a grade, so for the hospitals, it is one of the standards the hospitals should be using.”

To improve enforcement, the committee will be recruiting and training auditors to undertake a national audit of all blood transfusion services in the country, part of an accreditation process specific to these services. This process is set to begin in 2019, with all blood banks scheduled to be audited over a two-year period. The ministry has yet to take a decision on what will be the punitive consequences for hospitals found to not be adhering to these standards.

Quality, but also quantity

There is a dual challenge for blood transfusion services: ensuring both the quality and quantity of their supply. While there has been a lot of progress at the ministry-level in terms of standardizing practices to improve quality, ensuring a sufficient supply of voluntary donations is very much a work in progress.

In 2016, the MoPH launched Lebanon’s first national blood donor public awareness campaign to encourage VNRDs with radio ads, leaflets, and a hotline to inform donors of their nearest blood banks. This, while successful, did not have the full impact the ministry was hoping for, according to Feghali. Raising greater awareness of the need to donate blood altruistically and regularly, rather than for a specific person, was raised as one of the most—if not the most—important way to move Lebanon toward the WHO goal of 100 percent VNRDs.

Lack of voluntarily blood donations is not the only roadblock. According to the IJHPM article, other challenges that need to be overcome include: shifting from the mentality of replacement donations, misconceptions within the Lebanese community over the safety of blood donation, the out-of-pocket costs incurred by donors, and a lack of respect toward donors, who often have to contend with long waiting times and poorly trained staff.  Even if all these issues can be addressed, the authors of the piece—which include Dr. Antoine Haddad, head of Department of Clinical Pathology and Blood Bank at Sacre Coeur Hospital, and one of the members of the LNCBT—estimate that Lebanon is still a decade away from 100 percent VNRD.

According to Haddad, who spoke in person to Executive, another significant barrier to realizing an all-volunteer blood donor system is the lack of sufficient funds and manpower allocated to blood transfusion services. Haddad, while praising the work the committee has achieved so far, says that the only way to truly move the country toward voluntary donation is to legally designate blood transfusion as a public health issue under the purview of the MoPH. He points to the fact that Lebanon, unlike most countries in the region, does not have a national institute for blood transfusion. This means the country lacks the staff, resources, and funding of a fully empowered national institute, which would be able, among other things, to run a national media campaigns encouraging voluntary donation.

But he also cautions against trying to impose a centralized system that, while perhaps successful in other countries, may not be the best fit for Lebanon. During the 2006 War, for example, the decentralized nature of the system was actually an asset. When roads and infrastructure were bombed, Lebanese people across the country still had access to blood. According to Haddad, Lebanon needs a national solution for blood transfusion that specifically caters to the country’s needs.

Changing mentalities

In the absence of a national blood bank or institute for blood transfusion, the role played by organizations such as DSC and the LRC remains vital. Following the MoPH’s lead, since 2014 the LRC has been focused on quality control. According to Feghali, who is also head of the LRC’s blood transfusion services, the organization’s 13 centers across Lebanon have been improved and rehabilitated to international standards, with several sites inspected by international auditors. Now, the LRC is shifting its focus to increasing voluntary donations. Currently, the LRC supplies around 15-20 percent of the national demand for blood units, but more than 90-95 percent of this total is still via replacement donors, Feghali says. Next year, the LRC is launching a new communication project for all its services, including social media campaigns and a new website. Raising awareness about voluntary blood donation, along with organizing more blood drives, form integral components of this initiative.

A secondary target for the LRC is to improve the transport of blood units around Lebanon, which currently relies on patients’ families to move blood from their centers to hospitals. “We are trying at the LRC to put in place a transportation system that will assure transportation of blood directly to the hospital, totally monitored: From the time it leaves the Red Cross to the time it reaches the hospital, the temperature and the conditions [will be] completely monitored,” Feghali says.

Donner Sang Compter, meanwhile, helps patients directly through its call center database, which has grown to include the details of around 20,000 potential donors. Saad estimates that they link patients to around 50-60 donors per day—and while there are no official figures, research estimates that Lebanon needs around 150,000 blood units per year, or just over 400 units per day.

DSC is also making efforts to raise awareness around and increase voluntary blood donation in Lebanon. The organization indirectly helps patients by organizing around 160 blood drives per year, in partnership with hospital blood banks, to increase their stocks—through these, Saad estimates that around 6,000 blood units are collected annually. DSC’s greatest success in terms of encouraging VNRDs, he says, is through their affiliated clubs at Lebanese universities, which organize blood drives and awareness sessions on campus. “This has been the most efficient way to raise awareness because we get to meet people one-on-one and correct some misconceptions about blood donation, and we have been targeting the most enthusiastic target audience, university students, which helps build awareness for the future generations,” Saad explains.

The success of blood drives organized by DSC and the LRC, as well as people’s response after mass casualty events, shows that the Lebanese are willing to donate blood. What is required is a cultural shift, from seeing blood donation as an obligation in a specific time of need to something that is always necessary to save people’s lives. As it stands, the blood transfusion system in Lebanon, despite the stress it causes for all the actors involved, does work, and efforts are being made to improve it. But blood transfusion services follow a familiar pattern in Lebanon—one where an imperfect system lingers and gaps are, by necessity, plugged by non-governmental actors.

2 comments
0 FacebookTwitterPinterestEmail
Economics & Policy

Lebanon, lend us your ears

by Dara Mouracade
written by Dara Mouracade

The exciting world of audio storytelling remains relatively unexplored in the Middle East today, despite the region’s reputation for masterful storytellers. While podcasting as a medium is rapidly growing in the US and Europe, many radio stations in Lebanon and across the Arab world have yet to join this trend and produce innovative content.

Two problems exist: Firstly, there is a dearth of high-quality podcasts produced in Lebanon, and secondly, for those that do exist, it is hard for the podcast and the audience to find each other. Reaching a critical mass is incredibly difficult.

The podcasting industry as we know it began in the mid-2000s, but it was not until Serial—a US long-form investigative journalism podcast hosted by Sarah Koenig—struck gold in 2015 that podcasts became prominent in the media landscape. In 2017, the US podcast market was valued at around $313.9 million, a rise of 86 percent from $169 million in 2016 according to a study by the Interactive Advertising Bureau. In the Middle East, storytellers who began their careers on the blogosphere in the mid-2000s have begun to trade the written for the spoken word. There have been signs that podcasting is starting to pick up in MENA, but, as with any form of storytelling, production matters. Creating a successful podcast requires dedication, passion, time, talent, and resources.

Podcasting in MENA

In a recent article in Arab News, British-Lebanese journalist Nasri Atallah wrote about notable podcasts in the region, including Jordan-based Sowt, one of the biggest Arabic-language podcasts at 10,000-20,000 downloads per episode, as well as Dubai-based Kerning Cultures, another narrative-driven podcast, in English, which averages 5,000 downloads per episode, and Saudi Arabia’s Mstdfr network, which has around 20,000 listeners per month. Executive spoke to Atallah in Beirut, where he explained that Jordan, the UAE, and Saudi Arabia have more established markets, due to the use of brand partnerships to monetise podcast production. The Lebanese market is too small to be sustainable, he says, advising aspiring Lebanese podcasters to get a bigger audience by targeting the wider Levant and the English-speaking Arab world.

“Podcasting is a powerful medium, but you have to work on changing consumers’ habits from radio consumption to podcast consumption,” Atallah says. Even if you can find the audience, keeping them requires high production value. “Audio is notoriously difficult to produce, as you need to have a good, clean sound, proper tech equipment and efficient distribution,” he says, adding that podcast enthusiasts in Lebanon may have high expectations after consuming European and US podcasts.  “The key to success is to start small, be regular, iterate and look outward in distribution and promotion, as audience data is what matters most.”

Lebanese podcasters

Despite the small market size, there are Lebanese podcasts out there. Leyla Nahas has been presenting the podcast Beirut Bright Side Stories (BSS Stories), an offshoot of a blog of the same name, since February 2017. She tells Executive that the podcast—which has produced six episodes so far and is composed of narratives and interviews—was a natural evolution of her and Rami Obeid’s blog, which aims to share positive stories from Beirut. “It is challenging to produce exciting content with this format because sound design and production are expensive,” Nahas says, explaining that the podcast is a self-funded passion project, for now. Nahas and Obeid are also considering producing audio documentaries about Beirut, funded through sponsorships and subscriptions.

Queer Narratives Beirut, a podcast launched in June 2018, with 16 episodes in its first series, explored gender and sexual diversity, including transgender identities and the social and legal limitations on gender and sexuality in Lebanon. The podcast was initiated by UK PhD researcher Joy Stacey, who hopes to find funding for a further series in the future.

There are also several Lebanese podcasts scheduled to launch in the next few months, including: Who Run the World, a talk show with female entrepreneurs; The Huddle, a sports talk show; Movie Court, a film review show; The Pitch, a talking shop with entrepreneurs; and A Better Beirut, a talk show on positive stories from the capital that will be launched early November.

Despite these offerings, too few Lebanese are listening to podcasts produced in the local market. BBS Stories averages 360 listens per episode without any promotion, while Queer Narratives Beirut, which received a lot of press attention, averages 2000 listens per episodes. Mobile data in the country is notoriously expensive—perhaps a reason why podcasts are not taking off in Lebanon, where consumers will likely wait for a stable WiFi connection to stream or download a podcast.

Podcasts that have proved popular in the region are those that cover topics with enough regional or global appeal for their producers to be able to gain audiences large enough to sustain themselves via podcasting. At the moment, it simply does not make sense to produce a podcast purely for the Lebanese market, as the audience numbers are just not there.

Boudy Boustany, host of a popular show on Virgin Radio Lebanon that regularly draws in 30,000 listeners, believes that Lebanese consumers are not used to podcasts, with only a specific demographic listening to podcasts or watching vlog media on a regular basis. In the US and Europe, even a niche topic will appeal to a large enough audience and make it easier to sustain with ad money, which is not the case in the case in the smaller Lebanese market, he says, arguing it is too small to sustain podcasters. Like Atallah, Boustany believes that only through targeting a larger Arab consumer base could local podcasters make enough money to sustain a living.

Boustany has toyed with the idea of going into podcasting or video blogging himself, but believes that these could only be passion projects, with radio remaining the dominant medium. “You get more value from every dollar spent on the radio than almost any form of media in Lebanon because radio is a fairly targeted form of mass media,” he says.

Show me the money

So how do podcasts make money? Revenue streams for podcasts typically include advertising or another form of investments such as corporate social responsibility initiatives or grants. However, given there is little data on the popularity of podcasts in the Arab world, it is hard for aspiring podcasters to cold pitch their idea to investors—they would first have to build up an audience through word-of-mouth in order to demonstrate that listeners exist for their content.

While the ROI for podcasts in the Arab world is not clear, podcasts typically can open up various licensing and monetisation avenues. Podcasts can be adapted into TV series, books, live-recording events—there are many possibles, and each is a whole new potential revenue stream. Each successful adaptation allows for audience development and creates a marketing vessel for the original podcast as a standalone product. Being able to offer the same level of content on various platforms allows podcasts to be more engaging and impactful. It is a low-cost introduction strategy to a higher value production of the same content down the line.

Podcasts offer exciting opportunities to more than just their producers. Stefano Fallaha, just 20 years old, is the founder of Fallound, which began in 2016 as a social network and is now a mobile app and a piece of software for cars. The latter connects to car navigation systems and finds its user a perfectly timed audio podcast based on their commute length and interests. Currently in Beta stage, Fallound, which has secured the necessary seed funding, is going to be made publicly available this year.

“We want to fill people’s time with exciting and educational content when they are on the go,” Fallaha says. “People complain they don’t have time to read or watch a video, so their only getaway would be audio,” he says. “We’re disrupting the radio industry, and broadcasting networks are now stepping up their game and getting into personalisation to stay relevant. The mindset shift will come to Lebanon eventually, but it needs a lot more time.”

Rami Zeidan, VP of Partnerships at Anghami, a Lebanon-based music platform for the Arab world, says that while there is an existing regional audience for podcasting, it is hard to find regional offerings. To help rectify this, Anghami has launched a dedicated Middle East Forum for podcasting and hosted the first ever Middle East Podcast Forum Conference, held in September in Dubai. Anghami plans to curate content and evaluate audience readiness before creating original content. They aim to expand according to demand and to use this initial period to learn more about consumer profiles in order to inform a future monetisation strategy.

  Globally, the podcast scene is becoming more fluid. Apple is starting to be challenged by Spotify and Google Play Music, as the latter two start producing original content, and by Audible and Stitcher, who have both released some podcasts from their paywalls. These developments make the ecosystem less exclusive and more accessible. The podcast industry is thriving and growing more complex, opening up more opportunities for potential producers, even if it is still in its infancy, compared to other traditional and digital media. 

Storytellers in the Levent should not shy away from producing audio. The podcasting scene may be small, but it is also not oversaturated. Those who break into the industry now have a significant opportunity to develop an audience and gain quick recognition with little competition and few barriers to entry. In the Arab world, radio remains one of the most powerful media of communication, particularly given the levels of poverty and illiteracy. Podcasts and radio can have a symbiotic relationship: It is easy to develop podcast content into radio shows for local stations to replay.   

The content we want to consume is already out there, and while the local market may be small, Lebanese still have the potential to be a part of this podcast boom. We have the stories, and we have the passion, we just need content producers in this country to grab a mic and go for it—and we need people to listen.

0 comments
0 FacebookTwitterPinterestEmail
CommentEconomics & Policy

The impetus for change

by Nicole Purin
written by Nicole Purin

Shareholder activism has experienced a revival and is now growing in influence globally as an effective tool to transform companies by unlocking share price value and improving their strategic vision and governance tactics.

The phenomenon of shareholder activism is not new. When it started back in the 1980s, it sparked numerous controversies due to the aggressive tactics employed by a number of activists—referred to as corporate raiders—to change a company’s capital, managerial, and operational structures.

In comparison to the early days of shareholder activism, it has now become more common to view the practice as a catalyst for positive change that aligns the interests of a company’s board, management, and shareholders. Moreover, shareholder activism forces companies to review their focus and strategies.

From its initial prevalence in the United States, shareholder activism has, in the last few decades, expanded to new frontiers in Europe and other markets. In the countries of the Gulf Cooperation Council (GCC), where corporate governance, the performance of securities markets, and the public listings of large companies have, in recent years, been matters of increasing interest, several market players hold the view that GCC countries would benefit greatly from shareholder activism.

Proponents of governance and shareholder activism across the Middle East and North Africa (MENA) region argue that this part of the world is becoming increasingly transparent from a regulatory perspective. Also, as more companies are listed publicly, these advocates see the need for the region’s economies to shift toward increased institutional ownership and improved economic health.

The region today has more fertile ground for shareholder activism than it did in the early 2000s—when several securities markets in the GCC were in the early years of operations and had nascent professional investor cultures. However, any discussion of shareholder activism in MENA should take the complexities of such a development into account. The US or European models might need to be adapted to suit this geographical territory and legal and cultural environment. In short, one would need to create a Middle Eastern way of doing shareholder activism.

Activist history and models

In the context of securities markets, activism represents a strategy or a range of activities by one or more shareholders of a publicly traded company to drive some change within the company, with the ultimate goal of unlocking some form of shares’ value.

Depending on the changes sought, the activities and the level of engagement may differ. On one side, there is activism practiced by hedge funds seeking substantial company changes at the strategic level, within the board management structure and financial structure. This form of activism is interventionist as a fulcrum of change. Historically, these activists have been classified as “corporate raiders,” as they sought to dismantle a company they regarded as “inefficient” by taking full control of the company’s shares, often using their own capital and engaging in all sort of proxy tactics to gain control of the board.

Arguably, the first shareholder activist was US-based economist and investor Benjamin Graham, who, in 1927, pushed Northern Pipeline Company to distribute its excess cash to shareholders. The company was not willing to agree, so Graham ran a PR campaign to get himself appointed to the board of directors. At the time, such behavior was unheard of—a fund manager trying to influence the governance of a publicly-traded company.

Since the 1980s, asset managers like Carl Icahn and Nelson Peltz have built their fortunes by staging very aggressive raiding campaigns. In the 1990s, hedge fund managers such as Bill Ackman and Dan Loeb entered the game. Meanwhile, activist shareholders and hedge fund icons such as Robert Monks and John Paulson began softening some of the corporate raiders’ techniques, raising money from other investors and aiming not for full board control, but for minority board representation.

The focus of recent shareholder activism is, thus, not always the breaking up of a company, but the installation of positive changes via a new management structure, the restructuring of finances, and operational efficiencies. This new, softer side to activism can be classified as constructive activism, involving one-on-one engagements between shareholders and companies, and legalized in the new “say on pay” provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which grants a firm’s shareholders to have a right to vote on the remuneration of executives.

In the last 10 years, shareholder activism has grown exponentially, possibly due to the broadening of activists’ tactics. Over the years, many activist funds have been established, and Hedge Fund Research estimates that in 2017 activist strategies represented 15.1 percent of assets within the event driven category; total assets were $125.6 billion. Further illustrations of sector growth are set out below:

Evolution of shareholder activism tactics

More and more hedge funds have been adopting a capital allocation strategy, which is the process of allocating financial resources to different sources in order to increase profits. A target company may attract the attention of activists if a board is perceived as being ineffective, if it has a low market value relative to its book value, or if it is looking for a new CEO. Once a target is identified, the activist tactics are considered and selected. Numerous market sources, including the 2018 review by Lazard Bank on shareholder activism, seem to suggest that the market has evolved from corporate raider campaigns to consensus-based campaigns developed via dialogue and negotiations.

Several of the most versatile strategies are:

Divisive strategy

This strategy involves dividing board management via opposition campaigns, involving the solicitation of shareholders to withhold votes (no campaigns)—proxy contests designed to destabilize the board. This aggressive tactic is not always successful, especially in the ousting of a director, as it requires majority shareholders’ support.

Shareholder proposal strategy

Dialogue-based proposals are designed to effect changes in governance and risk management processes, as well to encourage the company to act in a more accountable way from an environmental perspective.

“Say on pay” corporate strategy

“Say on pay” is a legal measure first introduced in European jurisdictions that mandates an advisory shareholder vote on executive remuneration as proposed by the board of directors. It encourages hedge funds to rely on moderate tactics, such as shareholder engagement. Many applications of “say on pay” by hedge funds are designed to make changes to the compensation plan for executives.

A GCC perspective

Critics of shareholder activism argue that activist investors are interested in quick returns and short-term investments as opposed to fostering a long-term vision. But those in favor of activism argue that activist campaigns improve a company’s valuation in the long term, even after an activist has cashed out on a company. In reality, activism is seldom carried out over a short period of time. It usually requires months, if not years, to implement and measure, in addition to lengthy collaboration between institutional investors and the activist investor.

Most of the listed companies in the GCC are nano (EUR <50m) and micro cap (EUR 50-300m). Before an initial public offering (IPO), a company is usually backed by a private equity fund. Management is thus challenged to generate more cash flow in order to repay the debt, and  is under pressure to deliver a robust business plan.

When the company becomes public, most private equity funds exit and realize their financial gains. During the IPO process, asset managers can buy a stake in the company, but they are passive investors and are not represented on the board—and hence cannot change the vision, business, or value of a company.

Most companies in this space start with a great product and up to a certain point the demand for the product continues to grow, but then growth stifles. It is at this point that the company needs a solid transition to build on its success, adding products or services to sustain the corporate development through merger and acquisition operations. When an organization faces major change—disruptive innovation, taking drastic adjustments to transform an enterprise—managers can destroy a lot of value. Activist investing is a natural revolution to help listed companies become more efficient.

Activism in the GCC can be developed as follows: Nano and micro cap are a niche company market and there is an opportunity for an activist to add value in a legitimate way. As GCC companies are less well researched by analysts and less likely to follow corporate governance best practices, the potential for unlocking big share price gains may be greater than with larger groups of more established companies. Also, smaller companies do not always have the resources to fend off an activist campaign.

In the GCC, it is crucial for companies to become more transparent. In most instances, companies employ an auditor to analyze their financial statements, but sometimes those charged with scrutinizing the corporate books are too close to management. This hinders objectivity and can result in failure to detect malpractice. If an activist provides more due diligence, they can discover any financial shenanigans and poor management decisions that were made to sustain the value for the shareholders. They could then challenge the board and the management to bring more transparency.

Shareholder activism has evolved significantly since the 1980s and its reputation as a destructive force is no longer applicable, given the emergence of increasingly constructive campaigns. The GCC would indeed benefit from a form of shareholder activism that is constructive and proactive with extensive management dialogue, which could help companies become more transparent and operate in a more cost efficient way. Bringing greater transparency to publicly-listed companies in the GCC would arguably encourage greater investment from Europe and the US, and this would benefit the economy as a whole.

0 comments
0 FacebookTwitterPinterestEmail
Economics & PolicyQ&A

Lebanon’s housing authority to restart subsidization scheme

by Jeremy Arbid
written by Jeremy Arbid

How far will LL100 billion go? That was the main question Executive posed to Rony Lahoud, head of Lebanon’s public housing authority, the Public Corporation for Housing (PCH). While there are still variables to be calculated, at the time of this interview in late October, Lahoud suggested that almost two thirds of the demand for subsidized loans via the PCH would go unsatisfied next year.

For nearly two decades, until the end of 2017, Banque du Liban (BDL), Lebanon’s central bank, had offered cheap credit to commercial banks with the understanding that savings would be passed on to home loan borrowers (see October cover story). This year, BDL still offered cheap credit worth $500 million to the banks to finance home loans as part of its stimulus package, but that money was quickly used up. By July, the PCH had to stop accepting loan applications, creating a housing loan crisis that is now close to being solved, thanks to the LL100 billion ($66 million) allocated for this purpose in a swiftly passed law.

Given Lebanon’s current interest rate environment, it is not yet clear how many loans the PCH can offer with the allocated amount. Lahoud tells Executive that the housing authority is hoping to conclude negotiations—which include discussion of a new PCH loan product—with commercial banks by early November. Then, Lahoud says, he’ll know how much the subsidy will cost the PCH and the borrower, and how many loans the housing authority can support.

E   How were subsidized home loans financed before?

This new law is specific to the PCH—all other agencies or banks that offered subsidized loans [have stopped doing so]. Since 1999, [BDL] allowed every commercial bank to access up to 15 percent of their capital reserves held at the central bank to give home loans via the PCH and other institutions. And from 2013, there was the stimulus package, where the central bank offered a loan at 1 percent interest to commercial banks to use for home loans. At the end of 2017, the central bank stopped the first one [meaning banks could no longer access their capital reserves to finance mortgages], but it offered an additional $500 million in 2018 as part of its stimulus package.

E   This is the $500 million that was quickly exhausted during the first quarter of 2018?

This was the amount that [BDL said] could be used for home loans, across all subsidy schemes via PCH, the Lebanese Armed Forces, Banque de l’habitat, and directly from the banks. The banks could borrow this money from the central bank at 1 percent interest and were offering around 4 percent on mortgages. This $500 million could not satisfy demand.

E   Mortgages across all subsidized schemes is nearly $2 billion per year, so the central bank’s offering of $500 million for 2018 is only around 25 percent of demand by total value. Of that $2 billion, the PCH offers almost $700 million per year by total value.

For the PCH it is 5,000 loans per year with an average of $126,000 per loan. The average loan amount [multiplied by] 5,000 is $643 million per year.

E   The money for subsidized loans dried up quite quickly this year, and in September you told Executive that PCH approved 1,800 loans in 2018 before the money ran out.

It’s two thousand files this year, in the 10 months from the beginning of the year until now. This is $244 million disbursed by total value. The $500 million was divided by a quota between the banks and they let us know they had no more money to finance subsidized loans. We took the decision to stop receiving new files because we could not take in new applications while there were still some on hold at the banks. At the same time, people were presenting files to the PCH, hoping their application would be approved soon, but in reality we could not approve any new loans. So we preferred to stop receiving files until a financing solution could be found, because most probably a new solution would be more expensive than it was before and [potential borrowers] might decide not to take a home loan at 7 or 8 percent interest.

E   What was the official date that PCH closed its doors to new mortgage applications?

It was the beginning of July when we stopped accepting.

E   Now that Parliament has passed a law to finance PCH loans are you accepting applications?

No, not yet. The new law is already in force and we’ve started negotiations with the banks and the Association of Banks to see what can be done, and how we can start again giving loans, at what interest rates, whether we’ll need to change any criteria, and we are trying to create a new product. Before, our product was somewhat complicated: Over the first half of the loan, the borrower was paying just the principal, while the PCH paid the interest; the second half, the borrower paid back the PCH. So it was somewhat complicated and needed a lot of tracking from our end.

E   The PCH Facebook page recently posted that you were beginning to negotiate with the banks in relation to this law and to restart the subsidy scheme. What is being negotiated?

Before we paid the interest on the first period [the first 15 years of a 30 year PCH mortgage, when borrowers were paying the principal], and now PCH is going to subsidize the loans on the whole period. But now we’re talking about an environment where the interest rate is 10 or 12 percent and PCH is to subsidize that for the borrower, which is impossible for the PCH to pay the whole interest. So PCH is building a new product more similar to those offered at banks, where the citizen pays toward the principal and interest for the whole period.

[With the new product] the period can no longer be 15 years—it should become 25 years, and the loans should be offered in Lebanese lira. These two criteria were accepted by the banks. But what about the interest rate environment? We suggested that the subsidized interest be paid upfront. We’ll discount all of the interest subsidy and pay the net present value from the PCH. The whole amount of the interest that PCH is to subsidize will be paid at the beginning of the loan. The borrower pays the second part of the interest, paying toward the principal and interest over 25 years. This way the interest rate will be much less for the borrower than the market interest rate.

E   So because of the interest rate environment, the PCH might not subsidize 5,000 loans, as it had been doing before this year?

We project demand from all potential low-income and medium-income borrowers via the PCH to reach 8,000 applications. For sure we cannot service 8,000 files with the LL100 billion, so what we are going to do is accept many fewer applications, maybe meeting 30 percent of demand. We haven’t finalized our estimations yet because we are still negotiating with the banks on the interest rate for the mortgage and on the interest that the PCH will cover. If we are going to pay 5 percent from the PCH and 5 percent from the borrower, maybe it will be ok, but until now we haven’t reached a final decision with the banks. Once we calculate these two variables we will better know how many loans the PCH can subsidize in 2019.

E   This law is applicable from January 1, 2019 to December 31, 2019?

It is on the state budget of 2018, and we’ll figure out how to use it for 2019 as well.

E   What comes next after 2019, or if this money is used up earlier?

We’ll discuss that next, but now we’re focusing more on the new product with the banks, and once we have that, we’ll know how much it will cost the borrower and the PCH.

E   Is it possible that the PCH may be able to increase its annual budget as part of its request to the next state budget, and this LL100 billion would be the requested amount?

Yes, hopefully. Once we have this product and determine the two variables—interest for the borrower and what the PCH will subsidize—with the average disbursement amount of $126,000, we’ll know how many files [the LL100 billion] can subsidize via the PCH. Once we have all these numbers we’ll discuss with the Ministry of Finance to know where we are and what we can do.

0 comments
0 FacebookTwitterPinterestEmail
CommentEconomics & Policy

A long time in the making

by Ahmad El-Khatib
written by Ahmad El-Khatib

The PPP law, formally known as Law 48 Regulating Public Private Partnerships, was first proposed as a draft by Cabinet in 2007. It was not until September 2017 that it was passed by Parliament and published in the Official Gazette. In other words, it took lawmakers ten years to pass the PPP law.

Back in 2007, Lebanon’s public debt was circa $42 billion. Today, it has reached approximately $83 billion. While this massive jump in public debt was not caused by the absence of the PPP law, it is certainly arguable that a significant portion could had been saved, had the law been passed in 2007 and implemented in the intervening years.

There are numerous benefits to public-private partnerships. As well allocating the risks between the public and private partner, the benefits of PPP that are most relevant in the Lebanese context are the following:

It minimizes the financial risk to the government, given that PPPs are regarded as an alternative to public funds for financing new development or upgrading of infrastructure, both of which are capital intensive. With PPP, the costs will be covered by the private partner rather than eating into the government’s budget.

It increases the efficiency of the project—if applied to the right project under the correct procurement process—and increases effectiveness, by achieving the desired outcome in a time- and cost-effective way.

It helps foster transparency and limits corruption, which is a major current impediment to economic growth and sustainable development in Lebanon.

Several factors at play

These benefits, however, are dependent on several factors: whether the proposed PPP project addresses a public need and is suitable for a PPP, well prepared, commercially feasible, properly structured and tendered, and proactively managed through the life of the partnership agreement.

The importance of the PPP law lies in the fact that it ensures that different projects are consistently structured, tendered, and managed. This consistency lowers costs for the private sector and builds confidence in the market—in the absence of such a robust framework, different ministries may act with frustrating inconsistencies and, in doing so, put off potential bidders.

Meanwhile, the principal benefit of the PPP law is that it codifies the pre-procurement and procurement processes, meaning that any actors—the state, public institutions, municipalities or federation of municipalities—must follow the required steps in order to procure a PPP project. According to article 4 of the PPP law, PPP projects can be proposed by the president of the High Council for Privatisation and PPP (HCP), the “concerned” minister, the president of a municipal council, or the president of a federation of municipalities, with respect to projects under their purview.

In this regard, it is important to stress the need to create a pipeline of projects that increase the attractiveness to sponsors while, at the same time, focusing on the sectors contributing the most to the growth of our public debt. By doing so, the same types of sponsors will be more willing to incur bid costs in the knowledge that, if they are unsuccessful, they can simply roll-over their resources into the next project in the pipeline.

Now that there finally is a PPP law, the challenge is not only to attract private partners, but to attract the right ones. When investing in a foreign country, private firms assess certain risks, such as foreign exchange, economic viability (including GDP and inflation), regulatory risks, and political risks, such as government instability.

Unfortunately, Lebanon is known for its frequent political instability and deadlock. At the time of writing, the country was still waiting for Prime Minister-designate Saad Hariri to form the next cabinet, after over five months of political wrangling and stalemate. The Council of Ministers, in accordance with the PPP law, plays a major role in the procurement process of any PPP project undertaken by the state, public institutions, or any moral person of public law. In our opinion, this constitutes a major problem: Without a cabinet, PPP projects cannot move forward.

The Council of Ministers is a key decision maker at several points in the process: It must approve the project and the final tender document; on the suggestion of the concerned minister, it has the authority to appoint a member onto the board of the project company if a public entity has contributed to the share capital of the project company; the concerned minister must sign the partnership agreement on behalf of the state; and if the PPP project requires the expropriation of private properties, then there must be a decree declaring public benefit, which would need to be issued by cabinet.

No cabinet, no PPP

The approvals, appointments, and issuance of decrees mentioned above, cannot be carried out by a caretaker government, nor can a caretaker minister sign a partnership agreement. This means, in the likely scenario that Lebanon continues to have long-standing caretaker governments, the procurement process of PPP projects will become another casualty of the lack of functioning institutions.

There could be cases in which the HCP has prepared and approved a PPP project but there is no cabinet to give final approval, and so the project committee would be unable to launch the process to select the private partner. Or worse, the tender document may be approved by the HCP but not the government, or the private partner could be selected—after a long and thorough tender process—but the partnership agreement would go unsigned, because a caretaker minister has no authority to give it their signature.

If this happens, will the private partner wait? What message will we be sending to international investors in this scenario? Was this reputational risk taken into consideration when the PPP law was drafted?

It would have been preferable to keep the Council of Ministers out of the procurement process as much as possible, and, at the very least, to bestow the aforementioned responsibilities (with the exception of expropriation) on the HCP, for PPP projects of a certain size (for example, up to $50 million).

For PPP projects of a municipal nature, the process and implementation are much easier. Municipalities are more stable and the powers mentioned above are granted to the municipal council president or the president of a federation of municipalities, as the case may be. Given this, municipalities and federations of municipalities are urged to undertake as many PPP projects as possible.

Aside for the setback with the Council of Ministers, the PPP law is also silent on conflicts of interest that the public side (the HCP’s employees, project committee members, work team members, concerned ministers, ministers in general, the president of a municipal council, municipal council members, the president of a federation of municipalities, and/or their relatives) may have with the project company, the sponsors, or the contractors. This is a very crucial issue in order to fight corruption, and should be addressed in the implementing decrees of the PPP law.

Ultimately, it has been one year since the PPP law was passed and no PPP project has seen light yet. One can only hope that, despite all the challenges mentioned above, there will be a PPP project in Lebanon in less time than it took the authorities to pass the PPP law.

0 comments
0 FacebookTwitterPinterestEmail
Economics & PolicyQ&A

Interview with Ziad Hayek, Secretary General of the High Council of Privatization and PPP

by Thomas Schellen
written by Thomas Schellen

One observation that the World Bank’s latest economic monitor publication for the Middle East and North Africa conveyed to its faithful readers was that the internet infrastructure in MENA countries needs to be brought up to speed in order to facilitate better transitions into the digital economy. Published in early October, the monitor highlighted the need for “digital public goods,” first among them reliable and fast broadband internet access. It chastised markets in the region for not providing enough high-speed internet access at low cost and for containing barriers that limit data centers and “hurt the environment for a data-driven economy.”

Lamentations over the weakness of national internet infrastructure are very common in Lebanon and many failures in the implementation and growth of online businesses over the past two decades must be attributed to the poor and politicized state of this particular infrastructure (if you do not know this, you have missed years of Executive’s analysis). However, several remedial actions have appeared on the map and some of them, stakeholders in the internet and communications sectors tell Executive, will be felt as early as next year. Others are slated to become reality further down the road.

While there appears to be no reason for Lebanese businesses and households to expect an impending tsunami of internet infrastructures, allocation of blame on the absence of such infrastructures as all-purpose excuse for delivering a business project late or missing an important spec can  no longer be the go-to.

What should strike happiness into collective hearts, however, is what the arriving framework of public-private partnership projects on the national scene has in store. One of the first three PPP projects under preparation is a national data center, which appeals both in terms of affordability and positive implications for the digital transition and entrepreneurship in Lebanon. Executive was eager to learn more from Ziad Hayek, the secretary general at the High Council for Privatization and PPP (HCP). 

(Details for the other two PPP plans—a $500 million construction of Terminal 2 at Hariri Airport and the implementation of a $3 billion toll road from the southern edge of Beirut all the way through to the Nahr Ibrahim area—also solidified in October, and will be covered in the end-of-year outlook next month).    

E   When compared to these two projects of airport expansion and toll road construction—which are rooted in historic transportation knowledge and structures—the project of a national data center is perhaps a little different, given that it pertains to digital economy infrastructure, which has a history of around 10 years for most of its global iterations. What is your approach to the national data center?

We talk a lot about building the knowledge economy in Lebanon, and this makes a lot of sense because we all know that Lebanon has good education [systems], people that are multilingual, and that—from designers of [leading global tech products] to owners of major mobile networks—Lebanese are involved in the tech industry all over the Middle East, not to say all over the world, in a big way. The [question] is: How can we enhance the knowledge economy in Lebanon? One way to do this is to provide Lebanese companies with access to data center services that are close to them, whether for co-location, or so that people can have [nearby] access to their servers or their disaster recovery, but do so in a professional way. Today, most Lebanese companies are either small, and therefore have their data stored outside of Lebanon on some website or something—but these are not the companies that are providing employment. If we look at larger companies today, they are inadequately served. They either have in-house servers, but you do not always know if you have the best technical people [in in-house IT departments], or you are hosting with a small data center that may or may not provide you with all the services that you need.  We, thus, are looking to build a world-class data center that can provide multiple levels of encryption and that has multiple redundancies so that you have safety and security for storing your data, that can withstand earthquakes up to a magnitude of 8.5 [on the Richter scale], and that has multiple high-speed fiber connections. You are firstly looking to provide Lebanese companies with a better service. Secondly, such a data center, with people in customer service that can speak Arabic, could serve neighboring countries, where the same level of ability might not exist to create and manage data centers. Thus, this would be a contribution to the region. Thirdly, we think that such a data center is an infrastructure that can create jobs and contribute to growth in the private sector. For all these reasons, we need that data center.

E   Can you say anything about the planned dimensions, such as server capacity? 

Right now we are thinking obviously about having multiple locations, so maybe two or three locations to facilitate better securing the data. Overall, we are looking at the combined capability to account for about 6 megawatts in power consumption, and at power utilization efficiency to be about 1.6 times. We are looking for [the data center] to have about 500 [server] racks, and to be Tier 3 plus, meaning Tier 3 as a minimum. With power supply, it should be Tier 4 level, if not better. At minimum, we are looking for it to provide IAS, which is infrastructure as a service, but also additional things. We are establishing certain criteria that are not yet set in stone and will not be until we have a chance to not only go to the Council of Ministers, but also to discuss these issues with potential investors. What we do in the feasibility study phase is to try to figure out what the size of the market is, what technology is to be used, etcetera. While they are not final, these are the points where we are heading, more or less.

E   You are saying that the data center will serve corporate Lebanon and the private sector, but one would assume that it would also be intended for public sector usage. Do you have a ratio or mix of public and private usage that the data center would aim to achieve?

It will compete for business, and hopefully will be attractive enough to various government entities and provide enough security for these government entities as well as the private sector. But we don’t have a preset view [on the ratio of government usage].

E   There seem to be many issues that need to be considered from the perspective of cybersecurity when building and operating such a center. Some might claim that using contractors from certain countries might result in them installing back doors in your data center. Is this not a totally new field for Lebanon, as far as developing cybersecurity?

This is exaggerated. People think that when somebody builds a data center they have access to the data. This is not true. There are many technical aspects to this, but to put it in the simplest form: At a data center, you have your servers in a room, the key to the room, and the key to the servers, with your own encryption keys. If somebody wants to get access to your data, they can by hacking into it, but hopefully your encryption levels at a data center are much more secure than at a server in the basement of your building. The risk is not that the data center operator would have access to your data. The threat is hackers getting access to your data. In this regard, you will be more secure at the data center than at your own premises.

E   However, when talking about cybersecurity, isn’t it true that we do not even have all the requisite legislation in place regarding cybersecurity in Lebanon?

We are working on that.

E   And we also don’t yet have a national cyberattack threat detection center or response center in Lebanon, with all the required experts on 24/7 basis. Will a sort of national cybersecurity protection system, or threat and intrusion discovery and response system, be included when a data center is created?

The data center will have the capability to detect threats. This is not the problem. But in terms of legislation, let me point out that we already have the law for data privacy and for e-transactions, which is very good.

E   These were passed in September?

Yes. And we are working with lawyers as we speak, and there might be some enhancements that we can bring into this and suggest additional legislation.

E   If one considers the political sensibilities that exist in the fragmented Lebanese political and communal landscape, would you expect to see demands that one portion of a distributed data center has to be built in the Druze mountains, another section in Akkar or in the south or in Keserwan, or wherever?

I don’t doubt that the minds of many people who are not well informed, and who tend to politicize everything, will tend to have that angle. But anybody who knows what they are talking about will know that it makes no sense to say [the data center] has to be built in such or such area. The important thing is that it is built where there is access to proper power supply, to redundant fiber optic connections, and so on.

E   Power supply is important in a country with the climate of Lebanon, since it relates to the need for cooling the servers, as well as to the power needed for running them and all adjacent infrastructures. In Lebanon, power supply is, to date, not an easy topic. So if we are talking of 6 megawatts for the data center, how will this additional power be supplied? Will it be integrated in the national grid under a plan with EDL?

Ideally, there would be some contract with EDL for 24/7 power supply. It would probably be at higher rates [compared with supply to households], as we are not looking to get electricity cost subsidies for the center. But of course such a center would have to have a redundancy power supply of its own that has to be up at 99.99 percent of the time under service level agreements. Power supply is a challenge, and it is more expensive compared with power supply in other countries, but on the other hand, having a data center has other advantages, of being in the region, of having customer service in Arabic, and all those things.

E   Would ownership of the data enter under the PPP contract be shared between the public and private investors?

No, ownership would be 100 percent private, as with all other PPP projects. The government is not a shareholder, and they are not sitting on the board. It is meant to be a 100 percent private project where the government is providing land that is located where access to fiber optic connections is best, and our role [as the HCP] is to facilitate the building of such a facility in Lebanon. The benefit of this facility to the government is largely economic, as opposed to financial. In other words, the government is not necessarily looking to achieve a [financial] return on this as much as to facilitate [economic benefits].

E   As Executive understands it, there are many mandates and requirements in order for CEDRE-supported PPP projects to activate and tap into credit lines. Do any of the three projects have conditions that are related to requirements for specific reforms?

Not much. CEDRE was mostly about pledging money for Capital Investment Plan projects—with the majority of funding going through the government. Perhaps $1 billion of the amount pledged would be used to enhance credit for PPP projects. Whether the data center project would benefit from any concessional financing or not, I don’t know. We will see.

E   In terms of timeline, are you looking at the data center project to be implemented in between the airport expansion and the toll road construction, or concurrently with one of them?

It would be earlier.

E   When do you think it will start?

We are hoping that we could tender it by the end of next year, or perhaps early the following year.   

E   So we would have a tender possibly in late 2019, and would add three years in construction time?

Perhaps two years. It can be [built] quickly as it is not heavy infrastructure. [The project will involve] basically constructing a building to certain specifications and then putting in certain equipment.

E   Where else in the Middle East do we currently have capacious data centers?

Mainly in the Gulf, but we don’t have any in the area [directly around Lebanon].

E   Would you aim to have clients from all of MENA using the data center?

No, but first I have to say that it is a private sector enterprise, and it will be [up to] the private sector operator to go after business, whether in Lebanon or other countries. What we are saying is that there is potential for regional size.

E   Have you made any quantification of this potential in monetary terms?

No, and we are not able to do all that today. We can say that we are sizing the Lebanese market, but there is other potential, icing on the cake. If you want to build something that is modular and can grow, you will not make all investments from day one, so you will make a small investment for Lebanon and a certain part of the Lebanese market and grow the data center as needed.

E   So we are not talking about investments worth billions of dollars, as is common for large data centers in China and the developed world? What will the Lebanese data center cost?

We estimate it at about $100 million. But again, you don’t have to build a big thing all at once.

E   Right, small and smart is beautiful, and big is not always necessary. But it seems from what is being built around the leading data center markets, like China, that these are the largest infrastructures in the emerging digital era.

The demand is there, and we will see more and more data centers being built around the world. Data keeps increasing, it is not decreasing, as we are always storing and archiving more.

E   And all over the world we see increases in cloud computing and have artificial intelligence coming up. Are you planning for AI capacity in this data center?

We are not planning [for specific capacities]—we are putting minimums [that have to be met], and the market will dictate to what level we go.

E   Did you size the Lebanese market for its potential? How much is that?

Yes, but we are not talking about the financial modeling at this point. We keep this information to ourselves. This relates to our own ability to judge those [PPP] proposals.

E   What is the HCP’s perspective on the involvement of civil society, with organizations such as the Lebanese Transparency Association (LTA) monitoring PPP implementation?

This [inclusion of civil society] is my own personal initiative. We are not obliged to do this, but I have always been pro-openness to civil society and transparency. I thus took the initiative upon myself to call LTA and say that I would like to form a committee to audit our work, for transparency and fairness, from civil society, but I do not want this only to  involve the LTA; I want them to lead it because they are the [main] transparency association[in the country] and have links to Transparency International. I want other parts of civil society involved in this effort, but we have not yet reached a decision on the shape or form of this. But I invited civil society, at least the LTA, to the kickoff meeting for the airport project this month, for them to start early on this journey with us. There is a learning process that they need to go through to better understand what PPP is, and the difficulty of tendering PPP projects. Hopefully we will work with LTA and other NGOs on this.

E   Lastly, on the digital transformation of the Lebanese economy: How much of a role can the data center project—and improvement of knowledge economy infrastructures—play in the needed transition of the Lebanese economy into a digital economy? The Word Bank recently saw the need for a strong concerted effort in transitioning MENA countries toward the digital economy, but citizens, governmental, and private sector stakeholders on various levels of the Lebanese economy appear to be moving at different speeds toward a digital economy.   

The data center will be an enabler—perhaps the most important one, but one enabler. Another enabler is speed of connectivity, fiber optic to the home, etcetera. A third enabler is the development of content to get more people online and have them finding something interesting. We cannot say that one thing will be the magic wand to achieve the objective [transition to the digital economy]. The data center is an enabler, and we think that Lebanese society is at a level of maturity in technology and science and knowledge to benefit from something like it. We have reached a level in Lebanon where this is now needed.

E   How important do you personally think the transition to the digital economy is for Lebanon?

For Lebanon, it is huge. One major thing that the Lebanese complain about is corruption. By using technology, whether in e-transactions or for disintermediation in providing access to information, etcetera, we can hopefully combat corruption. I think this is the only way that we can combat corruption at this point in time, and the [data center project] is very important in this sense. In a second sense, it is very important to grow the Lebanese economy through digital [technology]. Our neighbor to the south has huge capabilities in IT and focused on some IT areas in ways that made them world leaders. There is nothing that prevents us [from achieving something equal]. We have no less qualified people, [no less] networked or connected people, and no less creative people. There is no reason why we can’t have [a great digital economy]. What we need is a concerted effort to provide our people with the systems, the infrastructure, and the enablers. That is what we are trying to do.

0 comments
0 FacebookTwitterPinterestEmail
Economics & PolicyThe triple frontier

The curious case of Assad Barakat

by Peter Speetjens
written by Peter Speetjens

There is a thin line between fact and fiction in discussions of the Triple Frontier, a border area between Paraguay, Argentina, and Brazil that is rumored to be a Hezbollah hotspot. More than one year has passed since US President Donald Trump stood on the White House lawn and promised an answer to the “menace” of Hezbollah. The Americans have long had Hezbollah in their crosshairs, but the change in occupancy at the White House brought expectations of a change in strategy. Instead, the US has renewed its focus on disrupting alleged Hezbollah financing networks by profiling  the Shiite diaspora in Latin America.

“Brazilian police arrest alleged Hezbollah financer,” read a Reuters headline on September 21. Lebanese-born businessman Assad Ahmad Barakat was taken into custody after an arrest warrant was issued against him by the Paraguayan authorities for “declaring an incorrect nationality and omitting information about loss of nationality.”

Argentinean authorities also accused the 61-year-old of attempting to launder $10 million through a casino in Puerto Iguazú, a city in Argentina. According to the US Treasury Department, Barakat is “a high-ranking Hezbollah financier” and one of the organization’s “most prominent and influential members.”

Numerous publications around the globe ran the Reuters story. Some, however, omitted the term “alleged.” A crucial term, since everyone should be presumed innocent until proven guilty, and  especially so in the case of Barakat—he has seen and heard it all before.

Following a series of reports portraying him as Hezbollah’s main operative in South America, he spent seven years behind bars in Paraguay for tax evasion.

An ongoing saga

“Every year or two we are confronted by a wave of allegations about Hezbollah and the terrorist threat in the region,” says Ali Farhat, a Lebanese businessman and part-time journalist who has lived in the Brazilian state of Paraná for some 18 years and works in the city of Ciudad del Este, across the border in Paraguay. “We are tired of it.”

“The latest charges against Barakat are just ridiculous,” Farhat says. “The authorities claim his Paraguayan passport was canceled 15 years ago. Hence, the charges. Yet he has worked in Ciudad every day since he was released from prison without any problems. Local police now say they were never notified Barakat’s passport had been canceled. I am convinced it is the same story all over again.”

In 2009, Farhat co-authored a book in Portuguese called “Terrorista por Encomenda” (Terrorist to Order), in which he and Brazilian researcher Fernanda Regina da Cunha Giulian investigated Barakat’s first conviction and the way in which he was made a symbol in the global war on terrorism.

Born in 1967, Barakat left Lebanon for Paraguay in 1985. By then one of his brothers had been killed in the civil war, while the other was running a small car repair shop. The youngest of the three, Barakat was determined to carve out a better future abroad. He opted for Paraguay as it offered one of the few visas easily obtainable by Lebanese. Gradually he built up a business, which primarily imported electronics from China.

“The problems started with a commercial dispute in the late nineties,” says Farhat. “Barakat had secured the rights to a popular electronic game (Brick Game), which a well-connected competitor had also wanted. It is then that the Hezbollah accusations were first heard.”

These accusations resurfaced in 2001, shortly after 9/11 and George W Bush’s announcement of the “Global War on Terror.” On October 6, 2001, the Paraguayan daily Ultima Hora ran a story reporting that the Paraguayan authorities eyed Barakat as the “alleged head of Hezbollah fundraising and the principal agent of Holy War in the Triple Frontier.”

This turned out to be only the opening salvo in a relentless media campaign. Citing anonymous government sources and experts, numerous other publications followed the tone set by Ultima Hora and with every published article, Barakat became synonymous with Hezbollah.

Farhat is convinced Barakat got caught in a perfect storm. He argues that despite the original accusation of Barakat’s links with Hezbollah being motivated by a business dispute, the media became enamored with the story of Hezbollah and terrorist financing, while the authorities were keen to prove their worth in the emerging global war on terror.

Brazilian police eventually arrested Barakat in Foz do Iguaçu, the city in which he was living, on June 22, 2002.  Although they admitted to having “nothing on him,” they extradited Barakat to Paraguay on November 17, 2002.

He stood accused of financing Hezbollah by selling counterfeit products, drugs, and even arms, but was ultimately sentenced to seven years behind bars for tax evasion.

“They did not have any evidence,” Farhat says. “Barakat owned video material of Hezbollah fighters training or in action against Israel, and he had made some donations to the Al-Shahid Social Welfare Association. Very general stuff. So, in the end they could only convict him for tax evasion.”

Another major question emerged when Barakat was released in 2009. Hezbollah’s alleged leading man in South America, now shorn of his supposed cover, did not return to Lebanon to receive a hero’s welcome. Instead Barakat returned to his Brazilian wife and three sons in Foz, where he lived, away from the limelight, until his arrest on September 21.

A lack of evidence

This does not mean Barakat definitely did not act on behalf of Hezbollah. He might have. But it was never proven. The US Treasury Department, however, still lists him as a “high-ranking Hezbollah financier,” and one of its “most prominent and influential members.” Barakat’s only conviction—tax evasion—is not even mentioned, while media-fuelled suspicion is presented as fact.   

South America expert Christopher Sabatini, adjunct professor at the School of International and Public Affairs at Columbia University and executive director of the non-profit organization Global Americans, declined to comment about the Barakat case specifically, as he was not fully versed on the details. However, he says he has been “closely following the dossier on the alleged presence of Hezbollah and other Islamic or terrorist organizations in the Triple Frontier since the mid-1990s, and so far there has not been a single case that proves the many wild accusations that have been made since.”

These “wild” accusations include but are not limited to: Hezbollah running training camps in the Paraguayan jungle, Hezbollah cooperating with Al-Qaeda to prepare attacks on American soil, and Hezbollah being in bed with Primeiro Comando da Capital, Brazil’s largest and most notorious criminal organisation.

Barakat is not the only alleged Hezbollah operative to be arrested in the Triple Frontier. In June 2010, Paraguayan police arrested 37-year-old Moussa Ali Hamdan for providing “material support to Hezbollah.” He allegedly transferred to the group the proceeds from the sale of stolen goods, including cellular phones, laptops, Sony Playstation 2s, second hand cars, and counterfeit Nike shoes.

In 2013, 30-year-old Wassim Fadel was arrested for sending a 21-year-old Paraguayan girl to Europe with 1.1 kilograms of cocaine in her stomach. She was arrested in Paris. The media immediately portrayed Fadel as Hezbollah’s very own Pablo Escobar in Paraguay.

Unlikely stories

“But these cases are peanuts,” Sabatini says. “If Hezbollah were to smuggle cocaine, would they really be interested in one kilo? Would they not send a container?”

Other elements in these stories about alleged Hezbollah activity do not add up. Hamdan was a dual citizen of the US and Lebanon living in Pennsylvania. He only entered the alleged Hezbollah financing scheme after being offered stolen phones by an undercover FBI agent. He even bought two fake passports from the same cop to settle an outstanding debt.

Regarding Fadel, Paraguayan police claimed that he had transferred funds to bank accounts in Istanbul and Damascus, which were owned by “Hezbollah members involved in the group’s financial operations.” The allegations are very specific, yet the names were never released.

Fadel had become a fugitive in 2008, when customers of his car parts company in Paraguay filed a fraud complaint. Would a Hezbollah kingpin really have been trying to make an extra buck by selling fake car parts?

“I’ve talked to several intelligence officers over the years and among them there seems to be a consensus that drug trade and money laundering in South America are not central to Hezbollah operations,” Sabatini says. “Let alone that the continent is used as a platform to train fighters and launch attacks on the US.” And if this were the case, US intelligence would presumably know. “Numerous State Department, Central Intelligence Agency, and embassy investigations have scoured the area so much that it must be one of the most studied areas by the US intelligence community in the Western Hemisphere,” Sabatini adds. It should not come as a surprise then, that the US embassy in Paraguay has downplayed the suspected Hezbollah presence in Ciudad. In 2007, Wikileaks published a US diplomatic cable acknowledging that illicit activities “including trafficking in drugs, arms, and counterfeit goods, as well as document fraud and money laundering” had taken place in the Triple Frontier, but also states: “Hezbollah has a small, direct, non-operational presence on the ground, but most Lebanese in the Tri-Border Area are Hezbollah sympathizers, if not financial supporters.”

The cable specifically refers to the donations made at the Shiite Mosque of the Prophet in Ciudad. Local Lebanese, however, swear these donations are only used for projects such as the local school. But even if some are sent to Lebanon, some sense of proportion is necessary. The same US cable mentions how in the Merchants Bank/Valley National Bank case, $3.7 billion was moved from the Tri-Border Area through the United States. Another case involved New York financial service provider Beacon Hill, which moved $13 billion in six years through 40 different JP Morgan/Chase bank accounts. Beacon Hill was successfully charged as an unlicensed money transmitter, while JP Morgan/Chase paid a hefty fine.

Another US cable published by Wikileaks concerns Paraguayan bank Banco Amambay and claims “80 percent of money laundering in Paraguay moves through that banking institution.” The bank is owned by Horacio Cartes, (the man the DEA suspects of cigarette and cocaine smuggling), who from 2013 to 2018 served as president of Paraguay.

“I have the impression the Hezbollah and terrorist threat in Ciudad del Este is predominantly a political issue,” says Sabatini. “It is a way for Latin Americanists and other parties to get the attention of the White House. That could concern defense budgets, jobs, or the conflict between Israel, Hezbollah, and Iran.”

So, why did the Paraguayan authorities again issue an arrest warrant for Barakat on the rather vague grounds of “declaring an incorrect nationality and omitting information about loss of nationality?” The clue lies in timing. The warrant was issued shortly after the inauguration of Paraguay’s President Mario Abdo Benítez on August 15. Paraguay is a close US ally and a participant in the State Department’s (lucrative) Antiterrorism Assistance program. Could it be that the 46-year-old newcomer merely aimed to offer a gesture of goodwill toward the White House?

We may never know for sure. What we do know is that some 50,000 Lebanese live and work in the Tri-Border Area, who are currently  all tarred with the same brush. The flurry of allegations from US and Israeli politicians, the media, and think tanks about Hezbollah’s alleged links in South America since 2001 has been relentless, and so far backed up by very little proof. There will be bad apples among the Lebanese in the region. Some may operate on behalf of Hezbollah. Yet, there is little doubt that the vast majority of these people left Lebanon to have a better future. Many succeeded and have helped make Foz and Ciudad into the tourism and shopping havens they are today.

And among these expats is Assad Barakat, who remains in custody awaiting possible extradition to Paraguay. Is he a Hezbollah financial mastermind, as some have claimed for years? Or is he an innocent father of three? One thing is certain: It will matter little when he is extradited—the story will no doubt repeat itself.

0 comments
0 FacebookTwitterPinterestEmail
Economics & PolicySanctions

‘America First’ is a risk to Lebanon and the Middle East

by Jeremy Arbid
written by Jeremy Arbid

Last month marked the 35th anniversary of the deadliest attack against US forces since World War II: the bombing of the US Marine barracks in Beirut on October 23, 1983 that killed over three hundred people, including 241 US military personnel. The official US line now is that elements of what would later become Hezbollah, backed by Syria and Iran, were responsible for the attack—although all three parties continue to deny involvement. During an event marking the anniversary, US President Donald Trump, with his customary love of theatrical moments, signed new legislation targeting Hezbollah. The first response from Lebanon was defiant.

For a long time the United States has pitted itself against Iran and, by extension, Hezbollah. Since the Islamic Revolution at the end of the 1970s in Iran and, later, Hezbollah’s inception during the Lebanese Civil War, the Americans have hunted the two in a remarkably consistent way. This has not changed under President Trump; American strategy, however, has shifted. It has been influenced by a fundamental repositioning of US policy vis-a-vis the entire world—a mindset most commonly referred to as “America First.” The Trump administration has been more aggressive in removing itself from or renegotiating existing treaties, and seems content with exercising a much more risk-friendly foreign policy. To understand how this new policy of Trumpism has affected Hezbollah, Lebanon, or Iran, looking at the realities on the ground is somewhat pointless. To understand these changes, one should instead examine Trump’s version of reality. This is not a new phenomena when regarding the foreign policy of America, but under Trump it has become particularly acute.

Trumpism writ large

The Trump paradigm, which is not an openly declared policy, is that the US will do what it likes and what suits it, with little regard to how it impacts other nations—allies included. This has had huge global implications. How many treaties has Trump made redundant, or at least announced his intention to scrap? In less than two years Trump has, for example, exited a landmark international climate change agreement, unilaterally walked away from the Iran nuclear deal, and, most recently, indicated he would junk an arms control agreement with Russia. Every foreign policy decision under Trump’s direction is a wild card.

Trump’s targeting of Hezbollah comes as part of a shift in America’s Middle East strategy to more closely reflect the policy goals of Israel and, to a lesser extent, Saudi Arabia—both hellbent on countering Iranian influence across the region. So far, Trump’s administration has sought to counter the group by targeting its financiers. This is not a radical departure from the previous administration, but it seems that Obama during his second term was less interested in pursuing Hezbollah and more amenable to working with the group’s patron, Iran.

In 2008, at the outset of the Obama administration, the Drug Enforcement Administration (DEA) launched a law enforcement campaign, code-named Project Cassandra, to disrupt Hezbollah’s alleged global drug trafficking and money laundering network. Following its investigation into Hezbollah’s sources of funding, the DEA alleged that the group reaped $1 billion per year laundering money from drug proceeds.

Near the end of Obama’s first term, drawing on evidence from the DEA investigation, the US Treasury blacklisted local financial institution the Lebanese Canadian Bank (LCB). According to the original indictment issued in the Southern District of New York US Federal District Court, LCB was involved in a tri-continental money laundering operation that stretched from South America to North America and West Africa. A money exchange entity in a West African country that was a subsidiary of LCB was accused of channeling the proceeds, but the money came mostly from manipulation of the used car market, including pre-owned vehicle dealerships in the US, with smaller amounts coming from Latin America. Allegedly, LCB was also involved in the financing of Hezbollah activity, but the actual affiliation of LCB was never visible, above the level of individual branch managers having some connections to the group. There was never a smoking gun linking bank executives to Hezbollah, and, in 2013, LCB’s board and all shareholders agreed to a settlement of over $100 million on the condition of no admission of guilt.

That year, discussions began in earnest between the Obama administration and its counterparts on the UN Security Council, plus Germany and the EU, that ultimately led to negotiations on an Iran nuclear deal framework. In pursuit of a drawdown of Iran’s nuclear weapons capability, the Obama administration began quietly withdrawing support for Project Cassandra, a Politico investigation published last December reported. The Politico investigation concluded that the Obama administration sidelined the operation because it feared DEA investigations and Treasury actions would jeopardize negotiations with Iran.

Ramping up sanctions

It was only 15 months ago, in August 2017, that Lebanon’s prime minister, Saad Hariri, stood on the White House lawn as Trump declared a forthcoming answer to the “menace” of Hezbollah. At the time, we did not know what Trump had in store.

In May, Trump withdrew the United States from the Iran nuclear deal, in part on the implied notion that Iran was using the country’s economic recovery from sanctions relief to fund Hezbollah. The Americans see Iran’s support for Hezbollah as a destabilizing force, in both a political and security sense, away from the interests of the US and its allies in the region. The Iranians see Hezbollah as a useful tool extending Persian political influence and its interpretation of Shiite Islam, Waliyat al-faqih, serving as a resistance and counter to Israel and, in recent years, securing mutual interests in Syria.

In August, the US reapplied a first phase of sanctions, and in early November reimposed a second phase of sanctions targeting key Iranian trading and energy activities, namely the nation’s petroleum exports. The US is targeting Iran’s economy to alter its political influence and military behavior in the region, and to temper Iranian financial support to Hezbollah.

Back in 2015, after the Iran deal was concluded, Congress passed a law—the “Hizballah International Financing Prevention Act” (HIFPA)—meant to kneecap the group financially and isolate it from the banking system worldwide. The legislation may have been driven more by America’s political environment rather than regulatory need, Executive reported in 2016, placating conservatives and war hawks in the Congress enraged by the agreement with Iran. It is, however, unclear what practical effect that law had in cutting Hezbollah off from the international financial system. HIFPA required the Obama administration to report to Congress on Hezbollah’s alleged narcotics trafficking and alleged transnational criminal activities, but if that was done the reports were never made public.

Amendments to HIFPA had been rumored to be in the works since mid-2017, as Executive reported, and finally, at the end of October, as America’s renewed clampdown on Iran was set to begin, Trump signed new legislation amending HIFPA,  the “Hizballah International Financing Prevention Amendments Act of 2017” (HIFPAA).

Congruently, throughout 2018, the US Treasury has sanctioned nearly 40 individuals and entities, “pursuant to the Hizballah Financial Sanctions Regulations.” In October, the US Department of Justice (DOJ) named Hezbollah as one of the “transnational organized crime threats” to the United States, alongside four Central American cartels. The DOJ move comes nearly 10 months after it formed the Hezbollah Financing and Narcoterrorism Team, tasked with “investigating individuals and networks providing support to Hezbollah, and pursuing prosecutions,” according to a DOJ statement. The statement also added that the new DOJ unit will work to “restrict the flow of money to foreign terrorist organizations as well as disrupt violent international drug trafficking operations.”

Through sanctions and the law enforcement actions, it seems a case is being built that could lead to indictments in US courts of Hezbollah officials and entities, or their affiliates. As of yet, we do not know how strictly the US will pursue Hezbollah on these fronts, how widely the US will cast its net, or whether there will be collateral damage. But what is clear so far is that the Trump administration is coming hard for Hezbollah, and this pursuit will likely intensify.

Diplomacy no more

The main difference between the Obama and the Trump administration in all this is that the former was pursuing Hezbollah while easing off its patron, Iran, while the latter is going full throttle after both. Under Obama, the US pursued a diplomatic solution to the prospect of an Iranian nuclear weapon, whereas now the US is seemingly on a path toward military confrontation with Iran and its allies—if Iran does not change course in its regional influence campaign.

At the moment, Iranians—and arguably the world at large—are content to wait out Trump. We do not know what impact the reapplication of sanctions on Iran will have on economies in the region, nor what will happen to the price of oil. If the Iranian oil supply to the market is disrupted, it could cause price shocks and keep the cost per barrel high. These dynamics will start to emerge toward the end of the year, in time for the next OPEC/Non-OPEC meeting, in December. We also do not know what these American actions mean for Iran’s patronage of Hezbollah, and the country’s regional ambitions. Neither do we know Trump’s endgame—assuming he has one—if Iran and its allies do not capitulate to American demands.

How all of this will affect Lebanon remains to be seen. We know that past experience with US law enforcement and Treasury sanctions forced the closure of LCB in 2011, and when the HIFPA legislation was implemented in 2016, a local bank was bombed. That summer, Lebanon’s central bank had ordered commercial banks to comply with the US law. After they did, the head office of Blom Bank, one of Lebanon’s largest banks, was targeted. There was no claim of responsibility for the bombing and local law enforcement did not publicly reveal the results of an investigation into the event, if one was even conducted.

Hezbollah might assume important ministerial positions in Lebanon’s next government, namely the portfolio of the Ministry of Public Health. Suggestions that a Hezbollah-run health ministry would jeopardize foreign funding to the ministry’s programs is the next game of who will blink first. By now we know it is not beyond Trump to manipulate American soft power at multilateral institutions, in diplomatic or financial form, to get what he’s after, and in truth those were carrots long before Trump was elected. But what will happen if America’s implicit threat is ignored—either by Lebanon, Hezbollah, or Iran—is an unknown, as the world at large continues to react to this wild card president.

0 comments
0 FacebookTwitterPinterestEmail
CommentEntrepreneurshipEntrepreneurship 2018Special Report

Social entrepreneurship in Lebanon

by Maya Wakim
written by Maya Wakim

Anyone with any knowledge of Lebanon knows that the country is perpetually described as teetering on a cliff’s edge, frequently stuck in political stalemate, and with infrastructure that leaves much to be desired. And yet, amid all this insecurity is the trope of the entrepreneurial Lebanese. Because, despite the difficult living standards, rampant corruption, and resignedness of citizens who must deal with the country’s various problems, there are a fraction who find themselves inspired by the situation around them into creating solutions for societal problems—and making some cash at the same time. And there is nothing wrong with that. Social enterprise is described in Forbes Magazine as for-profit businesses with “a mission to tackle global issues, such as alleviating hunger, improving education, and combating climate change.” In order to achieve these goals, these businesses “might fund specific programs, partner with governments or existing philanthropic entities, or follow a one-for-one donation model, and work on either the local or international level.” This is what we are seeing in Lebanon today.

In the past few years, Lebanon has witnessed a wave of startup ecosystem actors—including venture capital funds, investors, accelerator programs, and other financial and advisory entities—seeking to help Lebanese entrepreneurs go from ideation to a financially sustainable and profitable enterprise. These entities have focused on startups’ early-stage ideas and later stages of growth. Groups such as makesense, as well as Berytech and Fondation Diane, were established to equip citizens with the necessary innovation tools and design-thinking expertise to help social entrepreneurs achieve their mission.

The social entrepreneurship movement was born of a need to sustainably power changemakers, who would in turn would pass down their expertise, creating an expanding network of people using business to enact social change. It is a way to introduce a revenue-generating engine to social initiatives and make them self-sustainable. What differentiates social entrepreneurship from nonprofits and NGOs that are actively working on solving world challenges is that the latter model is one based on constant fundraising—and this, more often that not, is unsustainable. In other words, if the money runs out, the work stops and its impact with it. This is not to say that nonprofits and NGOs are not important—they are vital part of efforts to alleviate poverty, stall climate change, and solve other challenges. Social entrepreneurs would argue, however, that these groups need to be supported by similar yet self-sustaining initiatives like social entreprises. As they are less well-known than NGOs, it may not be clear to some what a social enterprise encompasses. Put simply, revenue plus impact equals social entrepreneurship.

Social entreprise initiatives drive impact and are based on a business model designed to spread that impact and make it more sustainable. In Lebanon, as elsewhere, this means using a business approach and utilizing the resources available for startups to creatively solve various societal issues, ranging from lack of transportation to gaps in the medical field. Having a financial engine behind it allows a social enterprise to scale up, grow, and spread across different regions. Meanwhile, an allocated budget permits the social enterprise to sustain its impact and gives the team behind it the chance to solve new challenges and adapt their business model based on the community’s needs.

People across the world are facing similar problems. Local changemakers are working on plans that would help solve challenges their communities are facing, and what they require is communication links with like-minded individuals elsewhere. Such contact would allow ideas and solutions to travel across borders. Global platforms, such as change.org and onebillionrising.org, help create these links by sharing content that brings attention to critical civic issues and sheds light on successful social enterprises around the world. The fact that many challenges are simultaneously global and local makes such platforms imperative for inspiring change in far-flung communities.

Establishing a social enterprise

In order to set up a social business, you need two things: a sustainable business model, and a challenge to be solved. A good starting point is the UN’s Sustainable Development Goals (SGDs), a blueprint to address comprehensive local and global issues by bringing multiple stakeholders together to take action. These 17 SDGs address universal challenges. However, assessing how best to tackle them is difficult. This is why makesense and other community-based actors were formed, in order to create the networks needed to tackle these global challenges by using social entrepreneurship to equip citizens with a platform, creative design thinking tools, and inspiration to take action. This civic movement has allowed entrepreneurs to connect to an extensive network of citizens for multiple purpose collaboration and customer reach. By creating this interconnected world under the umbrella of social entrepreneurship, many successful, sustainable ideas are traveling across borders. Changemakers do not need to be based in their country’s capital or tech hubs, they just need to be trying to create a solution to local issues. Most successful ideas were assessed based on impact, trial and error, and community support.

An opportunity for Lebanon

The list of challenges faced by the Lebanese is overwhelming. In Beirut, complaints over water shortages and the daily electricity cuts are frequent—yet those living outside the capital have it much worse. Traffic congestions, slow internet speeds, and poor infrastructure are just some of challenges that the Lebanese must navigate on a daily basis.

While the concept of social entrepreneurship might appear new to some, many are in fact practicing it within the scope of their work, without realizing they are doing so. In Lebanon there are different social entrepreneurial support systems scattered across the country, from the Tripoli Entrepreneurs Club (TEC), in the north, to the Jubaili Workhub, powered by Antwork, in the south. Such networks are well aware of the many problems that exist in Lebanon and are looking into impact-driven ideas backed by business models. Now is the chance for Lebanese citizens who are fed up with the way issues are being handled in the country to confront the status quo, while making a living from it. In the past eight years or so, financial support from different international and local funders has been given to ideas bringing change, at least enough to establish themselves in order to proceed. The financial sources are available in Lebanon, the challenges are very much in evidence, the motivating anger felt by citizens is intense, and the ideas are here. So why not go for it?

Lebanon has witnessed the rise of many social enterprises: FabricAid, the first second-hand clothes collector and distributor in Lebanon, which collects donated clothes, cleans and fixes them, then sells them at a lower price through pop-up stores around the country; Caesar Cider, an apple cider beverage sold around the country that emerged from the apple crisis in Lebanon, in which 40 percent of farmer’s apple crops were rotting due to the inaccessability of land export routes via Syria; and CIVVIES, a Lebanese eco-friendly brand that works with vulnerable communities to produce uniquely designed sustainable fabrics from recycled polyester and natural linens. All three social enterprises have won multiple awards and competitions since their inception, and have been supported by my organization, makesense Lebanon, mainly through tailored brainstorming workshops. They are sustainably assisting Lebanese communities and benefiting the environment by recycling products, among other methods.

Meeting the social entrepreneurs behind these ideas and listening to their stories and the impact they are making, motivates others to at least ask how to take the first step and make a difference. An observation that has been made by makesense over the years is that people around the world do want to make a change, but they do not know how to start. This is where a community plays an important role—its power lies in the knowledge shared during discussions. Lebanon, given its small size and tight-knit communities, has an advantage. People residing in Lebanon are more often than not connected to someone who could offer useful advice to someone else. Bringing these social dynamics into a local community of social entrepreneurs and citizens would empower and support the community. People all over the world want to make an impact on their societies, all while ensuring financial sustainability in order to survive. As risky as it might sound, there are many success stories out there that deserve to be heard. If social enterprise booms, the idea of a better Lebanon wouldn’t only exist in dreams and in ‘what if’ conversations, but would start appearing in our everyday lives. Many challenges are yet to be met with ideas, and many great ideas are yet to be heard. Social entrepreneurship in Lebanon has room to embrace numerous solutions and has developed enough to support ideas along the way. Perhaps teaching this notion in schools and emphasizing it in universities could create a new generation of social entrepreneurs. One can only highlight the importance of raising the next generation of citizens to become not just job seekers, but job creators and solution makers.

1 comment
0 FacebookTwitterPinterestEmail