Executive Magazine

A good summer?

by Nabila Rahhal July 4, 2018

written by Nabila Rahhal

The celebration of Eid el-Fitr on June 16 marked the beginning of summer 2018 in Lebanon. As the season kicks off, all those in the tourism industry are speculating over whether it will be as good a season as summer 2017, or whether tourism will take a turn back to the bleak summer days of 2012 to 2016. Despite a rocky end to 2017—with current Prime Minister-designate Saad Hariri’s since-rescinded resignation at the start November—the first quarter of 2018 was off to a good start. According to the Ministry of Tourism, the total number of tourists in Lebanon rose from 345,168 in the first three months of 2017 to 362,398 in the same period in 2018. This jump was led mainly by tourists from Europe and America, who together constituted 49.56 percent of all visitors to Lebanon in the first quarter. Performance numbers for the second quarter of 2018 are not yet available, but since summer has become the main touristic period for the country, all eyes will be on the next two months to determine what to make of 2018.

Of summers past

Tourism in Lebanon—the success of which had always been a roller coaster ride, dependent on internal and regional stability—was set on a downwards trend with the onset of the Syrian crisis in 2012, before taking a slight upwards turn in 2017, most likely as a result of the election of Michel Aoun as president at the end of 2016, and the resulting increase in political stability. However, this upturn was nothing to write home about, according to those in the hospitality industry, and was not comparable to the tourism witnessed in Lebanon in summers before the Syrian crisis. So far, according to those in the industry, it seems that 2018 is shaping up to be a repeat of the preceding summer. “Summer 2017 was a very good one compared to the previous year [2016], but not to be compared to the strong summers like 2008, 2009, and 2004. We are still very far from those summers. [Summer] 2018 is shaping up to be hopefully the same as 2017, but not better,” says Chadi Gedeon, general manager of Mövenpick Hotel and Resort Beirut.

Indeed, the dismal touristic seasons of recent years have lowered the expectations of Lebanon’s hoteliers. “We are seeing a light [at the end of the tunnel] this season, with better reservations so far in the year, and [we] are seeing more foreigners in the city,” says Nizar Alouf, board member at Riviera Hotel. “We hope that finally June, July, August will be good for Lebanon, and of course for us. The hotel industry these days is not looking to make money but to break even or not to lose money compared to the loss of money in past years.”

Will they or won’t they?

Although 2017 was marked by the slow but steady return of tourists from the Gulf, Hariri’s resignation announcement in November 2017 caused regional tensions to rise again, explains Daniele Vastolo, general manager of the Kempinski Hotel.

Whether summer 2018 will see more visitors from the Gulf to Lebanon is a subject of speculation amongst Lebanon’s five star hoteliers. “Every business today in Lebanon is suffering, in my opinion, from the boycott of the Gulf and Arab tourists over the last few years,” Roger Edde, the owner of the Eddésands Hotel and Resort, says. “This [boycott] is supposed to be formally lifted this year. What may help us is that there are serious tensions between Turkey and the GCC countries because of Turkey’s connection with the Muslim brotherhood and Qatar, and so many who had deserted us for Turkey might change their minds.” He continued: “Besides, Turkish people don’t speak Arabic, while Lebanese do. Lebanon is a small country that [Gulf nationals] know very well. They miss Lebanon.”

Gedeon says Movenpick had seen an increase of Arab Gulf visitors over this year’s Eid, as compared to the same period last year, but that with travel advisories cautioning nationals from some GCC countries against visiting Lebanon not yet officially lifted, he is not expecting a drastic increase in their numbers. Thus, business continues as usual and hoteliers must keep looking to develop other markets while keeping a longing eye on the Gulf.

Going local

For Beirut’s Kempinski Hotel, local Lebanese looking for a “staycation” have grown into a significant market this year. “In the last few months, we have been very strong with the Lebanese market itself, and 40 percent of our guests are Lebanese,” Vastolo says. “You have expats coming to visit their family, and, as a new market, we are having Lebanese coming from the south or the north for a little retreat here.” Moreover, he noted, new Kempinski hotels in Africa would likely make African guests a future growth market for Kempinski Lebanon.

Gedeon says that expatriate Lebanese have become the country’s main leisure tourists. “Ideally, our occupancy is supposed to be a 50/50 division between leisure and business, but these days, unfortunately, it is 70 percent business,” he says. “This is because there is no real leisure segment in Lebanon yet. We have the Lebanese expats who come back for the summer and this is our leisure market: they come for two weeks and don’t want to open their house or sometimes they don’t have houses in Lebanon. It is a strong segment but it is not enough.”

Widening the net

For the past few years, most of the people making up the tourism crowds in Lebanon have been Lebanese expats, residents of Lebanon, and Europeans. The tourism industry has thus had to diversify its offerings to cater to these groups of tourists, whose expectations of a vacation may differ from those of a tourist from the Arab Gulf—which had prior to 2012 been the main market to which Lebanon catered. As such, alternative tourism segments such as rural, religious and food tourism have been developed, bringing significant advantages to the communities in which they have been established.

Driven by the search for non-polluted beachesnd the high entry fees of most private beach clubs and resorts, beach tourism has been developing on public beaches like Sour’s, and Anfeh’s Tahet el-Rih, and is attracting Lebanese and European tourists alike. Beach bars, where one can enjoy a drink steps away from the water and without paying an entry fee, are also gaining popularity and have attracted seasoned hospitality investors. Meanwhile, beach resorts and clubs are coming up with innovative packages and concepts to attract new customers, but are struggling to stay abreast amid mounting costs and encroaching marine pollution, which works against their best efforts to provide a refreshing escape for those who choose to pay entry fees.

Only time will tell what summer 2018 will bring to the Lebanese tourism industry, but stakeholders in the sector will hopefully have learned their lesson, and will continue to work on the country’s nascent alternative tourism options and on the new markets that have opened to Lebanon—while not forgetting about our neighbors, the tourists from the Gulf.

July 4, 2018 0 comments

It starts with you

by Executive Editors July 4, 2018

written by Executive Editors

A driver throws a sandwich wrapper from his car window onto the street. A pedestrian casually tosses an empty plastic bottle into the sea during his daily morning walk on the Corniche. A family enjoys a lovely day picnicking on the beach or in the mountain and thinks nothing of leaving their trash behind. These are frustratingly and sadly daily occurrences in Lebanon, and they must stop. Now.

It is often said that the Lebanese have been spoiled by domestic help and tend to think that there is always somebody to clean up after them—hence littering with no afterthought—but this does not explain why the same Lebanese who walk the extra mile to place a piece of garbage in the bin in a foreign country think nothing of tossing it on the street in their own. This issue runs deeper. It seems that Lebanese do not feel a sense of ownership when it comes to public spaces, and while maintaining a sparkling clean home, they are apathetic toward littering on the street, beach, or mountain—public spaces to be enjoyed by all residents of Lebanon.

It is not a stretch to say that the vast majority know that littering is bad, but many do it anyway. There is a clear disrespect for public spaces in Lebanon. One factor could be the lack of civic education among many Lebanese. Civic education was only included in the Lebanese curriculum in the early 2000s and, therefore, the generations before that year were not taught to respect Lebanon, or their collective rights and responsibilities as Lebanese to maintain a clean and healthy environment. The generation educated from the year 2000 onwards have learned about the importance of collective responsibility, so hopefully they can share these ideals with their parents, teaching them not to litter rather than learning from them how to ruin Lebanon’s natural environment.

But until a real social contract is adopted, the environment in Lebanon will continue to suffer immeasurably. Our shores are drowning in waste while a significant portion of our seawater is heavily polluted. All of the beach operators—whether of public beaches or private resorts and clubs—who spoke with Executive said that the biggest challenge they face is littering, despite regularly cleaning the shore, sometimes multiple times per day. There are many factors that contribute to this waste onslaught—including the ongoing garbage crisis—and the eradication of littering will not be a panacea to all of our environmental problems. But we have to start somewhere, and the best place to start is with ourselves. It is arguably easier to get someone to walk a few extra steps to dump a piece of garbage in a bin instead of throwing it on the street than it is to get those in authority to solve the country’s waste management problems.

This does not mean the government should not intervene to force citizens to reduce littering. Civic education is the first step toward doing so, as it is only through the proper education of our youth that we can implement future change. For those who are beyond the age of civic education, a national awareness campaign against littering is needed to encourage people to treat public spaces like their homes and stop their rampant littering. Both of these steps, however, may be not enough of a deterrent against littering for some people and this is why some punitive measures should be introduced. It was only when driving without a seatbelt in Lebanon became a fineable offense that people began to strap in. Personal consequences for actions are the only thing that works for a wide number of people, and, as such, a fine should be imposed on those who are caught littering in public spaces.

Not littering may seem like a small step to take, but indeed, the longest journeys begin with a single step. If we want to save Lebanon’s beaches and make them enjoyable for both tourists and locals alike, then it is time to take that step. Right now. No excuses.

July 4, 2018 0 comments

Last word Opinion

Access to information in Lebanon

by Ghassan Moukheiber July 4, 2018

written by Ghassan Moukheiber

The same questions come up often: “How can I use the Access to Information Law (A2I)?” or “Can I use it at all, or has it joined the ranks of the dozens of good laws that are not enforced in Lebanon?” Lebanese citizens, once hopeful that transparency in the country would be heightened with the passing of the A2I Law on February 10, 2017—after years of preparation—are now disappointed by the many unfortunate examples that show how difficult, or seemingly impossible, it is to actually enforce. The latest in the series of such disappointments was the delay in releasing a copy of the naturalization decree, ultimately published after significant pressure on the website of the interior ministry. So, is the A2I Law dead?

To all such citizens, take comfort that the A2I Law is alive, but requires a stronger will and better means for enforcement. The law is an important milestone on the road to preventing and fighting corruption in Lebanon, but not an end of the road by itself—it requires citizens to monitor and promote its full enforcement. Below are some facts to illustrate issues that are not always well understood:

The A2I Law is in full force and effect. It does not require any implementation decree to become obligatory, as is falsely believed in good or in bad faith, by citizens and administration alike. All entities listed in the law, collectively referred to as “the Administration,” must abide by all its provisions without false excuses, such as waiting for an implementation decree that is in the making. However, all should make sure that such a decree—albeit useful if properly drafted and enacted—should not modify or limit the very broad and powerful rights provided by the law.

Enforcement remedies are available. Many administrations responded positively to requests for information. Others, unfortunately, did not. In such cases, in addition to the legitimate, if not necessary, political blaming and shaming—and until the National Anti-Corruption Commission is established by law—the reluctant administration can be subject to a judicial injunction passed by the judge of urgent matters of the Shura Council. This was successfully done in the past and citizens are encouraged to seek such remedy in the future.

The law is about more than just access to information. Many, including politicians and lawyers, overlook the fact that the law also provides new provisions: to protect private personal data and to mandate a written rationale for all individual administrative decisions, under the sanction of annulment. Both subjects were in debate over the naturalization decree. The following caveats must be noted: First, the protection of personal data should not be an excuse for not providing access to personal decrees; and second, judges and lawyers should be encouraged to strike down non-motivated administrative decisions using the A2I Law in order to force a change in behavior of reluctant administrations.

Automatically published information is more important than access to information upon request. This includes; annual activity reports, regulatory administrative decisions, and, most importantly, information about funds, within 15 days of their expenditure. The challenge remains to have all the above appropriately written and published on dedicated webpages for each administration. Many supportive initiatives are underway. The law further exposes the counter-trend decision of the government to put the electronic version of the Official Gazette behind a paywall. This measure is in violation of the general principle of transparency underpinning the A2I Law, and therefore requires a reversal through the development of a free, fully-fleged legal web portal. Also, the same general legal principle of transparency, and article 56 of the constitution, mandate that all administrative decrees and decisions be automatically published in the Official Gazette, including, but not limited to the so-called individual decrees, such as naturalization and pardon decisions.

As the saying goes in the legal world, “You win your case twice: once when the judgment is passed, and then again when it is enforced.” The same applies to laws. We won first, after many years of effort, when the A2I Law was enacted. The challenge now, for citizens and politicians alike, is to keep-up the efforts of another nature, to win again, by making sure that the law is properly enforced by all concerned administrations.

July 4, 2018 1 comment

Comment Economics & Policy

Let’s have a serious talk about drugs

by Joseph el-Khoury July 4, 2018

written by Joseph el-Khoury

The cannabis debate never completely goes away in Lebanon. This is not surprising, given that the country is a major producer and consumer of the psychoactive plant. Everyone who is anyone has an opinion on the drug, usually expressed through impactless sound bites. The discussion was reignited on June 18 by an Internal Security Forces (ISF) Facebook post reporting a “drug bust” that led to the arrest of three teenagers, accompanied by a picture showing rollups, a plastic bag with a small amount of hash, and one joint. The post drew widespread mockery online, with comments from Facebook users thanking the police for “saving” them and making them feel much “safer.” Beneath the sarcasm, the inadequacies of our drugs laws were duly exposed.

Retribution or rehab?

This viral ISF misfire was followed by an official, theoretically binding, circular issued by Attorney General Judge Samir Hammoud on June 26—World Drugs Day—urging his colleagues to immediately refer drug users to the Drug Addiction Committee, in accordance with article 199 of Law 376 (1998). Since the law was passed 20 years ago, judges have had the option of referring individuals arrested for drug possession to a rehabilitation committee based in the Ministry of Justice. However, a survey released earlier this year by SKOUN, a local non-profit outpatient therapeutic center, found that a very low number of arrested drug users had been referred. There are a number of explanations for this, stigma and ignorance being obvious ones. But for years the committee has also received no political backing, remaining chronically underfunded and understaffed.

The value of the rehabilitation offered via this committee is questionable, even to those arrested and referred to it as “addicts.” The term addiction has itself lost popularity in clinical circles as it does not account for the wide variety in patterns of use and the impact on the physical and mental health of the user. Evidence from a multitude of studies worldwide suggests it is likely that the majority of those arrested for possession of cannabis, or even harder drugs, are not addicted to them and do not require intensive treatments like detoxification and residential rehabilitation. Most drug use is recreational, though some remains problematic and can lead to loss of functionality, mood disorders, and psychotic illnesses in the absence of physical dependence.

The traditional structure of rehabilitation in Lebanon focused on the tail end of heavy drug use: mostly opiate-dependent young men who had fallen by society’s wayside. Some organizations, such as Oum el-Nour, did evolve, and now offer a more diverse approach, such as community programs and specialist centers for women. In 2012, the Ministry of Public Health launched its opiate substitution program, which widened Lebanon’s treatment horizons, but also widened the rift between the proponents of total abstinence and the advocates of harm reduction.

Despite an absence of reliable statistics, patterns of illegal substance abuse in Lebanon continue to evolve. New drugs have come onto the market—such as spice, salvia, and ketamine—and are often sold mixed together and laced with toxic contaminants. The use of cannabis is also on the rise, with studies revealing a wider public tolerance and increased use amongst the younger generations. The electronic dance scene has also exploded, with Beirut becoming an international destination for techno-fueled nights out. With this reputation came MDMA and a variety of stimulants, expanding the inventory of party drugs, which was long-dominated by cocaine.

Each country has an idiosyncratic drug ecosystem responsive to social, political, and economical factors that regulate supply and demand. In Lebanon, the establishment has realized that action needs to be taken, yet they and the public seem incapable of having a mature debate on which drug policies to adopt.

Shifting policies

Whether you think drugs are harmless entertainment or the affliction of our generation, it is hard to find a convincing argument for putting adolescents in jails that fail to rehabilitate. Outside of Lebanon, the drug problem has been approached in a more innovative manner, with an emerging trend toward decriminalizing or legalizing some or all drugs. All policy options carry risks and have caveats. But generally, a body of evidence is building to support this liberal perspective. Portugal, the Netherlands, Uruguay, the US, and—most recently—Canada have all been more than willing to experiment with this approach.

Decriminalizing is usually the least problematic first step, as it involves the state foregoing the use of incarceration for drug use. It does not require a significant shift in philosophy, as prison sentences could be replaced by fines and investment in prevention and treatment efforts.

Legalization, however, carries with it a logistical nightmare. It requires a strong state apparatus able to guarantee the sources of production and distribution of drugs. I do not believe the Lebanese government would be able to regulate a legal drug production and retail industry. For example, calls to legalize cannabis for medical purposes—recently backed by the MPs of Baalbek-Hermel—ignore the fact that the overwhelming majority of cannabis is used for recreational purposes in Lebanon. Exporting Lebanese cannabis for medical use would mean depriving recreational users of a cheap local supply. This might be welcome to some, but the counter effect would be an even greater reliance on criminal networks to source and sell cannabis to recreational users.

Politicians, bloggers, and advocates have too often used populist discourse to gain the support of a large section of the population, while dismissing the basics of drug economics and global experience. It is worth mentioning that the US is only now investing millions in researching the impact of cannabis on mental health, in particular psychosis.

As its stands, the takeaway message has to be that the drug conversation should continue, in a transparent and honest way. Supporting liberal laws for dealing with drug production, dealing, and use should not automatically mean support for recreational drug consumption. Cannabis is not a harmless path to achieve happiness. In the event that it is legalized, it should be put at least on an equal footing with alcohol. Limitations on who can use it and under which circumstances should be enforced. Legal or not, substance abuse in all its forms should be discouraged, especially for those still in the developmental stage before adulthood.

July 4, 2018 1 comment

Comment Economics & Policy

Refugee rights not up for debate

by Bassam Khawaja July 4, 2018

written by Bassam Khawaja

In the past month, Lebanon has seen a number of troubling developments regarding the presence of Syrian refugees, with leading politicians heightening calls for the return of refugees to Syria and making unfounded accusations of an international conspiracy to settle them in Lebanon.

As countries around the world have turned their backs on refugees, Lebanon is hosting an estimated 1.5 million Syrians, by far the highest number of refugees per capita in the world. At the Friends of Syria donor conference in Brussels in April, Lebanon made important commitments to refugee rights, including on residency status, education, legal protection, and nonrefoulement—the prohibition on returning people to places where they are in danger. These could have a real and positive impact on the lives of Syrians in Lebanon—if they are carried out. But since then, things have taken a turn for the worse.

Following Brussels, Lebanon’s president, speaker of parliament, and foreign minister slammed a joint EU-UN statement that mentioned a “choice to stay,” saying that it suggested permanent settlement in Lebanon. But that phrase was part of a recommendation that only related to people displaced within Syria, not to refugees in Lebanon.

Just after Lebanon recommitted in Brussels to not forcibly returning refugees, politicians turned up the volume for their return. Although not calling outright for forced returns, President Michel Aoun said he would seek a refugee “solution” without the UN. He also called on the United Arab Emirates, Saudi Arabia, and Egypt to help facilitate refugee returns. The Foreign Ministry, meanwhile, summoned the UN refugee agency’s country representative and accused the agency of scaremongering after UNHCR put out a neutral statement saying it was not involved in the return of 500 refugees to Syria in April.

Most recently the caretaker Foreign Minister Gebran Bassil gave UNHCR two weeks to develop a strategy for refugee returns and alleged that it is trying to discourage returns to Syria. He then froze residency permits for UNHCR staff in Lebanon—without the government’s backing—accusing UNHCR of hindering the return of Syrian refugees by “spreading fear.”

Bassil claimed that by interviewing Syrians prior to their return, UNHCR was causing refugees to fear returning to Syria. But these interviews are part of UNHCR’s core mandate to protect the rights of refugees and ensure they are aware of the conditions in Syria so they can make an informed choice about whether to return at this time. UNHCR cannot “encourage” or facilitate returns of refugees before it has assessed that conditions in Syria are safe.

The attacks on UNHCR are a troubling escalation of pressure on refugees. Since the beginning of the crisis, Lebanon has generally respected the international prohibition on refoulement, and has—with some exceptions—not forcibly returned refugees to Syria. But while there is no evidence that recent returns of Syrians have been forced, Human Rights Watch found that returns from Arsal last year were not voluntary, but were the result of harsh living conditions, largely as a result of Lebanese policies that have restricted legal residency, work, and freedom of movement.

Refugees who want to return to Syria voluntarily are free to do so. But under international law, Lebanon cannot force or coerce refugees or asylum seekers who have a well-founded fear of persecution in Syria to return. Lebanese politicians have claimed that areas in Syria are “safe,” but this ignores the volatile nature of the Syrian conflict, in which more than 900,000 people have been displaced within Syria in the first four months of 2018 alone.

And aside from generalized conflict, many refugees fear arrest, torture, and forced conscription if they return. These fears are well founded. Human Rights Watch has for years documented widespread patterns of arbitrary detention, torture, and deaths in Syrian government custody. If Lebanese politicians are so eager for refugees to return, they should stop using UNHCR as a scapegoat and focus their efforts to addressing the real barriers to return, including Syria’s unlawful detention practices and the government’s use of urban planning laws to seize private property without due process or compensation.

Lebanese politicians have justified these calls for return by claiming that Syrians are hurting Lebanon’s economy—arguments made largely without evidence. The presence of Syrians has certainly put a strain on services including waste management, electricity, and education, but these services have also been bolstered with international aid in response to the crisis. And while the war in Syria has certainly taken a toll on Lebanon’s economy, there is little concrete evidence that the presence of refugees has done the same. Meanwhile, refugees contribute to Lebanon’s economy, paying for rent, phone bills, and shopping in Lebanese stores—aside from the billions of dollars in humanitarian aid to Lebanon.

But despite aid to Lebanon, the international community’s striking failure to resettle meaningful numbers of refugees has contributed to the crisis here. Syrian refugee admissions to the US have dropped almost to zero. The European Union is still hiding behind the EU-Turkey deal to keep refugees out of Europe.

There is an urgent need for a fact-based discussion around the issue of refugees in Lebanon. The government should keep the commitments it made in Brussels and end attacks on the international community and baseless speculation about an international plan to settle refugees in Lebanon. Meanwhile, the international community should step up both humanitarian aid and resettlement of refugees to demonstrate that Lebanon has not been abandoned to bear this burden on its own.

July 4, 2018 1 comment

Editorial Opinion

Trickle down trash

by Yasser Akkaoui July 4, 2018

written by Yasser Akkaoui

The destructive nature of the Lebanese never ceases to bewilder. While we claim to be the most civilized nation in the Levant, we have managed to slowly hollow out our mountains, toxify our rivers, turn our seaside into landfills, and contaminate our air with heavy metals and cancerous fumes—and we do not even care. With perennially selective vision, we turn a blind eye to the floating decapitated cows’ heads, human feces, and plastics, and just dive straight in among them.

To observe this willful blindness, all one needs to do is go and watch our fishermen on Beirut’s Corniche reeling in their dinner from the murky sewer water. These images rightly belong to far less developed nations, but now this reality is ours.

There has been a stunning degradation in our civil behavior. While Lebanese brag about how clean their homes are, they have total disregard for anything beyond their doorstep.

Why would they care? Successive governments have failed to develop policies, strategies, or indeed any plan that will preserve the only truly valuable national asset that we have—our nature. These same government officials are the first to acquire licenses to chew up our mountains, or bicker over garbage contracts to fatten their pockets while they tan in ostentatious villas built on public coastal land.

All this did not happen overnight. Ours is a decadent culture contaminated by more than 40 years of increasing ignorance and deteriorating awareness and leadership.

The garbage is up to our necks and it will drown us—unless we open our mouths, taste the scum, and renew our calls for an environmental policy that is quickly developed, implemented, and reinforced. One that is free of loopholes, self-interest, and corruption, and one that must make amends for years of contemptible negligence toward our natural environment.

July 4, 2018 2 comments

Lifestyle

Neuro-leadership

by Samah Karaki June 19, 2018

written by Samah Karaki

In numerous reports questioning the gender gap in the workplace, particularly the gap further up the leadership ladder, one persistant argument points to differences in men and women’s confidence. This has led many to address how women can be empowered in the workplace. Such steps are necessary at all professional levels, as even some very high-powered women can feel as if they do not deserve their positions, having the so-called “imposter syndrome.” But confidence is not a panacea; solving the gender gap is a complex issue requiring an equally complex approach.

In a report published recently in the Harvard Business Review, data analysts from management consulting company McKinsey & Co. and workplace analytics company Humanyze tested the argument that women’s behavior is to blame for the dearth of female leaders. For this landmark study, researchers spoke with 70,000 workers from 222 companies that employ more than 12 million people. Of those, 44 percent said that unconscious bias among male managers is a significant barrier to gender diversity in the workplace. This indicates that arguments about changing women’s behavior wrongly place the onus on internal rather than external factors. Based on the results of this study, one cause of gender inequality is the unconscious bias that men are more creative, smarter, and better leaders. Which raises the question: Are they? What does the science actually say about gender differences in leadership? Do men and women have different brains that could reflect different abilities? If so, whose is better suited for the workplace?

Some are uncomfortable with a biological account of human behavior, feeling it underestimates the influence of the social and cultural forces that shape who we are. It is almost certainly true that our personalities partly develop from cultural expectations around traditional gender roles. But over the past 15 years or so, new technologies have generated a growing pile of evidence that there are inherent differences in how men and women’s brains are wired and how they work. We do know now that some differences are innate: at seven months female babies focus more on faces than male babies, and even male baby monkeys prefer playing with cars.

The left side of the brain stores and uses what is known and deals with facts, with information in isolation, while the right brain is constantly on the look-out for what is new and engages with emotional information, with concepts as a whole. Sometimes the left side is referred to as “the male brain,” and the right side as “the female brain,” but this is a misleading oversimplification. A 2014 study found that the two hemispheres of a woman’s brain talk to each other more than a man’s do. Women’s brains consistently showed more strongly coordinated activity between hemispheres, while the men’s brain activity was more tightly coordinated within local brain regions.

There are a number of conclusions crucial to women being valued in organizations that can be drawn from these observations. Men, because of their brain activity, focus on problem-solving and outcomes, not readily taking the broader picture into account. Women may appear to lack focus, but the suggestion here is that they are scanning wider horizons. When applied to the workplace, this ability would be “big picture thinking,” seeing the impact of decisions on a large number of stakeholders, and taking relationships into account when solving a problem. This way of thinking is not lacking in focus, but rather a strength that can bring huge value to a team.

If the future of excellence in organizations and their capacity to retain talent lies in the quality of relationships and trust among employees, then it could be that women have a more intuitive understanding of such processes.

Power and testosterone

Dominance and power are often connected with the hormone testosterone. It is true that high-power alpha males in primate hierarchies have high levels of testosterone, and powerful and effective leaders also have high testosterone that makes them more motivated by competition and more optimistic when it comes to risk-taking. Women, on the other hand, have less testosterone, and a large number of studies have concluded that they are more risk-averse than men. Women approach risk while paying attention to facial expressions, body language, and unspoken words. In other words, they have more empathy when they take decisions.

In challenging times, however, high testosterone can actually undermine leadership by reducing this empathic accuracy and driving men toward over-optimism, most notably during the 2008 global financial crisis. A recent study used experimental games to examine how power and testosterone levels affected leader corruption over time. The study showed that those who had high levels of testosterone were most corrupt when they had high levels of power. In other words, power interacted with endogenous testosterone in predicting corruption. As you might suspect, women, who have lower levels of testosterone, were more resistant to corruption than their male counterparts.

This is not to say that any conclusions on whether women are “better” than men in leadership roles or vice versa should be drawn. Challenging situations demand leaders that have the flexibility to utilize an array of leadership qualities that includes risk-taking and high confidence, but also reading other people, listening to employees’ concerns, and then making one’s own decisions, along with guiding, inspiring, and protecting the group.

This points to the need for women to stay true to their own skills and values to be authentic. When we hear about empowerment in the workplace, what is often suggested is that to reach these levels of power women must act more like those who have long been historically empowered: men. Women are expected to embody the characteristics we often attribute to men in the workplace, as if these are the only characteristics that can contribute to professional success. But diversity in leadership is key to business success. Globalization has intensified the pressure and demands for competition and change, so companies that want to survive these challenging times need to find the way to spark innovation by harnessing the power of different ideas from diverse groups of people and tapping into a range of opinions, ideas, and experiences.

The final thing to remember is that it is very easy to hold gender as the marker for diversity within an organization, but it is not the only form of diversity. There is also cultural background, age, sexuality, disability, and most overlooked, diversity of thought and experience.

June 19, 2018 0 comments

Book Review Economics & Policy

Inside the global economy

by Riad Al-Khouri June 12, 2018

written by Riad Al-Khouri

In publishing a “practical guide” to the global economy, American economic researcher Andrew Vonnegut provides a toolset for better understanding the ways in which it is prone to be influenced by “big shifts.”

According to Vonnegut, such shifts can be demographic or ecological, but can also involve issues related to inequality, information technology, and emerging markets. Viewing some or all of these shifts through a unified global economy lens can beneficial in analyzing the present geo-economy or preparing for future movements in it.

The book would be of interest to readers in countries that cannot shape the world to satisfy their particular national economic interests—a reality faced by most, if not all. Other approaches often use individual (national) economies as their starting point and then model the global system as interactions among them. Vonnegut considers the global economy as a whole, not simply a sum of national parts, providing a framework that is not extrapolated from national perspectives of international economics.

Vonnegut’s writing drew on his academic expertise teaching a course on global economics at the University of California Santa Barbara (UCSB), and his practical experience as a consultant working in emerging markets finance and policy (with a stint in the Middle East, where this author met him).

Contemporary economic phenomena in my view can be explained using Vonnegut’s approach. An example of this is the global impact of the United States tax reform that was adopted by the Congress at the end of last year.

According to a report released in February by UNCTAD (the United Nations Conference on Trade and Development), US corporations may bring in up to $2 trillion under the new tax regime by repatriating cash from foreign affiliates. As analysts describe it, the reform ends a system whereby companies defer tax on foreign earnings until the repatriation of funds. Instead, the new measure treats those earnings as if they were being repatriated, with an 8 percent tax on non-cash assets and a 15.5 percent tax on cash.

UNCTAD noted that the last similar US tax move—the 2005 Homeland Investment Act—resulted in the repatriation of $300 billion from abroad, and that funds available for repatriation in 2018 are seven times larger than in 2005. With $3.2 trillion in US overseas retained earnings, including about $2 trillion held in cash, this amount is today equal to half of US-owned foreign direct investment. Consequently, the UN body said, “repatriations could cause a large drop in the outward FDI stock position of the United States.”

Such a shift in FDI stock is expected to have significant effects on global investment patterns. The implications for developing economies are not wholly clear as they comprise a wide range and also depend in part on the reactions of other countries. Using the tools provided by Vonnegut would be of value in assessing these inter-relations and the ramifications of US and others’ policies beyond their borders.

However, Vonnegut’s analysis of the global economy as more than a grouping of domestic economies could fruitfully be taken even further by adding a geopolitical framework. Andrew Vonnegut’s famous cousin, the novelist Kurt Vonnegut, once wrote that US President George W. Bush had “gathered around him upper-crust C-students who know no history or geography.” Inside the Global Economy, as it stands today, could do with a geopolitical component and would benefit from being beefed up with perspectives on history and geography. Regardless, the world is changing so fast that a second edition of this book should not be far off. I give the current global system another decade before a very different world starts to replace it.

Also, it has to be mentioned that Inside the Global Economy pays little attention to Arab countries. This is deplorable because this otherwise fine book could have much to say in clarifying the context of regional turmoil in this part of the world. Introducing, for example, the case of Qatar’s dispute with Saudi Arabia, within the context of the Iran-US clash, would provide a more shrewd analysis of energy markets. If the geopolitical element is woven into Vonnegut’s analysis, this comprehensive book will be of even greater value to readers seeking to understand the global economy, from the Arab world and beyond.

Khouri was assisted in this book review by Emily Silcock.

June 12, 2018 0 comments

Banking Cover story Q&A

The essential view

by Thomas Schellen June 11, 2018

written by Thomas Schellen

Executive sat down with Riad Salameh, the governer of Banque du Liban (BDL) to discuss the prospects for the country’s GDP, the role of the central bank, and the external and internal challenges that lie ahead.

E Thank you for sitting down with Executive at this crucial time for Lebanon. I understand that you very recently discussed the country’s economic outlook and the positive impact of the elections on the financial situation with President Michel Aoun. In the current context, how do you see the perspectives for Lebanese GDP in the next two years, or perhaps even in the longer term?

Lebanon is a volatile country and there always are unforeseen events. The central bank has taken it as its policy not to announce estimates for growth prior to July of every year. In general, the Lebanese economy will profit from the implementation of the resolutions at the CEDRE conference. On one side, we estimate that the growth can increase—[in excess of] the normal growth of the country—by 1 percent on every $1 billion invested. On the other side we think that the reforms, which have been announced or promised by the government, will increase confidence and will therefore contribute to positive growth as the government has announced that it will decrease the deficit to GDP by 5 percent[age points] over the next five years.

E How about the risks related to the reforms in the current geopolitical environment, in which we have just seen the oil price go above $80, or if we look at the interest rate environment in the United States and many concerns about the Middle East in Europe and the US? How much of a risk exists that the reforms and fiscal discipline needed to reduce the deficit by 5 percentage points of GDP over five years would lead in the short term to negative developments in the economy, specifically in the perception of their situation by the people?

The challenges are true challenges, and we will be facing them whether the increase in interest rates because of the world increase in rates, [or] whether the higher oil prices. [It is also true that] geopolitical risks will be influencing the economy. But I believe that if there is realistic political will internally [in Lebanon] to undertake reforms, that these reforms will be executed. I don’t want to speculate. We have to wait to see the new government, and it will be their [responsibility].

E Some bankers expressed views that beyond GDP growth and employment creation because of the CEDRE inflows, it could also create a possibility to lower interest rates. Do you see any room for lower rates in Lebanon?

Interest rates are going to be stable. You cannot talk about lowering interest rates in a global environment where rates are going up. We have seen that emerging markets in the world are now practicing higher interest rates. The banks and the economy will have to adapt to this new level of interest rates. The only way to moderate this increase is to improve on the fiscal [situation], which will improve the rating of Lebanon and lead to an equilibrium in our market with lower spreads when we compare our rates to the international markets.

E So the risk premium on Lebanon could be reduced by measures of reform and fiscal discipline?

Yes.

E Was there any reason for concern in the recent widening of spreads in Credit Default Swaps (CDSs) for Lebanon, which reflect the cost of insuring debt?

This is temporary and not linked to Lebanon as such. As yields on the 10-year [US treasury] bond went above 3 percent, we have seen a sell-off in all emerging markets. Lebanon also has seen its [bond] yields pushed higher, which normally pushes CDSs higher because of technical reasons. There are no new credit events in Lebanon from us which would justify any reaction.

E If we turn to looking at the role of the central bank in Lebanon, BDL has been, of course, the guardian of the monetary policy and of banking but also, especially in recent years to a large extent, of the entire economy, talking about the stimulus packages initiated by BDL. Do you see a possibility that under a reform paradigm, the economy could shift and see the government take a more determined role in fiscal policy?

We will welcome such a move. It is our hope and our aim to depart from non-conventional central bank activities, provided that the government fills the gap. During the past years, this [stimulus from BDL] was needed to maintain the stability in the economy and the social stability, but our main [area of] concern is the monetary stability and the banking sector, and also keeping Lebanon compliant with the international laws.

E Wouldn’t the government and specific ministries be hard-pressed in finding the cash to create incentive programs such as the housing loan incentive?

This will depend on the budget which [the government and Parliament] will adopt. Of course, all these initiatives need to be funded and need to be subsidized. Thus, if the policy of the government is to take over these activities, this will be shown in the next budget, because in the present budget there is no allocation for such subsidies.

E The story of BDL over the past 25 years cannot be separated from your story as its governor. When you were inaugurated on August 1, 1993, what was your expectation on how long you would be in this post?

At that time, I thought it would be a one-term operation, but events in Lebanon have put the central bank and my presence here as a matter of consistency for the country. Various governments have therefore decided that I should continue.

E With the effect that it looks today as if you might on one not too distant day, namely in about one year, enter the record books as the world’s longest continuously serving central bank governor of all times up to this point in history.

[Laughs] I don’t know what the terms of the other central bankers are, but I did not do it on purpose.

E As you have the benefit of being able, from personal experience, to review the challenges of the central banker’s role as they evolved over many years in the international development of the financial economy, how in your view does the current phase of 2017/18 compare to previous phases in the role of central bank governor of Lebanon?

Well, the banking sector has improved, and the confidence in the currency has improved. Our concentrations and concern now are on the implementation of the new rules and regulations and accounting standards that have been decided through the Basel III agreements. Challenges that did not exist when we started are now important risk factors for the stability of the country, and I mention here what we have to face in terms of compliance and in facing the sanctions that are part of our daily business. The challenges have changed from the time when it was our objective to create the confidence in the currency, decrease dollarization, and strengthen the capital of banks. Of course, we have to keep these objectives, but we are now in another world of the added challenges that I mentioned.

E The IMF has recently used the term “unsustainable” in describing Lebanese debt to GDP ratios and the current account deficit, but one could argue that these ratios have, for many years, been far from positive and indeed worrying. Is Lebanon’s situation today worse than in previous periods?

We differ with the IMF with their estimate of growth for 2017, and these differences can influence all the feasibilities in projections that can come after. We think the growth in Lebanon was about 2.5 percent in 2017, and they put it at about 1 percent. The realities come from the market. Lebanon’s stability depends on confidence and on the inflows that come to Lebanon every year. This is what we look at more than at economic data, especially since, as you know, the GDP in Lebanon is undervalued as we are in an economy where not everything is really billed.

E What do you tell bankers, especially bankers from international markets, who would say that the Lebanese pound is overvalued?

You cannot maintain an overvalued currency for so many years. This is the best answer. We have seen a live stress-test [of the currency] in November when Prime Minister Hariri resigned. It created demand on the dollar where depositors were converting and it also created outflows. But the system remained stable and things reversed as the political event finished, which was a political and not a monetary crisis. That this reversal happened means that markets are looking at the value of the pound and being realistic. On the other hand, nobody in the world could really determine what the value of the pricing of a currency is. It is [determined by] supply and demand.

E It seemed from a recent conference sponsored by the Bank of International Settlements that the view on exchange rates in small open economies is shifting from a focus on such countries’ independent stances on monetary policy to greater understanding of inescapable dependencies through policy spillovers from globally dominant central banks. Research papers thus appear to put more emphasis for central banks to know if their currency is close to its long-run equilibrium value rather than using other metrics for assessing the real exchange rate, which seems to indicate that that the impact of external influences on small economies and your positions on the exchange rate are increasingly being validated.

Yes, and our policy is derived from the realities of Lebanon. We have a dollarized economy in Lebanon today, and there is no value added to this economy if we do not maintain a peg on the pound. On the contrary, the peg on the pound creates demand for consumption and also stable purchasing power, thus social stability.

E But from your perspective, how could the competitiveness of the Lebanese economy be increased vis-à-vis strong manufacturing nations which have exchange rates that make their products more competitive in global markets, when looking for example at regional behemoth Turkey where the exchange rate just this spring reached 4.6 TRY to the USD, down from about 3.5 a year ago and from 2 in 2014?

The higher costs that are linked to production in Lebanon are essentially due to the absence of a proper infrastructure. Once you have this infrastructure, you are going to be able to produce and be competitive. Cost is on the other hand also due to lack of efficiency, which means that you need a more serious approach at work[places] in terms of working hours and having fewer holidays. This would also help increase salaries in the private sector by way of an increase in demand [for labor].

Lebanon is competitive in many sectors, but our infrastructure is today really very backward. We are talking here not only about roads and transportation, but also about the environment, about fighting pollution [and] exploiting the sea. The resolutions of the Paris conference are important to create a base for a productive [and] competitive economy, and the internal reforms are important for effectiveness. Our view is that the public sector growth as share of GDP should stop, and we should encourage the growth of the private sector to have a greater part in our GDP. That will turn out to give leverage to Lebanon.

E Which brings us back to the CEDRE process and the importance of international support for Lebanon. One of the issues in this regard is the refugee issue that was the main topic at the Brussels conference held in April. Is the drain on the Lebanese economy and society from your perspective a component that needs more international humanitarian and development assistance, beyond what was pledged in Brussels or at earlier such refugee aid conferences?

[The refugee issue] is a cost on Lebanon and has been stated as such by the World Bank and the United Nations. [In the presence of] such a cost, whatever reforms you do, there will be pressure on the government. The increase in the security forces, for instance, and the cost of that increase is due to the fact that you need more people to assume security [functions] when you have such a number of refugees. And so on.

On another side, the Syrian war also has hurt Lebanon because residents from the Arabian Gulf countries are not visiting Lebanon as before and because our exports are almost impossible to achieve. So whatever you do in terms of [improving] productivity, whatever you do in terms of [achieving] reform, these [economic restraints due to the refugee issue] are realities and currency devaluations are not going to solve these realities.

But returning to the relation between competitiveness and the exchange rate, I take you to the Italian example, where [Italy] used to devalue the lira to improve the economy [before the EU’s establishment of the economic and monetary union]. They realized that [this approach] was not working and that is why they joined the euro, which is a stable currency. The currency can play as long as it does not create inflation.

E Could then inflationary pressures on Lebanon arise from the CEDRE inflows of money, if the equivalent of more than 20 percent of the country’s GDP in one year are to flow in over the course of five years?

The investments are spread over 10 to 12 years, so the issue of inflation can be mastered.

E And the central bank will play a strong role in this?

Of course.

E If we turn to the banking sector, where you mentioned the need to comply with international rules and also apply new accounting standards. One of the goals of the unconventional measure initiated by BDL in 2016—often called the swap—was to enable banks to build up profits that they would retain for the purpose of switching to the more demanding International Financial Accounting Standards, or IFRS 9, if I understood correctly. The migration to IFRS 9 was mandated for the first quarter of this year. Can you tell us anything about how it was achieved, if it was smooth or if there were any hitches?

It was smooth. It has delayed the publishing of our usual statistics by two weeks, but, as of now, all banks are taking IFRS 9 as the reference in reporting. There are also other circulars which were considered positive like the issuance of the liquidity cover ratio. One can say today that the banks are properly capitalized because when we did the engineering [of 2016] and we also asked the banks to have a solvency ratio of 15 percent, based on Basel III. Today, they are at over 15 percent [solvency].

E Is this the case all throughout the sector?

It is the average of the sector. You always have one or two banks which are behind, and we follow their cases, but you have to admit that what we are asking [of Lebanese banks] is beyond any level of what is required worldwide.

E As one always hears rumors about new developments and pairings in the Lebanese banking industry, is there any change in the BDL policy on mergers of banks in the top tier of now 15 banks, the so-called Alpha group with deposits of over $2 billion each?

We have not introduced any change so far. We are, of course, flexible, and will adapt to the realities, adapting our policies to what is required to be able to keep Lebanon financed properly. For the time being, we do encourage mergers but not among the top 12 banks. We think that the consolidation that has happened by market forces has also improved the confidence in the banking sector in Lebanon.

E If I may ask in this context about another financial sector, namely insurance. Insurers have spoken for some time about having appealed to you for subsidized soft loans from BDL that would encourage consolidation in this industry which according to the World Bank’s Financial Sector Assessment is beset with over-crowdedness and unhealthy competition on pricing. Is there any outlook for the insurance sector to get soft loans from the central bank or any other form of support toward consolidation?

The insurance sector is not in our jurisdiction. It is controlled and regulated by the Ministry of Economy [and Trade]. We have no project for putting any subsidized loans [at the disposal of] the insurance companies in the country.

E What can we expect for 2018 as far as Circular 331 and its process, as far as the Beirut Stock Exchange (BSE), and as far as the electronic trading platform (ETP) and the transformation of the current capital markets environment?

On 331, we are committed to pursue implementation of this circular as we believe that it is going to contribute to the creation of a productive sector for Lebanon, productive like we see it in the modern world, and that would play an important role in improving efficiency and competitiveness in the country. [Regarding the BSE], we are still waiting for the government to designate board members so that the process of privatization of the Beirut Stock Exchange can be pursued as the law requires. On the electronic platform, we are getting there. It is a matter of one or two months that we will have the clearing system in place. We are presently testing it and want to operate [the ETP], even if we will not sell it for the time being because we are waiting to sell it at the same time as the Beirut Stock Exchange. We believe [the ETP] will create liquidity in the country.

E Is it correct that an ETP is usually especially beneficial for the trading of government securities on basis of certain volumes?

Such a market gives you the freedom to list all types of papers after getting the approval of the [Capital Markets Authority]. There are no restrictive measures such as on a classic stock exchange. We anticipate seeing trading not only in government securities [but also] in currencies, except for the Lebanese pound, [and] in shares when these shares cannot be listed on the stock exchange. We hope that [the ETP] will [provide] exits for startup companies and funds, and also hope to see commercial paper and debt paper traded there. Trading should be possible from all over the world, so this is another way to integrate the Lebanese diaspora with the local economy.

E How about things like bonds for financing parts of the PPP projects in infrastructure? Would the ETP be a possible avenue for trading such bonds as financial papers with small minimum tickets in Lebanon?

The idea of CEDRE is to fund the projects with international funds, not local funds. Therefore, apart from certain exceptions, this should not be a place to use in order to fund these projects.

E When multilateral institutions such as World Bank and European Bank for Reconstruction and Development, which have committed to roles in the financing of Lebanon’s infrastructure projects, will come to Lebanon, will BDL have an advisory role on the evaluation of projects or in some other form sit at the table when projects are being negotiated?

The central bank has no role in this. These are international funds, and the follow-up should be done by international bodies. [The process of discussing the infrastructure investments] is between the government and the lending institutions or countries, but whenever our contribution is required we will not hesitate because we think that the project is beneficial for Lebanon.

June 11, 2018 0 comments

Last word Opinion

The impact of GDPR on Lebanese businesses

by Jihane Abi Saleh June 11, 2018

written by Jihane Abi Saleh

With the continuous digitization of human life and economy, questions around the ownership and privacy of our personal information need urgent attention. From June, it will be crucial for Lebanese companies to understand the implications of new European regulations on the ownership and limits to exploitation of personal information, which came into force at the end of May.

As of May 25, two years after the adoption of the General Data Protection Regulations (GDPR) by the European Union, organizations who are registered in the EU, or selling products and services to EU residents, have to apply GDPR. This can range from large international manufacturers and online retailers, to small enterprises and commercial bloggers. But many in Lebanon assume that this new regulation will not affect them.

This could be mistake, and a costly one, for companies that offer products or services online that are purchasable by EU residents. All local companies with a strong digital presence outside Lebanon should determine whether they need to initiate compliance with GDPR.

GDPR is a landmark European Union regulation that prescribes the rules and regulations for the collection, processing, use, storage, and destruction of the personal information of EU residents. The main aim of this piece of legislation is to protect consumers by giving them greater control over their personal data that is transmitted via the internet, and to compel businesses to be more accountable and transparent in their use of customers’ personal data.

As an EU regulation, GDPR is not a priori applicable outside of the bloc, however, one of the considerable changes introduced by GDPR is in its extraterritorial scope, which allows it to reach non-EU organizations performing transactions with EU residents. Under article 3 of the GDPR, a company may still have to abide by its rules even if it is incorporated outside of the EU and has no physical presence within the EU.

Compliance with GDPR is thus required of companies anywhere, as long as their activities entail the offering of goods or services to European residents, the processing of data from such persons, or the monitoring of users’ behavior that takes place in the EU. GDPR will likely apply to a Lebanese business even if it has no employees or offices within the EU, but is selling a product or service to EU residents, or even simply offering to sell, irrespective of whether a payment is made or not. Likewise, abiding by GDPR is a necessity for any Lebanese company that monitors the behavior of European residents, for example, if it processes information about consumers in an EU country to predict their behavior, or does surveys on the behavior of EU residents. In addition, GDPR is applicable to a Lebanese company if it has EU-based employees and is processing information related to these employees.

GDPR would not apply if the Lebanese company is undertaking regular marketing of goods and/or services. This means that if the company has a website offering goods and/or services but does not have a physical presence in the EU and shows no indication of targeting any EU residents, it is not required to comply with GDPR rules simply on the basis that an EU resident can somehow stumble upon its website—what this means in practice will emerge over time.

However, the GDPR likely will apply to a company, irrespective of its country of incorporation, if its website targets EU residents, if it accepts the currency of an EU country, has a domain suffix for an EU country, offers shipping services to an EU country, or provides information in a language that is predominantly spoken in an EU country such as Italian, French, and German.

Violating the GDPR and failing to report any infraction of personal data rights of EU residents can result in hefty fines; in serious cases, regulators can penalize businesses 20 million euros, or up to 4 percent of their previous year’s worldwide turnover, whichever is higher. For smaller infringements to the GDPR, regulators can impose fines amounting to 10 million euros, or up to 2 percent of the companies’ worldwide turnover, again, whichever is higher.

Lebanese companies, thus, would benefit from informing themselves about the provisions and requirements that are coming into force with the GDPR. If uncertain as to whether GDPR applies to a Lebanese business, it may be a good idea to contact an auditing or consulting firm with expertise in doing business in Europe, or approach a specialized adviser to make sure that its privacy initiatives are in order. This will not only avoid legal proceedings and painful fines, but also express a will to protect fundamental rights and freedoms of individuals, and in particular, the right of consumers to the protection of personal data.

June 11, 2018 0 comments