Executive Magazine

Hard and getting harder

by Jeremy Arbid January 18, 2018

written by Jeremy Arbid

Life for Syrian refugees in Lebanon is a daily struggle for survival. Their situation in 2017 has deteriorated, in terms of receiving enough aid or finding work to meet basic needs—and because humanitarian aid continues to decline as financial need rises, next year will not be better. Many Lebanese nationals have also seen their socioeconomic situation decline, and poverty rates for both Lebanese nationals and Syrian refugees have risen dramatically. Economic anxiety has increased, as well as tensions between the two populations. Returning to Syria in 2018 does not yet appear to be a viable option. The civil war in Syria continues, peace is not yet certain for much of the country, and stability is still too uncertain to allow refugees to return to their homes.

Mireille Girard, head of UNHCR in Lebanon, met with Executive in November 2017 to talk about aid and development efforts to help both struggling populations cope in 2018.

E Are Lebanon’s refugees better off at the end of 2017 than they were two years ago?

In general, the situation has deteriorated socioeconomically for Syrian refugees. This is the largest group, but it’s really affecting all refugee populations. Because the socioeconomic environment in Lebanon is also grim, it’s also affecting the Lebanese communities, and particularly the Lebanese communities in the areas that are hosting the largest numbers of refugees. Refugees have been generously hosted in places that were already underserved before the crisis, such as Akkar and the northern Bekaa, where you already had scarcity of water and not enough electricity for the villages. So imagine, with an additional population, you have to share more of these scarce resources, so that creates a strain on both populations, and neither of them have enough to cover their needs. It is a big challenge for the international community and for the government of Lebanon, trying to cope with the situation and mobilize as much funding as possible.

E On the UNHCR website, there is a $2 billion request for 2017, only 30 percent of which was met by mid-October. Is that still accurate?

We will see more clearly at the end of the year. More money was pledged to Lebanon at the Brussels conference [in April 2017] and not all of this is allocated yet, so we hope it will be allocated against these prioritized activities that have been jointly planned by the government of Lebanon and the aid community. In 2015, we had $2.1 billion as the appeal. Last year, it rose to $2.4 billion, and this year was $2.7 billion. Lebanon is in a protracted situation with the economic slowdown, which is not due to the refugee presence, but more because of the war in Syria, which has led to [a decline in exports and tourism]. This has a strained both populations. Some are going more into debt—that is very critical for the Syrian refugees, and we see that within the refugee population, 90 percent of households have debt, close to a range of $900 per family. It’s the same for a number of Lebanese. So the international community is trying to address dual aspects, response and resilience, while helping both the displaced population and the communities that are impacted by the presence of refugees, as well as the services that are serving this overall population. It’s a challenge, but in Lebanon, not going to a camp situation has enabled us, instead of creating an artificial aid support that funds schooling and hospitals in camps, to help the hospitals and schools in the area. This benefitted both populations and is also a way to build solidarity.

E It does seem, however, that in Lebanon—but also abroad as well—local populations are becoming less generous, less welcoming, and hostile even.

Yes, absolutely. One is the institutional response and, where we are, the second one is really the level of vulnerabilities. Let me identify the vulnerabilities first. Between 2014 and 2015, 50 percent of Syrian refugees were below the poverty line—now it has become 70 percent. Twenty-five percent were below the extreme poverty line, or survival line, and that is now 50 percent. And it has continued to deteriorate, but thanks to everyone’s mobilization in London and Brussels, we managed to keep people’s heads above the water, so the dramatic deteriorations have been slowed down. But it’s still happening. Refugees are sliding more and more into poverty. We’re now at 58 percent of refugees below the extreme-poverty line; more than half are at the survival line, and 75 percent are at the poverty line. The level of vulnerability has increased dramatically. The level of Lebanese vulnerability has also increased in that there is very serious unemployment because the economy is not generating jobs, and skilled jobs are not really created. There is less construction and tourism; there [are fewer] jobs in many sectors. People are going more and more into unskilled labor, and this is creating competition between the Syrian refugees and Lebanese, and this leads to tensions.

E Does the UNHCR have data on labor?

We know that the government estimates that for youth, there is a much higher percentage of unemployment. It’s in excess of 30 percent sometimes; for the rest of the population, it’s lower. For the refugees, what [UNHCR] estimates is that within the adult population, 30 percent are working, and they work two weeks per month on average.

E Thirty percent of the adult refugee population is working, but are they primarily underemployed or not fully employed?

On average it is two weeks a month. The number of [refugees] that have secured a full-time job is quite rare. [At the] start the month, [refugees] don’t know how many days they will be able to work, which is extremely destabilizing, because they don’t know if they will earn enough to pay for rent. We know refugees on average pay $200 for rent, $35 to $50 for electricity, and about $30 for water per month. These are running costs no matter what. For education, the costs are covered for Syrian and Lebanese in public schools, but there are transportation costs, clothes for children, and a number of other expenditures. If a refugee works two weeks a month and the daily labor rate is about $12 per day, that will be about $177 per month.

E Is it safe for refugees to return to their homes in Syria?

We see that the situation in Syria, there are discussions on de-escalation, and this is very encouraging. The Geneva talks were interrupted for a while, but they have resumed, and this is a good sign. At the same time, we see that in Syria we’re still in a war situation. Not that we’re waiting for a full peace agreement, but we need some certainty that whatever is discussed is going to be sustainable. When you are a refugee, and you have been through tremendous difficulty to get your family to safety—and sometimes you were displaced several times in your own country before reaching safety—you want to make sure that you don’t bring your children back to war, or to a situation where you step on a landmine. So what you need is some political dialogue that will guarantee that what is discussed is agreed upon. That will give the signal that they have safeguards, they have guarantees. For example, while we see progress, the month of September [2017] was the deadliest month of the whole conflict. In the first six months of the year, 500,000 internally displaced in Syria were able to go back to their homes, but during that period we had 1 million newly displaced people. That tells you that the context is very fluid. There is progress, there is light at the end of the tunnel for sure, and [displaced] people are watching that, the refugees are watching that, and this is what they hang [on]to everyday, because they want to go back home. Close to 90 percent of the refugee population are telling us that there is no question, they want to go back to Syria, and this is not atypical, we see that in every situation. The large majority at the end are going back. This is the main solution for them, and it’s their preference. But they are saying not immediately. At the moment, they aren’t feeling secure enough to go back. So they’re watching to see when will be the time they’ll feel secure.

E Can Lebanon be a laboratory for testing better humanitarian and development solutions?

I’m absolutely convinced about it. We’re in the context of a humanitarian response, in a country that has a lot of [entrepreneurial] history, a lot of knowledge, a lot of skills, and we can benefit much more than we are at the moment, so we need to mobilize the energies and the focus. We have been doing a number of exercises with startups in Lebanon, we have a lot of young motivated entrepreneurs who think outside the box and give new ideas. This is welcome and the future of humanitarian responses. We have to go more; more into cash, more into innovation, more [collaboration] with the private sector.

E Do you see progress on the issue of legal residency for refugees in 2017?

A number of people are still not renewing their residency—some of them aren’t eligible for it, and some who haven’t yet received it. This still is an issue because this is preventing people from going through checkpoints and from bringing their kids to school. A number of people are still required to go through a Lebanese sponsor—and that requires money.

E Does not having residency impede refugees from registering marriages and childbirths?

There has recently been some legal mobilization to facilitate registration of births even if parents don’t have a legal residence, which was a big issue before. Where we are still having big difficulties is that if you pass the first year [without registering a child’s birth], then you have to go through a judicial process that is long and expensive, so people give up. If they don’t do it the first year, they usually give up because the process is too difficult for them to go through. We’re working toward seeing if that can be facilitated exceptionally because of the situation of refugees. You don’t want to leave children stateless. When people go back home, they have to go back as a family. The children of Syrian parents are Syrian and should be recognized as such, so if you have a birth with the name of the father, the father being a Syrian national, automatically the child is Syrian. So when the child gets back to Syria, it’s on record that he’s a Syrian national, and cannot be left behind.

January 18, 2018 0 comments

Expanding understanding of human rights in Lebanon

by Bassam Khawaja January 17, 2018

written by Bassam Khawaja

“It’s like there’s fog across the whole town,” said Othman, a resident of Kfar Zabad in the Bekaa Valley. “We’re coughing all the time, unable to breathe, sometimes we wake up and see ash in our spit.”

Othman was describing the effects of the open burning of garbage, which takes place regularly near his home. Open burning of waste across the country is a dangerous and unreported part of Lebanon’s waste management crisis.

In December 2017 Human Rights Watch released a report on the health risks of Lebanon’s waste management crisis. We found that the open burning of solid waste at more than 150 dumps across the country poses serious health risks to nearby residents and that the authorities’ inaction to end this open burning of waste was violating their right to health. Those living near dump sites which are burned reported an array of health problems consistent with frequent and sustained inhalation of smoke. Children and older people are at particular risk and these dumps are disproportionately located in lower-income areas.

Failure to inform

The government has failed to meet other basic obligations toward residents to inform them about the impact of the crisis on their health and environment. This lack of information has taken a heavy psychological toll. In particular, parents told us they worry about the potential impact burning has on their children. There is no excuse for the government’s failure to monitor the air quality and provide this basic information to the public. People have a right to know about the health risks in their environment. They should demand it.

But burning trash is not just a health or environmental issue. Just like torture, freedom of speech, or women’s rights, it is also a human rights issue—and therefore triggers Lebanon’s obligations under international law.

Although the Universal Declaration of Human Rights splits civil and political rights (such as the right to life or freedom from torture) and economic, social, and cultural rights (such as the right to health or education) into two separate international treaties, human rights are indivisible. Rights have an equal status—no group of rights is more important than another—and the denial of one right frequently impedes the enjoyment of others.

While state obligations around civil and political rights are often absolute and immediate, states are generally required to strive for realization of economic, social, and cultural rights. This distinction is rooted in the perception that greater resources are often required to achieve such rights. But that does not give Lebanon a free pass. Both sets of rights are binding and authorities are required to show that they are taking appropriate steps to fulfill economic, social, and cultural rights.

The Lebanese government has long found hollow excuses to not fulfill these obligations, pointing to a lack of money or political instability to justify its inaction. Lebanon’s civil war ended almost 30 years ago, and the state today has the wealth, know-how, and international support to make progress on providing education, health, and basic services. But as time passes without improvement, residents have turn to private initiatives, allowing the government to shirk its obligations. The country has settled into a cycle of low expectations and meager results when it comes to basic rights.

Work to be done

To get back on track, Lebanon needs to do more to fulfill its binding commitment to respect, protect and fulfil rights such as the right to health and education. This would encourage citizens to demand action from their government, require the government to guarantee a minimum level of protection, and introduce accountability for government failures.

The human toll of inaction is easy to see. Last year, HRW found that more than 250,000 Syrian refugee children are not going to school. Despite the efforts of the Ministry of Education, families are facing serious barriers that violate Lebanon’s obligation to provide an education in a nondiscriminatory manner.

Discrimination within Lebanon’s education system is not limited to Syrian refugees. We have also found that schools in Lebanon systematically discriminate against children with disabilities, and do not adequately accommodate them in the classroom. Although Lebanon adopted a law in 2000 guaranteeing access to inclusive education for people with disabilities, the government has done little to implement the law. Few Lebanese public and private schools offer any form of inclusive education. This, too, is a human rights issue: the exclusion of children with disabilities discriminates against them and denies them their right to an education.

Lebanon of course deserves international support as it struggles to host the highest number of refugees per capita in the world. But this is not just a humanitarian or development issue—each of these children has a right to an education. Access to free and universal primary education is so fundamental that it is immediately binding—in other words, trying to address the problem over time is not acceptable. Every week without an education harms each child who is out of school. The denial of that right will have serious consequences for the children, their families, and the future of Lebanon and Syria.

After decades of sub-par basic services and governmental intransience, there is a widespread lack of faith in the government to make progress on these issues. But in failing to move forward to fix these problems, the government is not only failing the Lebanese people and their basic needs, it is also violating its obligations under international law.

January 17, 2018 0 comments

Human Rights Women's rights

Another year of elusive equality

by Matt Nash January 17, 2018

written by Matt Nash

Despite a constitutional guarantee of “equality of rights and duties among all citizens without discrimination,” Lebanese laws treat men and women differently. The most famous imbalance is a 1925 law decreeing that only children born in Lebanon to Lebanese men are entitled to Lebanese nationality. Activist campaigns to amend the law have been unsuccessful and prospects for change any time soon remain remote.

In 2017, Parliament amended the penal code to abolish an article that allowed a rapist to avoid criminal charges if he married his victim, however, the legislature chose to keep in place articles of the code allowing girls as young as nine to legally marry. Parliament also established a new cabinet portfolio—Minister of State for Women’s Affairs—although the choice of a man to lead this sparked mockery among Lebanese social media users. As of early December 2017, the minister had not offered any detailed reporting on his accomplishments during the year, and how permanent and effective the portfolio will be are open questions.

In addition to discrimination enshrined in law, Lebanese women are frequently subjected to harassment in public spaces and the workplace. Little was done legislatively on that front, but the local NGO KAFA succeeded in July in getting the Ministry of Justice to back amendments to a 2014 domestic violence law strengthening the protection of women abused in their homes—though the proposed changes require cabinet approval, which had not arrived at time of writing.

Poor marks

As per the World Economic Forum’s Global Gender Gap Report, which ranks countries based on proximity to gender parity, Lebanon is in the bottom 10 percent (137 of 144). Weak political empowerment (142) for women in Lebanon drags down the country’s overall ranking, but Lebanon’s score for economic participation and opportunity are also below its overall rank (133).

It is unacceptable for Lebanese women to be treated so poorly, and few signs point to state institutions leading the charge toward empowerment any time soon. In the interim, NGOs and civil movements will continue to push for greater equality.

On the economic front, the League of Lebanese Women in Business (LLWB) is continuing a campaign launched in 2016 to persuade local privately-held companies to appoint more female board members. Individual LLWB members have also pooled resources into an angel investor fund to take equity in female-founded startups. Banks, interviewed earlier this year, insisted on the need for and desire to have more female representation in mid- and top-level management positions.

Evidence compiled by the United Nations as part of its “Progress of the World’s Women 2015-2016” report suggests Lebanon can achieve increased GDP growth by increasing gender parity in access to education (where Lebanon scores quite well) and labor force participation (where men still dominate with 76 percent participation, according to the World Economic Forum’s Global Gender Gap report findings for Lebanon). The economic benefits of increasing the numbers of well-educated women in the workforce are medium and long-term, the UN report says. Increased female participation in education and the labor force boosts growth in the medium-term and leads to healthier, better educated children, which then pushes these economic benefits forward to a second generation.

Both the moral and economic arguments for equal rights in Lebanon are clear. If there is hope for advances toward gender parity in Lebanon in 2018, incremental change in the private sector is far more likely than than grand shifts at the policy level, however short-sighted and disappointing that may be.

January 17, 2018 0 comments

Human Rights Overview

The rock and the magic beanstalk

by Thomas Schellen January 17, 2018

written by Thomas Schellen

Human rights are the rock from which modern civilization mines its values, its social contracts, and its entire portfolio of identities. Human rights are the very justification for our system of social coexistence and stratification. They are key to understanding humanity’s (mostly unsuccessful) attempts of balancing the logic of solidarity against the logic of economic greed, the logic of universal equality and dignity against the logic of discrimination and political power, and the logic of preserving planet Earth against the logic of exploitation.

The idea of rights as inherent to the human being and as the foundation for social contracts is, in historic terms of development of thought, quite recent. Today’s stupendous and still-accelerating development of inalienable human rights can be traced to roots of formulations in the 17th and 18th centuries in England (Bill of Rights of 1689), France during the French Revolution (Declaration of the Rights of Man and the Citizen), and the United States of America (Declaration of Independence).

It took quite some time for the concept of human rights to emerge out of the seedbed of natural rights as an idea of Western religion. In the 19th century, an encyclopedia published in Germany claimed that human rights inherent to man were an indeterminate concept that “has to lead to different interpretations in different circumstances and can only be valid in a Christian context.”

Not long after formation of the concept, human rights were thus often seen as vague and tied to an ideological view of man as created being endowed with spirit, and through the will of God superior to, and existentially different from, animals. In the early 20th century, another popular encyclopedia defined human rights as “the totality of the ideal requirements that man directs at the state and whose provision he demands from the state.” The “scientific” perspective on human rights of the time was declared to include the right to emigration, the choice of belonging to a state, and also rights to procreation and the use of nature.

Today, human rights arguably draw their ideological strength from the dominance of humanism—usually in its secular version—in international discourse, influenced by Western thought. UN bodies tend to describe human rights with broad strokes of proclaimed universality, declaring them to be “rights inherent to all human beings” on top of the homepage of the UN’s High Commissioner on Human Rights (UNHCR). In a speech he delivered in the fall of 2017, UN Secretary General Antonio Guterres—who formerly held the office of UNHCR chief and appears to be a darling of some civil-society stakeholders—juxtaposed human rights with terrorism. He stated that human rights “are a true recognition of our common humanity,” diametrically opposed to terrorism, of which he said, “Terrorism is fundamentally the denial and destruction of human rights.”

Notwithstanding such regular bursts of ideological confirmation and unwavering adherence by highly credible human rights advocates, human rights can also be considered to be anything but universal in 2017—69 years after the United Nations General Assembly adopted the Universal Declaration of Human Rights (UDHR) in 1948, with the votes of 48 countries against the eight which abstained, and two which voted no.

Implementation still a dream

It would be insane to claim that human rights are applied universally today, even on the most basic level. Whether the focus is on freedoms from or freedoms to, one cannot ignore today that freedom of conscience, freedom of worship, freedom from torture, and freedom from want scarcely exist in even the most democratic or the most economically developed societies.

The same goes for additional layers of human rights, such as the right to education and health, gender equality, and protection from violence and discrimination. The human rights to work and to live in dignified social circumstances and without environmental hazards do not even see serious pretense or attempts of universal implementation. If anything, each addition of a new human right only leads to a higher count of human rights violations in the daily experiences of the ever-growing numbers of humanity. Human rights are also far from universal in conceptual and philosophical terms. This is evidenced by many changes and diverse understandings of human rights, since the first renderings of the phrase in Enlightenment-era political documents.

Yet, despite the precarious state of their implementation and their dependence on human definition and cultural evolution, human rights are, today, inextricably linked to the social, political, and economic future. Increasingly, human rights are of economic importance and impact all areas of economic activity. Sometimes, the business community might even be more aware of this relevancy than the civil society and activist community. The old ideological divide between left and right in this regard still shines through today when civil-society stakeholders embellish their human rights appeals by bashing transnational corporations and bad capitalists.

It is not unheard-of that transnational corporations are guilty of, or at least complicit in, human rights violations in the world of work, in the climate and environmental arena, and elsewhere. But neither make corporations perfect culprits, nor do activists—who are often at the forefront of human rights battles—make innocent and pure lambs of self-sacrifice for the good of humanity and universal rights. Activism and capitalism both are deeply human endeavors.

The human rights discourse of today deserves to be freed from the ideological definitions and 19th and 20th century juxtapositions between an ideological left and a capitalist right. Capitalism in the 21st century is an imperfect, but adjustable economic system that reflects imperfect human behavior. It is not the 10th reincarnation of the 18th and 19th century socioeconomic and politico-ideological reality of hapless exploiters and growing proletariat that Karl Marx exposed in a visionary, but flawed, set of observations and assumptions garnished with materialist determinism.

A geo-social triangle of progression

Human rights today belong to a complex of forward-pointing qualifiers of any society’s achievement potential, with deep economic implications. This moral and practical relevance to the corporate and business world is as clear to economists and corporate leaders as the perils of the capitalist mode of our world are to civil society exponents. The relevancy of improvements in the global state of business is visible at every corner and side of the triangle composed of human rights, humanitarian principles that are expressed in international humanitarian law, and geosocial aims which are enshrined at this stage of international discourse in the sustainable development goals (SDGs).

Lebanon is part of the world in the 21st century and depends on being a part of this world. This is demonstrated very convincingly from the country’s extreme sensitivity to regional and international political decisions, from the intensity of its interaction with external partners in everything, and from the enormity of the national trade deficit. Despite its humongous political and systemic inconsistencies, Lebanon does function as a society, and is not fit to be thrown to the dustbin or treated as a failed state. But it is, and has for many years, been a troubled state as far as the implementation of human rights is concerned. This year, 2017, saw some legal progress on rights of children and women, and indeed of all people in Lebanon, in the changes to the legal protection of rape victims against forced marriage, and in the law criminalizing torture. Much, however, still needs to be revised in its legal frameworks outlawing torture. From the perspective of international human rights organizations, Lebanon is still no example when it comes to the protection of human rights, and especially when it comes to social, political, and economic rights or environmental, education or health rights.

On the other hand, comments from diplomats, UN officials, and political leaders of developed countries upon visiting Lebanon from about 2012 onward were filled with praise for the humanitarian role that the Lebanese fulfilled in the Syrian refugee crisis of the last five years. The global community’s moral debt to Lebanon in this regard has been acknowledged more than once (in the speeches by World Bank President Jim Yong Kim and then-UN Secretary General Ban Ki Moon during a joint visit to Beirut in spring 2016), and the Lebanese people were recently described as “humanitarian and responsible,” during President Michel Aoun’s speech to the UN General Assembly this September, in which he also advocated for Lebanon to be given the role of official center of dialogue with a mandate from the United Nations.

Great opportunities await

Were it to take steps to capitalize on its potential for implementing human rights and SDGs, a whole bouquet of benefits could bloom for the country—of which at least six come to mind that are very practical and economically rewarding. First, above any economic regard, it is good for self-esteem to do what is recognized as right by time-honored moral teachings, and by present-day world consensus. Second, and better accessible to economic quantification, Lebanon has a definite opportunity to improve productivity and social coherence within its multi-faceted society by applying rights-based approaches to inheritance and personal status, by improving its human rights protections, and by upgrading the provision of education, utilities, and even infrastructures, which are all in line with human rights and SDGs.

A third and closely related benefit to making the country more livable and “leave no one behind” is to keep Lebanese from emigrating for the wrong reasons. By no indication will emigration ever cease, but there are positive and negative economic outcomes of emigration that could well be correlated more or less strongly to positive and negative reasons for emigration. According to anecdotal evidence, many of the negative reasons seem to be related to people’s experiences of inequality, poor infrastructure, and feeling deprived of physical opportunities or freedoms. Positive reasons for emigration include a desire to advance your career and acquire knowledge for the sake of one day coming back home to share the wealth of knowledge.

Fourth is the humanitarian economy, where Lebanese entrepreneurship appears to have untapped potentials. One recent groundbreaking study on humanitarian economics—written by the Swiss academic Gilles Carbonnier partly during a stay in Lebanon—shows how the economic and political-economy dimensions of humanitarian crises and responses have risen in importance in the world. Being involved in humanitarian economic activity can be the mental opposite of profiteering from wars, but nonetheless, quite profitable.

In writing the book on humanitarian economics—which, as he told Executive, draws on both neoclassical and behavioral economics—Carbonnier states on one side that essential principles of humanity and impartiality in this economic activity “require a degree of altruism, refraining from acting only out of self-interest,” but that on the other side it is necessary for actors in this field to channel or constrain “the altruistic impulse in order to pursue greater effectiveness” and avoid negative side-effects of emotional and thus anti-economic decisions.

He shows how the dimension of this economic activity has shaped a humanitarian marketplace with an immense growth trajectory from the 1970s to the 2010s. According to his research, the international humanitarian aid sector in 2010 was “a multi-billion dollar enterprise with more than 270,000 workers involved.” Make space, carmakers, at least as far as employment growth rates are concerned.

Carbonnier cites data according to which international humanitarian aid volumes grew in the short term (more than one third to $24.5 billion from 2012 to 2014) and long term, from substantially less than $3 billion annually before 1980 to over $15 billion at the start of the current decade (in constant 2012 prices). Moreover, he finds that over the past two decades, the supply of humanitarian aid increased rapidly, but that this was caused in part by economic demand from donor countries using humanitarian assistance as a “default foreign-policy instrument” rather than by a parallel surge in actual humanitarian needs. Plus, he finds that the humanitarian marketplace has greatly diversified in terms of participants and types of services provided. For a country like Lebanon and its entrepreneurs, this has important implications. One implication is that private-sector actors can contribute to humanitarian economics and do not have to shun moral profit.

Fifth, if one agrees with the assertion Secretary General Guterres made in his anti-terrorism speech at the University of London’s School of Oriental and African Studies in November, implementing human rights can be a preventive instrument in the fight against terrorism. This is bound to produce any number of financial and economic benefits. Guterres implied as much when he called for all parties to conflict to “respect and ensure respect for international humanitarian law and human rights in situations of armed conflict.” He pointed to short- and long-term aspects, stating that “all human rights, including economic, social, and cultural rights, are unquestionably a part of the solution in fighting terrorism,” and that “upholding human rights and the rule of law is the safest way to prevent a vicious circle of instability and resentment.”

[media-credit name=”Ahmad Barclay & Thomas Schellen” align=”alignright” width=”621″][/media-credit]

The sixth element

The sixth opportunity for growing Lebanese humanitarianism and proverbial generosity into a magic beanstalk for accessing untapped socioeconomic potential lies in fulfilling the country’s aspiration to be a hub of international peace diplomacy and conflict management. This opportunity presumably comes with the prerequisite of having stronger legal frameworks and more convincing societal practices in human rights, stronger application of international humanitarian law, and greater efforts toward fulfilling the SDG agenda in the period until 2030.

Scrutiny of and by nations of international roles with a moral dimension, such as holding a seat on the UN Human Rights Council or membership in UN organizations such as UNESCO is increasing, with reasons for protests or withdrawals existing at the opposite ends of the political-ideological spectrum. But it would not be harmful for Lebanon’s desire “to be a permanent center for dialogue between different civilizations, religions and races as an United Nations organ”—as President Aoun told the UN general assembly in September—to have a strong human-rights framework and a convincing monitoring process for SDG achievements, in addition to being “a microcosm of diversity” and practical example of humanitarianism.

Neither would it hurt for the government to clarify its position on rights of refugees, step back from harsh measures against refugee populations, and counter rumors of alleged refugee criminality—thus improving the overall positive impression of Lebanese assistance to the huge refugee population.

The country might influence the international discourse on human rights, just as it did as the UDHR was being drafted in 1946-48 through the Lebanese scholar Charles Malek. It has the humanitarian credentials to be a laboratory for the study and implementation of international humanitarian law on a country level, it is home to academics and civil-society thinkers with the mental prowess to contribute much to the global debate on geo-social goals in the SDG discussion, and it has an appetite for a culture that is a bit more satisfying to the spirit than global consumerism.

If Lebanon were to upgrade its implementation of human rights, strengthen adherence to international humanitarian law, expand its role in the global humanitarian economy, implement the SDGs, and monitor progress of these goals, it could avail itself of a new meta-economic growth opportunity that is not dependent on finite resources or the reconstruction needs of a neighboring country. It would not be a moral failing nor an economic sin for Lebanon to capitalize on its experience as small country that, for more than six decades of its not-even-a-century-old nationhood, has been exposed to competing global interests in the center of the world’s most conflict-rich region. It would be an act of wisdom.

January 17, 2018 0 comments

Q&A Retail

Black clouds in the retail sky

by Nabila Rahhal January 16, 2018

written by Nabila Rahhal

Executive sat with Nicolas Chammas, chairman of the Beirut Traders’ Association, to discuss the retail sector’s performance in 2017, in light of continuous market stagnation in Lebanon.

E As of mid-November, how has 2017 been for the trade sector in Lebanon?

This year has, unfortunately, been another bad year. The decline in the commercial sector has been a steady one since 2011. The growth rate for the economy in the past five or six years has been less than 2 percent, which is negligible. This is the nominal growth, not the real growth—which is less—while the growth per capita is negative.

Taking the period between end of 2011 and end of 2017, the average decline for the trade sectors combined is 35 to 40 percent. This is really a meltdown of the trade sector in Lebanon, keeping in mind that it’s the [greatest] contributor to GDP.

The food and beverage and staple segments have been in better shape than durables [furniture, cars], or luxury [watches, high-end electronics, jewelry]. Durables and luxury have suffered much more than these staples.

E There is a popular belief that the luxury segment is not very affected in times of economic hardship because “the rich get richer.” To what extent is this true?

Not really—they are not getting richer anymore.

Let’s not forget that remittances from abroad have declined as well. Traditionally, expatriates transfer money—mainly from the Gulf and Africa—but these regions have been affected tremendously [by] the drop in the price of oil.

Meanwhile, the purchasing power of Lebanese residents has declined for everyone, even the rich. The more you substitute the Lebanese labor force with [a] Syrian labor force, the more the national purchasing power is declining.

E How does this situation affect you as traders?

Every economic agent is in a state of deficit today, but what is visible is the twin deficit of the state, meaning the balance of payment and the fiscal budget. When you have a negative balance of payment, it means that the state is living beyond its means; same thing for companies, where most are indebted, and for most households.

As the economy is a chain, every part of the chain is suffering. Take the commercial sector, for instance: We’re the biggest borrower from the banking system, because we’re the largest sector. This is what I call the visible debt, you see it in the books of the banks—but what you don’t see is the payables from the customers to the retailer. Today, retailers don’t sell, unless, in many instances, they make financial facilities to the consumer.

Also, there is liquidity stuck between the retailer and the wholesaler, and between the wholesaler and the supplier. So, in this commercial chain there is maybe $7 or $8 billion stuck.

E Does this situation explain why there seems to be an increase in discount stores and sales across the retail sector?

Absolutely. Not only have sales diminished in volume, we also have a price factor. Traditionally, the commercial sector goes on sale twice a year: after the summer and after the end of year, in order to liquidate the stock and bring in the new collection.

But now, it is happening all year round to attract people—but this kills your margins as a retailer. Even if you are selling, you are selling practically at a loss. Also, what this is doing is getting people accustomed to buying only when there is discount.

E Did the situation not improve at all in 2017, especially with the election of President Aoun in October 2016?

Lebanon today is more stable than most countries [in the region], but the perception of Lebanon is still not good.

And let us not forget that [the government] enacted a law with about 25 new taxes that very much hurt consumption and investment. Add to this the ongoing political crisis, and the terrible strife between Saudi Arabia and Iran, which is reverberating across the Lebanese economy.

So people today are afraid to consume, let alone invest. And this is very deplorable because it is happening during the fourth quarter which is most important [period] for the economy and the trade sector: it typically represents something like 35 percent of our yearly turnover. So if we lose momentum in the fourth quarter, it will be a dire sign heading into 2018.

E What solutions do we have?

We need a political settlement under a favorable regional umbrella.

Lebanon can’t pay the price of any outside conflict as we’re too weak and small a country. We have to put our own house in order, find a political settlement, and arrange elections as soon as possible.

E Following such a settlement, how quickly will the situation improve for the retail sector?

Provided it’s a credible settlement, the situation will pick up quickly, just like it did after the Doha settlement in 2008.

It will take longer for the financial situation in the sector to improve, but at least you would’ve started a trend. You can’t change the situation of debt and deficit overnight, but you can put it on the right track.

This can happen with one prerequisite: growth.

E How do we ensure this growth?

Growth is built on two things: the facts on the ground, which will take time to change, and expectations. The economy is to a large extent reliant on expectations; if people have positive expectations then this drives growth quickly. For instance, if we were to say ‘in six months [we will] be in good shape economically,’ this will give back confidence in the Lebanese economy, which is currently scaring people away. Only a credible settlement can attract them back.

January 16, 2018 0 comments

Q&A Retail

The long journey of a large retailer

by Nabila Rahhal & Thomas Schellen January 16, 2018

written by Nabila Rahhal & Thomas Schellen

Local markets have proven remarkably resilient when it comes to resisting the dominance of large retailers that offer fast-moving consumer goods (FMCG) in hypermarkets and supermarkets—those behemoths of daily shopping that you enter with an empty shopping cart the size of a compact car and leave with said cart overflowing. One operator of mega-sized retail stores, Kuwait-based The Sultan Center (TSC), closed its Lebanon stores in 2017, but at the same time, other operators steered their outlets into major expansions. Majid Al Futtaim’s Carrefour franchise, for example, ventured into Beirut’s Dora City Mall following its very large operation in the Beirut City Centre Mall in Hazmieh. But perhaps no FMCG retailer added more outlets in 2017 than Spinneys. Hitting age 20 in Lebanon in its current incarnation—it entered Lebanon in the 1940s but opened its first post-war store in Dbayeh in 1998—Spinneys opened three new outlets by end of October 2017 and is set to operate 19 stores all across Lebanon by the end of the year. Executive sat down with Spinneys Group chief executive Michael Wright to discuss the FMCG sector in Lebanon and the details behind its ongoing expansion.

E 2017 saw changes in the landscape of large retail in Lebanon, perhaps most visibly in the shuttering of TSC stores. Where is the Lebanese FMCG sector heading, and how do you assess the market for large retailers, such as Spinneys and your direct competitors?

This market is long overdue to modernize in terms of the segmentation [between large and small operators]. People often will tell you here that the Lebanese market is [unique] because you have a personal relationship with a local small shop and when you buy, you will get credit. However, when I was a child in England, it was exactly the same: There was a little corner shop and you knew the name of the guy and you played with his kids. But all markets end up modernizing because of the benefits of what mass-market retailing can bring to consumers and to everybody.

This process has, for various reasons, been delayed in Lebanon. One important reason is that distributors make more profit when selling to the small stores. Because the small stores have no bargaining power, the distributors purposely support that end of the market for their own benefit. The small retailer has been grazing off his shop: He doesn’t really make money out of it, but his family picks out their dinner for the night off the shelf and they feel that things are going well. I think this segment will come under more pressure in future. Then we look at modern retail and ask: Why did it not take market share? One reason is that the differential in the market has not been supported by what distributors do. So what I see happening now is that there have been too many modern retailers struggling in this one-third of the market that they operate in.

E Is it still one-third of the FMCG retail market that is in the hands of modern retail?

It is still one-third. Within that, it means the battle is amongst them, and the weaker players eventually lose out. Some players [in modern retail] only exist because of their accounting methods, which don’t count property costs. They think they are in business, but should better employ their capital somewhere else. The result of that has been a slow process of some retailers losing out, which takes a lot of time because of the commercial model, where it takes a long time for the death to happen. You have trade credit, and [even] if your profit and loss (P&L) component falls apart, you still have cash and carry on. TSC has lost out. Monoprix tried to expand and retrenched, Bou Khalil has been in trouble for many years, there is no secret in all of these things. I warned my friends in the distribution business of this slow death of some. TSC were trying to give us their business in exchange for some shares in the combined business and we refused that.

E Why did you refuse?

I didn’t want to take their business because it was full of debts and losses. It was just a bad setup. Some of their [store locations] were okay, but some of the deals on their sites were horrible.

E Do you mean in terms of store leasing costs?

Yeah, the leases were unsustainable. When I looked at it, yes, I gained a bit of market share, but their losses were as much as my profitability. I don’t see the benefit of that.

E There has been talk that the forced exit of TSC has impacted many distributors and smaller suppliers. By your estimate, are these impacts digestible for the distributors, or will they change the retail business in Lebanon?

I think the scale of the debacle in TSC is probably digestible. Of course, nobody likes it, but I think even the least cautious [distributors] had de-leveraged a little with them over the past few years. So I doubt we’re going to see any distributors going under or being in financial difficulties because of their losses to TSC. Of course, the same can’t be said for the poor staff.

E What is the scenario for the small individual suppliers? Rumors are that TSC also left those people sitting high and dry.

They left everybody. They were taking products from anybody who they could get it from and one of the reasons why we broke off talks with them [was] because of their intentions that they described to us previously. We had turned down taking their entire business because it was just too much work, so they came up with other scenarios where they would carve out their operation and leave behind the rump of their problem and bankrupt it. And we said we did not like that plan because it was going to leave a big mess behind, and we didn’t want to be involved with that. So yes, I’m sure that some small suppliers [are left with unpaid invoices]. The numbers I heard with the large and medium suppliers are that they can absorb [these losses], but I’m not sure about the smaller end [of the market], where I don’t have the information.

E What is the rationale for Happy, your new brand?

We recognize that part of the market is entirely price-focused and perhaps not driven at all by any quality development, neither range nor service. This is why we developed Happy as a discount brand, which is doing very well and is our strongest-growing format. The discount model just means a different way of working. Consumers have to adapt to the offering, and [discount markets have internationally] taken a big chunk of mass market purchasing. Some of the market has moved up to shop at the higher-end of quality supermarkets, and some people mix and match; they do some shopping here, and some shopping there. This market is changing. The advantage that Spinneys has over the rest of the mass-market people is that they can’t offer the quality elements that Spinneys offers, and neither can they compete with the pricing of Happy. Because Happy is not about cutting prices of products that you find in every supermarket; the main products are there, but a big part of the range [consists of] different, but comparative products [offered at lower price].

E Where are you in market share today?

A year ago, which is the latest figures we have from Nielsen Data, we were at 4.5 percent of the total [FMCG retail] market and 12-point-something percent of the modern trade. Since then, we’ve opened three new stores, and we have two more to open; thus, I’d like to think that [in future market assessments] we’ll be in the 10 percent range of the total mass market, and the 15 to 20 percent range of modern trade. When I speak to some of the larger international brand [owners who distribute their products in Lebanon], I never hear anyone saying that we’re less than 7 percent of the total market.

E By rolling out new stores, are you trying to dominate the market in the modern retail segment?

Dominate is not at all the word I like to use for what we’re doing. I like to say that we want to serve the consumers who ask in all surveys to have a Spinneys near their house. That is what we’re doing. With anything we do, we don’t aim at attacking our competitors; we aim everything we do at being customer-centric.

E What is your total network size in 2017, including markets, hypermarkets, discount markets, delivery centers, warehouses, and fleets?

If we include the two stores that we’re about to open, this takes us to 19 stores, including Happy. If we split it down by sizes, we have five large stores, four small stores, and 10 medium-size stores, of which three are Happy stores. The new stores haven’t yet broken even because they are in the first few months of operation, but they are growing nicely; all our middle-aged and older stores are doing very well. Some regions go up, while others go down, but the general trend of the overall business is going up. One thing to note is that price deflation has been an interesting factor over the last few years, in the sense that consumers react violently to any inflation and seem to not notice deflation at all.

E Does price deflation occur in Lebanon because of varied movements of currencies that you could use to advantage in your purchasing strategies, or are other factors in play?

The deflation, which was substantial—many large categories had 30 percent deflation—was driven by two factors. One is parallel imports: Currency fluctuations in Egypt and Turkey [where the Egyptian pound and Turkish lira moved lower against the dollar in recent years] allowed a big arbitrage on price differential [for parallel importers]. These were mainly unscrupulous third parties who not only brought in parallel products but also did a lot of under-invoicing to avoid taxation. All modern retail chains steered clear of [such deals]. Instead, we all worked with the distributors on achieving more promotions to counter the effect [of cut-price parallel imports] on consumers. But inevitably, the distributors weren’t able to stop the political influences that allowed people to cheat, and so they cut their prices.

The other driving factor is that the economy is stagnant, and all distributors are under pressure from their principals to increase their volumes every year. They, therefore, lower their prices, expecting sales to go up. It doesn’t work, because everybody is doing the same thing [in the context of the currency movements of the euro against the dollar, which were enabling this deflation]. As a result, you can look through many categories and see prices that are much lower than they were a few years ago. Coffee, milk powder, detergents, and whisky have seen 30 percent [downward] price moves, which is an enormous transition in [an FMCG] market.

E Isn’t it true that you’ve had increased prices in the consumer goods basket—for example, in dairy products such as butter and imported yogurts—some imported goods, or in meat? And how much of an impact do we have to expect from new, or increased taxes for future prices in the FMCG sector?

I don’t see that there has been much commodity inflation expected for butter, which has gone up recently because consumers in China developed a taste for it. Some of this [consumer-price] inflation you mentioned has been driven by government decisions, like the move from loose white cheese to pre-packed white cheese, which is much more expensive. The decision is driven by protecting local industry, but at the cost of not allowing consumers to have the choice between pre-packed and loose.

E Do you expect inflation from higher Value Added Tax? There was one concern voiced by critics of trade and commerce in general, saying that retailers will use the impending VAT increase to hike prices in advance.

That’s the theory of consumer groups and ministries of economy in all countries. The first reaction [from consumer advocates] when taxes are slated to go up—or when Ramadan or Christmas is coming—is to cry out that retailers will exploit this opportunity and prices will go up. I’ve never seen [such price gouging] to be the case in any multi-chain modern retailer, but it’s a good story [for] people saying that we will protect you against these horrible retailers. But it doesn’t happen because in a market where you have multiple FMCG competitors, we do a much better job of competing with each other than any regulator could ever do.

E Still, the impending tax changes in Lebanon have created some commotion and feelings of concern.

I remember when the VAT in Lebanon was first introduced in 2002. In most cases, except for cars, it was a re-regulation of taxation policy and a trade-off between implementation of VAT and a reduction of import duty, which in most cases ended up in a [price-] neutral position. Despite the neutrality of the price change, the consumers reacted terribly. [Sales] volumes dropped by 20 percent and never recovered, even though there was no change in prices. So I hope the Lebanese consumer won’t panic when these VAT increases are implemented [from the start of 2018] because it will probably be absorbed into the system.

E Also for alcohol?

It’s a bit different for alcohol. Alcohol prices have been very depressed and whisky for example has been very cheap. I think everybody has hit the bottom in pricing alcoholic beverages and the currency exchange rate on the euro is moving against everybody, so there is no room on that side. I think that any increase in alcohol taxes will have to be reflected in price increases.

E How important is alcohol for Spinneys in terms of turnover and profits?

In turnover it’s below 5 percent of total business, and in profits it is on par with the rest, neither more, nor less profitable than other products.

E When it comes to digital, will big data and retail analytics change your game, where you can track consumer habits through their cell phone and such?

We aren’t at that level yet, but we will be. I already have more information about my consumer shopping habits through our loyalty points program than I’m able to use today. We’re still working our way through using that kind of information.

E But the trends in digital retail have reached the FMCG business globally. How do you deal with that?

We look at what trends are hyped and what are ready to be tried or implemented. Home delivery is one aspect—home delivery is the dream of many app creators who want to design an app for supermarket deliveries and make money from it, but it doesn’t work. [British FMCG retailer] Tesco, for example, was waxing lyrical about how much money they were making from home delivery under the previous management, but when the new management came in they said they were losing money.

E So how does home delivery work for you, since you have been at it for a few years even without the digital aspect?

I was very specific about my aims in home delivery. I wanted to gain expertise in it, to try and find what the possibilities are, and to do it in such a way that doesn’t commit me to never-ending losses of pursuing it full-scope. Therefore, I allocated certain [capital expenditure] and marketing expenditure to it, I set up a specific model that I believe would be profitable, and let it run with those and see where it naturally goes. Where it took us was into profitability, but not very high profitability.

E You haven’t mentioned yet how many warehouses the group has and how large your fleet is. What are these numbers?

We operate from three warehouses: One is a third-party logistics warehouse and two are in-house satellite warehouses. We mix and match products between these locations according to type, volume, and value mix. Our delivery fleet for consumers is, I think, three vehicles. The fleet serving the stores is 15 plus, I believe, but I’m not sure of this.

E So delivery of goods from your warehouses to your stores is mostly outsourced to the various logistic providers?

Exactly. However, we’re going to bring logistics in-house because we believe we can flex what we’re doing better in the future if we take ownership of the logistics side of our business. Our role is being more than just a retailer. This year, we brought around 300 containers through direct relationships with exporters and our company, which puts us as a mid-range distributor in terms of volume, and I would hope by the end of next year we should have at least added 50 percent to that. By a year’s time, we will hopefully be almost in the high tier as a distributor.

E Does that mean you will be growing the portfolio of stores branded as Spinneys and Happy?

Yes. Between already-signed stores, stores that are agreed and about to be signed, and stores which we’re still working on, we have a plan to reach 30 stores within two and a half years. That’s not assuming any expansion of Happy, which we will [also pursue], acquisitions of existing stores from somebody, or moving into any smaller store format.

E Do you plan to grow Spinneys’ own label?

Spinneys’ own label brand has its positioning and is becoming stronger and stronger. But I have a belief that it’s very important to avoid overemphasis on Spinneys’ own label, and I prevent it becoming over-expanded for the sake of over-expanding it, because that actually reduces some of our quality aspects to consumers.

E Finally, congratulations on your 30 years at Spinneys. Did working in the Middle Eastern food market fulfill your expectations?

Yes. I joined the company on Dec 14, 1987, and I remember wondering at the time how long this job will last. I was not lacking a career in the UK, but left the UK because the retail market was being de-skilled in [that] they didn’t want management taking the decisions. So I wanted to come to a market where I could think about things, and then implement them and make changes. I have to say that [was] one of the gratifying paths of my career, and I’m glad that I came.

January 16, 2018 0 comments

Overview Retail

Highs and lows

by Nabila Rahhal January 16, 2018

written by Nabila Rahhal

This year, consumers were bombarded with text messages announcing all the latest store sales and irresistible promotions. Those able to ignore the messages could not have failed to notice the multiple number of shopfront displays with massive red sale signs. Despite all this, most shops remained relatively empty.

On the whole, it was yet another disappointing year for many of the country’s retailers. And yet, there were a few bright spots. Summer 2017 was reported by many retailers as a busy season with an increase in sales, while the opening of several new malls added dynamism to the sector.

A good summer

Many tourists and expats visited Lebanon in summer 2017, boosting the retail sector in multiple ways. Global Blue’s insight into tourist spending report revealed a slight overall increase in purchasing this year up until October 2017 (the latest available figures) as compared to the same period in 2016—with the largest increase coming in the third quarter of the year, during the summer.

Retailers have credited visiting expats for most of the increase in summer business. Izzat Traboulsi, CEO of T2 Trading, the retailer for Hugo Boss in Lebanon and Egypt, says summer 2017 was “phenomenal.” “We had Iraqi and Egyptian customers with high purchasing power, but the people we depend on the most are the Lebanese expats who come to Lebanon in the summer,” says Traboulsi, explaining that since these Lebanese expats are here on vacation from their daily life and work, they have more leisure time to shop.

In an interview conducted in August 2017, Mher Atamian, managing director at Est. Hagop Atamian, a distributor of luxury and medium-end watches in Lebanon, said his business now relies more on visiting expats who come to Lebanon during the summer vacation than on Gulf tourists, who have been frequenting the country less and less.

Indeed, although more tourists visit Lebanon during the summer, it seems their direct impact on retail through their spending is still small. “There has always been a positive correlation between tourism and businesses in general, and this year is no different. However, the size of the impact differs from one industry to another. For instance, [usually] tourism affects the hospitality sector the most, with retail coming in second place,” explains Khalil Noujaim, managing partner at Level 5 Holding, the exclusive agent of the French luxury brand Eden Park in Lebanon, in an interview with Executive conducted in August 2017.

Traboulsi explains that a good tourism season, such as summer 2017, reflects positively on his existing customers, and, as such, has an indirect impact on Hugo Boss. “We’re not reliant on tourists and expats alone during the summer, but also on existing clients who spent more this summer. When tourists are in Lebanon, they’re going to spend money on hotels, restaurants, car rentals … and this has a positive impact on our customers. When our customers make more money, they will shop more,” he says, explaining that 90 percent of their sales are from locals, while tourists—when they are present—are a bonus.

It’s a mall world

Another bright spot for the retail sector was the launching of new commercial centers, with the largest branch of The Spot Mall opening in Choueifat in May 2017, and ABC Verdun welcoming customers as of July 2017.

It usually takes up to one and a half years for a new mall to show good results, according to Traboulsi, because it takes time for people to get used to it, and for advertising campaigns to take effect. Despite that, he says Hugo Boss has done well so far in ABC Verdun.

Both Traboulsi and Atamian say that ABC Verdun opens a new catchment area for them, mainly Lebanese residing in Africa who come home for the summer, and whose homes are in proximity to Verdun.

Traboulsi also speaks of the consumer-behavior patterns shoppers in ABC Verdun have displayed. “The footfall wasn’t [high], but the average ticket was, meaning there is purchasing power in Verdun. Also, our high-priced items in Verdun performed better than those in Achrafieh and Dbayeh—this is a good indication for us because, again, it shows the purchasing power is there,” he explains.

A downward spiral

Despite those small highs in summer 2017, it was, overall, another bad year for the retail sector. Talk of tax increases—which began early in 2017—did nothing to encourage consumer spending.

The results of the Byblos Bank/AUB Consumer Confidence Index for the third quarter of 2017 show that the index dropped by 13.5 percent from June to July, by 5.5 percent from July to August, and by 2.2 percent from August to September. The authorities’ determination to increase taxes and fees, at the expense of households’ day-to-day needs, exacerbated consumers’ skepticism and added an unnecessary burden on the already stretched budgets of households,” says Nassib Ghobril, chief economist and head of the economic research and analysis department at Byblos Bank Group in the report.

This effect was felt in the premium fashion retail sector as well. “Talk and fear of increased taxes have impacted us a lot in that people worry about increased cost of living, and so decide to save their money instead of shopping. This is normal; even in Dubai when they announced the introduction of a 5 percent VAT, it slowed down the market tremendously there as well,” says Traboulsi, explaining that he only felt the impact on business starting October 2017, when talks of a tax increase intensified, and that so far sales figures have not dipped too significantly—citing a 10 percent drop in October.

Outlets and savings

With consumer focus on economizing, it is no wonder that outlet stores did so well this year, and that events like Black Friday, which was held at the Beirut International Exhibition and Leisure Center (BIEL) in November, were popular with consumers. Traboulsi says Hugo Boss participated in the BIEL Black Friday event and made approximately the same amount of money in the first three days of the event as they did the whole month of November.

It is also no wonder that the idea of dedicated outlet malls is finally taking root in Lebanon. Centerfalls, projected to open in Metn’s Mazraat Yachou in October 2018, will be Lebanon’s first designer outlet mall and will attract many of the country’s premium retail brands.

Traboulsi says that while he would consider opening a Hugo Boss in such a dedicated outlet mall in a remote location, he would never open one in proximity to any of his stores, as some brands have done. “We focus on our clients to sell them [merchandise] in our stores either at full price, or at a small discount during the sales period. The client of an outlet store should be a different business: You can’t open an outlet mall in the middle of a busy area where there is high footfall and potential clients for your full-price collection. My aim is to keep my clients coming to my store and have the outlet clients go to my outlet. The outlet is the bonus, while the real margins are in the shop,” he says.

The retail sector is betting on the end-of-year festivities and gift-giving—which usually account for a high percentage of their sales—to make up for some of the losses this year. Otherwise, the going will be tough heading into 2018, and we may be reporting more of the same next year.

January 16, 2018 0 comments

Comment Hospitality & Tourism

Breaking new grounds

by Christine Assouad January 12, 2018

written by Christine Assouad

Entrepreneurship is about dreaming, and making those dreams come true. This has been my story for the past 20 years.

I started my Dunkin adventure at the age of 20, not thinking for a second that I would still be here 20 years later, still passionate and excited about the brand as if I had opened my first branch yesterday. For me, this is key: I love what we are doing, especially the fact that, with coffee and donuts, we are spreading happiness every morning in 35 branches across Lebanon. Making sure we are putting a smile on people’s faces has been my driving force for the past 20 years.

Semsom is another passion of mine. Inspired by a conversation I had 10 years ago with an American taxi driver who had no idea what Lebanese cuisine could offer, I was determined to spread the joys of our food to the world. I like to think that if he knew what we had achieved since, he would be really proud. We have opened branches in Beirut, Jeddah, Kuwait, Muscat, Dubai, and New York, and the best is yet to come.

I get a lot of questions about my New York experience. It has been very challenging, but very rewarding as well. The main difference with the MENA is that New Yorkers do not know what Lebanese cuisine is.

[pullquote]While our guests knew what hummus, shawarma, and falafel were, they did not associate them with Lebanese cuisine[/pullquote]

We purposefully did not open in areas with a high density of Lebanese because education has been our main mission. One challenge we faced was that while our guests knew what hummus, shawarma, and falafel were, they did not associate them with Lebanese cuisine. Another challenge is that most guests do not like to take risks, especially on their lunch. They have 30 minutes, and they have their favorite spots or numerous options, either on their block or through delivery, to choose from. The risk is not financial, as our meals are around $10, but it is more that they do not want to be disappointed with a meal. So we did a lot of sampling, office tours, and neighborhood parties to introduce them to Semsom because once they taste our hummus—which is made with my grandmother’s recipe—they are hooked and keep coming back: More than 20 percent of our guests visit more than once a week. But, the biggest challenge has been real estate: We had to visit more than 100 locations to finally get a lease. The main reason was that we compete with major global brands such as Pret A Manger, Chipotle, and Starbucks, so it was difficult to get a landlord to give us a space. We had to change all our cooking techniques to be workable at hoodless outlets. We knew going in that the first outlet would be challenging, but it was a way to get our foot in the door.

Overall, it was a challenging two-year learning curve to fully understand how the market worked. We are in a much better place now with three outlets, a pop-up store at Goldman Sachs, great catering deals with major brands, and two more stores in the pipeline. We will be ready as of 2018 to start expanding into other cities.

I have not yet discussed how being a woman factors into all of the above. Perhaps it is because I actually do not label myself a “woman entrepreneur,” but rather, simply, a passionate entrepreneur. It is a challenging world out there for all of us, women and men. The highs and lows are the same for both. And teaching this to young women entrepreneurs through mentoring has been one of the most rewarding experiences for me. I thrive in helping others flourish, in ensuring that they dare to dream, and more importantly, in guiding them to equip themselves with the tools to realize their dreams.

January 12, 2018 0 comments

Hospitality & Tourism Q&A

More than one way to cluster

by Nabila Rahhal January 11, 2018

written by Nabila Rahhal

Rabih Saba and Marwan Ayoub are the founders of Venture Group, a development and consulting group known for its hospitality clusters.The group developed Uruguay Street in 2012, followed by The Village Dbayeh and The Backyard Hazmieh. Saba and Ayoub sat down with Executive to discuss their new venture, Restos St. Nicholas, as well as their future plans for developing more diversified clusters.

E Can you tell our readers more about your newest project, Restos St. Nicholas, in Ashrafieh?

The project was a joint venture with the landlord [Emile Sabbagha], who is the owner of Sabbagha Development, a land and real estate development group. We would say it’s one of our most strategic and harmonious partnerships, not in the least because Emile is an engineer himself, and so was integral in the development process.

Starting with this partnership, we developed what we like to call a boutique cluster that complements Ashrafieh. We’re answering a particular need: While in the evening people [in the area] usually go out, in the daytime, there is a high presence of commercial spaces like banks and offices, which require such F&B clusters.

E How does St. Nicholas differ from your other hospitality clusters?

It’s more integrated with its environment. There are three access points on three different streets, so you can walk through it without sitting in any outlet or feeling that you’re entering a cluster.

Our other projects are introverted, but in this one, the facades are on the street, and you can see those dining. So, you see, there is a different concept development process for every cluster and every location we work with.

E Looking back on your experience in cluster development, what are the lessons you have learned?

We started with F&B because this is our background, and where we come from. But we learned through experience that what we’re doing is much more than just having restaurants and bars; it’s about developing real estate properties, have them make revenue, yet retain their owners. So now we see our kind of cluster development from a different angle, which may not involve restaurants at all.

E How does the cluster model operate at a wider level?

It works on the economics of proximity and answers a need. For example, we go into a rural city in Lebanon with a certain purchasing power and a certain understanding of a given service, like healthcare, and say that we’ll bring them expertise that they usually commute to the capital to access—for example, a medical center with a couple of floors for children’s healthcare and other types of clinics, with the same value they usually get in the capital.

E So is that your outlook moving forward in your development projects?

That’s the next thing for us. There’s certain ceiling to what the F&B industry can accommodate in Lebanon. Now, we’re developing F&B clusters in Ramlet Al Baida, Zahle, Beit Mery, Ajaltoun, Saida [Sidon], and Sour [Tyre].

We’ll adapt the clusters based on the areas I mentioned because they are, in some sense, not as mature as the capital—with the exception of Ramlet Al Baida—so we’ll go with brands that are more affordable for the purchasing power of the area, and so on.

But again, there would be a certain ceiling. We’ll be developing these six to seven projects in the coming three years, and then what? We’re into development, so going forward we’ll look at other industries, as we have started doing.

E So in total, you’ll be developing and managing around nine hospitality clusters? Isn’t that spreading yourself too thin?

On the contrary, our business model works better when there are many projects because it operates on economies of scale and scope. This is where an experience in one cluster would benefit the other.

E What type of industries are you considering for your future developments?

We’re looking into a couple of concepts now, basically in the line of an office park and healthcare. But again, we’ll only develop value-added conceptual projects. You won’t see Venture Group develop a building with offices—it has to be a full experience: a compound where you get parallel activities, just like what we did with the restaurants.

You can see that our clusters have complementing services which cater to everything but shopping. So they are more community centers than a collection of restaurants or bars.

E What makes a good location for a cluster from your experience?

It depends on the industry. For F&B, it has to be accessible and visible, and the proximal market or catchment area has to have a need for such a project. There are many factors we consider. We look into the build-up area designated by law, and as such, if it would be feasible financially to have a project.

E How do you decide which industry would perform best in a certain location?

We consider the local market needs and the maturity of the area. We would not develop an F&B project with places to drink and dine out if there isn’t a lifestyle which suits such outings.

We, as Venture Group, would start with F&B because it’s a sure thing so far that we’ve done. If the F&B is not adequate—either because we already have a project in the area or the area doesn’t need an F&B-focused project—we would be looking at other industries.

E On what basis do you select your tenants?

It’s product and price related. It depends on which F&B brands are willing and have the investment capacity to penetrate a certain area. They know better than us somehow, those big brands, where they want to go because they are more in touch with the consumers than us, and actually that’s how we test the market. From 10 phone calls, we can almost know whether a location in Zahle is good enough or not because these brands would tell us if they have potential clients in the area or not.

E Lebanese are notorious for their short attention spans when it comes to F&B locations. How do you keep your existing projects viable, knowing that you celebrated The Village Dbayeh’s two-year anniversary in November 2017?

It’s all based on keeping them “happening.” There are two angles. The first is the normal dynamics of the consumer: You wouldn’t see a Hazmieh resident in The Backyard Hazmieh in August, but you would see many Lebanese expats there instead.

The other angle is how we add value to the project by having a calendar of events. These events keep people coming back. You visit an F&B cluster either because it’s within your community, or because there’s something happening, and that’s why events are important.

E Last time we spoke, in 2016, you were developing F&B projects in Egypt. Can you update us on these projects and your expansion plans?

We signed projects in Saudi Arabia and Dubai, but our core presence as a company with a full set-up is in Egypt. We have a couple of projects there that we’re already working on, and a couple more in the pipeline. We also have our eyes on growing stable markets at the touristic level, such as Cyprus, but we want to grow organically and not burn ourselves by moving too fast.

January 11, 2018 0 comments

Hospitality & Tourism Q&A

Diversifying Lebanon’s tourism

by Nabila Rahhal January 11, 2018

written by Nabila Rahhal

Executive spoke with Pierre Achkar, president of the Lebanese Federation for Tourism Industries and the Lebanese Hotel Association, who says the tourism industry has learned the hard way the dangers of relying on one market.

Although no single market can replace the Gulf tourists, he says, the tourism sector is developing alternative markets and new revenue streams to try and make up for the decreasing number of visitors from the Gulf.

E Lebanon’s tourism industry has been largely reliant on tourists from the Gulf. Was that still the case in 2017?

For the past 50 years, Lebanon has been reliant on the Gulf market for tourism. And this is normal, whether in Lebanon, Europe, or America: It’s called proximal tourism. France can’t have its touristic boom if its neighbors, Germany and Italy, boycott it, for example. This doesn’t mean that we in Lebanon aren’t developing other markets such as Europe, Russia, and China. But these markets demand stability in Lebanon and need a long-term strategy. Also, some of these countries require infrastructures that don’t exist in Lebanon.

E Can you give some examples?

I’ll give you an example of my recent trip to Russia with Jean Abboud, the president of the Association of Travel and Tourist Agents [in Lebanon]. We learned that Russian tourists want to stay in beachfront resorts where they can swim in the sea. While we have a few resorts like that in Lebanon, we don’t have enough volume to satisfy a large demand. What is needed today are beach resort hotels in touristic areas such as Beirut, Jounieh, Byblos, and Batroun.

E What is stopping us from developing such properties?

We, in the hotel industry, are working on this. We would need at least 3,000 rooms on the seashore to create this resort tourism, and the locations of these properties would have to be in well-developed touristic cities with restaurants, nightlife, and [other] activities.

But the problem is that the cost of land is very high in these areas, and the area available to be developed only allows for a small number of rooms. Therefore, it would take an extremely long time to return one’s investment, so it doesn’t make financial sense to develop such projects in the current circumstances—unless one owns the land.

Russia, Germany, Scandinavia, and all those cold countries that want beach tourism constitute a major tourism market, with 700,000 Russians visiting the beaches of Turkey this summer. Capturing this market would allow us to diversify our tourism portfolio and reduce our reliance on tourists from the Gulf—but we have to prepare and be ready for it. Lebanon has to decide if it wants to adjust the building laws to accommodate resorts. This is just one example of the tourism diversifications that we’re working on.

E What about tourism from other European countries?

The lack of stability in Lebanon is discouraging European travel agents from proposing Lebanon as a destination to their clients.

The past 10 years in Lebanon have been filled with internal turmoil. Many European travel agents invested in promoting Lebanon during this period, and even sold travel packages to groups, only to have an incident happen that would cause cancellations.

When this happened several times, these agents removed Lebanon from their product offerings, and now they would only put it back if we had four to five years of continuous and consistent stability in the country.

Meanwhile, the tourists from the Gulf were still visiting Lebanon despite the internal security situation. This is why we say that Gulf tourists not coming to Lebanon in recent years is a political statement, and not out of fear for their security.

E But following the election of President Aoun in November 2016, they returned to Lebanon, correct? Many in the sector are saying that 2017 was a good year for tourism overall.

They started coming back in small numbers, and we did indeed see an increase in the number of Gulf tourists over the previous year—but it was nowhere near the numbers in 2010 and before. This is because the political tension didn’t ease up completely, despite the election of President Aoun.

On the surface, however, the situation looked positive, especially since security in the country has been well controlled over the past three years, thank God, contrary to most countries in the world.

We also have the Lebanese Diaspora Energy initiative, and the events it hosted in the countries [with high levels] of Lebanese immigration. It also organized a large conference, which was held in Beirut and was attended by 2,000 visitors [who will in turn encourage family and friends to visit].The Ministry of Foreign Affairs and Emigrants had a big role to play in activating this Lebanese diaspora market, which has huge tourism potential; the improvement in tourism that we saw in 2017 was thanks, in part, to this market.

Other factors that contributed to a positive outlook in 2017 are the security and the alternative tourism streams that we had developed.

But, the big difference [between these tourists and those from the Gulf] is in the length of stay. When Gulf tourists used to visit Lebanon, their average stay was 10 days. Meanwhile, the average stay of European tourists, for example, is three days. So while this year we had a big volume of tourists, their shorter stays meant less profits and lower room rates [because more empty rooms need to be filled].

This is not to mention that the Gulf tourists spend more than other tourists, and also they tend to invest in Lebanon or in Lebanese F&B concepts, which they take back to their own country. This doesn’t happen with tourists from other parts of the world.

E You mentioned alternative tourism. Can you elaborate on what that means, and what you, in the hospitality industry, have been doing to develop this?

When you’re faced with a problem in the country, and your main touristic market is not visiting, then you’re forced to seek alternative forms of tourism to attract different nationalities and markets of tourists.

So, we started developing alternative tourism streams in Lebanon, from medical to religious to beach tourism. This is something we should have begun working on 10 years ago, instead of waiting until now. But today, we’ve become so desperate for business and, as they say, “necessity is the mother of all inventions.”

E At the end of 2017, because of the political crisis surrounding Prime Minister Saad Hariri, the tourism situation was back to being uncertain. What’s the outlook for 2018?

We have entered a new scenario which is definitely harmful for the hospitality sector. The few thousand Gulf tourists who were visiting Lebanon again will stop doing so.

If you ask me if their visits since the end of 2016 were that impactful to the sector, my answer would be no. Because, as I said earlier, they had not come back to Lebanon in big numbers yet. Also, those who were visiting Lebanon this past year largely had their own homes, so they were not that significant to the hotels.

But what is harmful is what is being circulated in the international media about Prime Minister Hariri and potential armed conflicts in the country [at the time of interview in November 2017]. Everybody has access to news these days, and what they are reading and seeing is discouraging for tourism, especially for European tourists.

The only nationalities which wouldn’t be affected by such news are the Arabs: The situation in Syria, Iraq, and Egypt is worse than Lebanon, and so they would continue to visit Lebanon for vacations. But they are not enough to build a tourism market on.

Up until now, everything is uncertain. If the current crisis is the beginning of a solution, then all will be good for tourism. If it’s going to escalate further, then we’re in trouble—the whole economy will be in trouble, but the first to be affected in tourism are hotels and furnished apartments.

The positive point is that tourism in Lebanon is very resilient, as history has shown: The minute a crisis is resolved, hotels are fully booked the next day.

January 11, 2018 0 comments