Trends | October 2011 by MediaquestCorp.

October 2011 /N° 158

Qatar

Syria

Significant salary rise to boost economy

Activists abroad go online to support revolution

Uncertainty Reigns Following the Arab Spring, the Middle East enters a period of economic, social and political transformation

Winning Way

Region's private equity firms adapt to modern investment model

: w iv e uncil

Eastern Promise

r Co e a Int Shur

ini e a v r si Bah

u l b, a c j Ex a Ra

Oil producers in Arab region look toward Asia as Western economies struggle

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A MediaquestCorp Publication Canada ........................C$ 7.50 France .......................... € 4.57 Germany ....................... € 6.14

Egypt ..............................E£ 10 Italy.............................. € 5.17 Jordan ............................. JD 4

Kuwait ...........................KD 1.2 Lebanon .................... L£ 5,000 Morocco.........................DH 22

Oman............................ OR 1.5 Qatar .............................QR 15 Saudi Arabia ...................SR 15

Switzerland ....................SFR 8 Syria............................ S£ 100 Tunisia .......................... TD 2.5

UAE .............................AED 15 UK .....................................£ 2 USA ....................................$ 5

Registered in Dubai Media City

Qatar

Syria

Significant salary rise to boost economy

Activists abroad go online to support revolution

Uncertainty Reigns

Following the Arab Spring, the Middle East enters a period of economic, social and political transformation E VERY ROLE X IS MADE FOR GRE ATNE S S. THE DAY-DATE II, L AUNCHED IN

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Winning Way

Region's private equity firms adapt to modern investment model

Eastern Promise

r Co e a Int Shur

ini e a v r si Bah

u l b, a c j Ex a Ra

Oil producers in Arab region look toward Asia as Western economies struggle

: w iv e uncil

r mi a S

diaquestCorp Publication

........................C$ 7.50 .......................... € 4.57 ny ....................... € 6.14

Egypt ..............................E£ 10 Italy.............................. € 5.17 Jordan ............................. JD 4

Kuwait ...........................KD 1.2 Lebanon .................... L£ 5,000 Morocco.........................DH 22

Oman............................ OR 1.5 Qatar .............................QR 15 Saudi Arabia ...................SR 15

Switzerland ....................SFR 8 Syria............................ S£ 100 Tunisia .......................... TD 2.5

UAE .............................AED 15 UK .....................................£ 2 USA ....................................$ 5

Registered in Dubai Media City

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ECONOMY

Going Public By Staff Dubai

f you were to ask any GCC citizen if they would prefer to work in the private or public sector, the majority would say the public sector. The perks offered by the governments to their employees in this region are hard to match. Last month the icing on the cake for government sector employees in Qatar was a significant increase in salaries. In a royal decree that applies to Qatari government employees, retirees and military personnel, an increase of 60 percent in the basic salaries and social allowances for state civilian employees, a 120 percent raise for military personnel serving in officer ranks, and a 50 percent raise for those serving in other ranks was announced.

14 TRENDS | October 2011

The pension of civilian retirees will go up by 60 percent. Employees referred to retirement before the enforcement will also benefit from the raise. The pension of retired military officers will also rise between 50 and 120 percent. The decision became effective on September 1. The increase in the basic salaries and social allowances will amount to QAR10bn ($2.74bn) a year, in addition to QAR10bn to be paid once for the pension fund and another QAR10bn for retireesâ&#x20AC;&#x2122; subscriptions ahead of implementing Qatarâ&#x20AC;&#x2122;s retirement and pension law. The increase in salaries will definitely improve consumer spending, not only in Qatar, but also in other GCC countries.

An analyst, who did not wish to be named, said that Qatar has taken a lead but other countries in the region are likely to follow the suit and raise salaries of public sector employees. There are mainly two reasons behind the substantial increase of salaries, she said. One is fueling the engine of economy and the second is calming domestic emotions in the wake of Arab Spring. However, the attractive salary-raise in Qatar has not gone down too well with the rest of the workforce. The Qatari employees working in the semi-government agencies are unhappy over the exclusion from the recent pay raise granted to the nationals, said a report in Doha-based newspaper The Peninsula. The local workforce has called on the government to apply pay raise for all Qatari staff in public and private sectors, it said. Qataris in the private sector will flee and head to government agencies in contrary with the governmental directives and the development strategy approved in the 2030 Qatar Vision calling to recruit nationals in the private sector, said the report. Despite the concerns expressed by the Qatari staff at semi-government and private firms, the salary satisfaction is quite high in the country. Vice-president of sales at Bayt.com, Amer Zureikat, said Qatar has recorded the highest salary satisfaction in the region, with three percent of respondents highly satisfied, 60 percent with medium and 37 percent with low satisfaction. The online recruitment and research firm said in its 2011 Salary Survey that satisfaction across the Middle East regarding wages was looking stable, with three percent of residents stating they are highly satisfied, 52 percent saying they were averagely satisfied, and 45 percent stating they have low satisfaction.

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ECONOMY

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Reuters

By Atique Naqvi Dubai

f diamonds are a girl’s eternal best friend, then gold is the darling of investors during hard times. In recent weeks gold prices have been flirting with the magical figure of $2,000 an ounce, and analysts say that the popular yellow metal will cross that figure by the end of this year. Precious metals, especially gold, have time and again proved to be an elixir of economic life. As the euro struggles to keep its head above water, the recent downgrade of Italy by Standard and Poor’s has added more troubles to the fairly troubled euro zone. With the economic climate in the United States turning murkier, traders and investors have been making a beeline in global markets to get their piece of gold. The result: record-high gold prices.

16 TRENDS | October 2011

Chief Executive Officer of Newmont Mining Corporation, Richard O’Brien, said during the Denver Gold Forum, that the gold may rise to $2,000 an ounce by the end of this year, and $2,300 an ounce by the close of 2012 because of investors buying the metal as a haven amid turmoil in financial markets. “We’re going to continue to be in a bullish gold-price environment for the next five to seven years,” said O’Brien, according to Bloomberg. Gold climbed to a record in early September and is in the 11th year of a bullish market, the longest-winning streak since at least 1920 in London, reported Bloomberg. It touched a record $1,921.15 on September 6, advancing by 25 percent this year. But is gold really a safe haven?

Saxo Bank’s global head of FX options and forward training, Gustave Rieunier, says ‘yes’. Gold and other precious metals have been in great demand because people see them as a safe haven,” he said. “Global economy and capital markets are struggling and we have seen a great inflow in the buying of Swiss francs, seen as a safe investment, but after the Swiss government decided to weaken its currency, there are very few options left that are safe. One is gold.” It may not be an exaggeration when market insiders say gold prices are likely to cross $3,000 an ounce. “It all depends on whether we are in a bubble or not, but the speed of increase seen in gold suggests that it may go beyond $3,000,” said Rieunier. The World Gold Council, in its recent report, said although the prices are skyrocketing the demand is not slowing down. Despite a higher gold price, Indian and Chinese demand grew by 38 percent and 25 percent respectively during Q2 2011, compared to 2010. This growth is likely to continue, due to increasing levels of economic prosperity, high levels of inflation and forthcoming key gold purchasing festivals in India and China, said the report, adding that the impact of the European sovereign debt crisis, the downgrading of US debt, inflationary pressures and the still-fragile outlook for economic growth in the West are all likely to drive high levels of investment demand for the foreseeable future. Head of precious metals at Emirates NBD, Gerhard Schubert, said, “The Gold price has been holding very well and the current price is still within the 10 per cent correction level already seen. When the price fell from $1,912 to $1,703 it was the correction and everybody was expecting some sort of correction.”

FOCUS

The Rise of the Arab Hacktivist Events in Syria have led to the rise of a virtual society of hackers and activists abroad that are using the Internet to push and support the revolution. TRENDS investigates. By Aline Sara Beirut

gypt’s upheaval took over the country in a matter of days, Syria’s commotion has lingered, nearing its eighth month of bloodshed since the events started in March. As international outcry escalates, President Bashar al Assad continues to crackdown on mostly peaceful activists, leaving close to 3,000 dead, another 3,000 unaccounted for, and scores incarcerated. While Egypt’s revolution was short, sweet, and mostly focalized in Cairo, agitation in Syria is comparatively peripheral, sporadic, dispersed, if not borderline schizophrenic. It has spared both Aleppo and the capital Damascus –home to 2.4 million – where fractions of the population, particularly the 20 TRENDS | October 2011

better-off and minorities, remain vehement supporters of the regime. Within the Arab awakening, Syria distinguishes itself by a hefty network of activists abroad. Years of life under persecution for merely questioning the regime has honed their skills in resistance, particularly cyber dissidence. “Since before the Arab spring, a small network of activists and citizen journalists has been working to expose the abuses within,” Ahed El Hendi, a political activist who fled Syria and now lives in D.C, tells TRENDS. From sit-ins before Syrian embassies worldwide, to meetings with highranking global officials, Syrian activists abroad work around the clock to support the uprising back home.

“In Syria, there is systemic effort to document the abuses and propagate them,” explains Mark Turrell, founder of Orcasci, an agency specialized in the science of spread. By transferring the happenings internally to the outside world, turning a blind eye is increasingly impossible. Even long-term allies Turkey and Iran have urged an end to the bloody clampdown. It was only last winter that Assad, frenzied by turmoil in the region, enabled access to websites such as Facebook and Youtube, hoping to appease those formerly deprived. “After Tunisia, we felt Syria could be next, so we wanted [our friend inside Syria] to be prepared,” said Hendi, founder of the Syrian Youth for Justice and coordinator of the Arabic program at Cyberd-

Grapheast/AFP

October 2011 | TRENDS 21

Reuters

FOCUS

“Developments in the Arab world are a logical outcome of massive developments in communications” issidents.org, a human rights organization that promotes the voices of Iranian and Arab web activists. “But we had already started to work to expose the regime’s evil doings, months before the Arab Spring,” he noted. By sending in anything from basic camcorders and cameras to Thuraya satellite phones, the dissidents foresaw means of sidestepping basic restrictions on Internet to circumventing a telecommunications shutdown, should Assad mimic his counterpart in Egypt, ousted President Hosni Mubarak who had suspended Internet and phone network to squelch Egypt’s dissent last January. Those fighting from within document the violence and upload it online; while those abroad acquire the videos, verify 22 TRENDS | October 2011

their authenticity, treat them and publish them on the net, explained Majd Eid, another Syrian in asylum in Paris. “Today’s developments in the Arab world are a logical outcome of massive development in communications,” stressed Eid. Syrian power heeds on stopping people from gathering and brainstorming on reform, but today’s era of social media has caught up with the regime, he tells TRENDS. Like Ahed, Eid is a political refugee who fled the country after his father’s activism put him under government watch. They and most of their counterparts abroad are former detainees and critics of the Baath regime. Others were forced to leave due to the lack of job opportunities or public liberties. At present, they are nowhere near close to giving up on their

country’s awakening. Many have become successful business men, offering their financial support to help sustain the opposition and its network from afar. But monetary contribution and cyber activism are just the tip of the iceberg, as political strategy and data collection also rank high on furthering the struggle. Mohammad Al Abdallah, who served two prison terms in Syria and is now spokesperson of the Local Coordination Committee, said his group helps organize protest movements within, but also acts on the political front. “We are the first to have provided a political vision as a solution to the current situation in the country,” he tells TRENDS; “We also assist in mobilizing the people over there.” As a US-based activist, he has met with a number of US officials, including the US Secretary of State, Hilary Clinton. Rather than merely addressing their concerns, these activists help update the international authorities on progress back home. “The ultimate goal is to increase pressure on the Syrian government and lobby for a resolution at the United Nations Security Council,” said Abdallah, currently based in D.C. To date, there has been no resolution from the UN body against the Syrian dictator, although both Europe and the US have slapped Assad and his entourage with heavy sanctions. For his part, Ausama Monjad, who works between London and the States, uses a network of grassroot movements and activists to gather information. Monjad, who left Damascus after being detained back in 2005, covers news and provides commentary and analysis for media outlets, governments and academic institutions. Operating under the umbrella of the National Coalition to Support the Revolution, the 31-year-old sends out the daily “Syrian Revolution news-round up,” a compilation of relevant articles and updated figures of the revolution’s casualties. He dedicates himself full-time to antiAssad initiatives worldwide and says his

Corbis

FOCUS

“We’ve created our own virtual society, and the regime can’t seem to understand or control it” greatest challenge is finding enough time to respond to all of those interested in the Syrian cause. In addition to the newsletter, “I also supervise the production of research targeting the transition period postAssad, working closely with dissidents, both inside and out, to unite the opposition,” he said, clearly foreseeing an eventual downfall of the regime and planning for options after its topple. Meanwhile, being abroad does not spare him, or any other of those active, retribution from the regime. In Latin America, Naima Darwish, a Syrian living as far out as Chile, said she was called in to the Syrian embassy in Santiago after mobilizing a protest in support of the Syrian people. “They asked to come in, but when I refused they called 24 TRENDS | October 2011

me and told me I should not risk my success and my career for stupidities,” said the 30-year-old clothes designer, originally from Homs. She estimates the number of Syrians in Chile at around 300,000. In Lebanon, another major hub of pro-democracy activity for Syria, antiAssad activists have long lived in fear given the intricate ties between the neighboring nations. “Working from France and the States would be easier and safer, as here all the activists take additional precautions,” said Mojab Mahmoud al Samra, a 33-year-old father of two. As recently as last august, protesters before the Syrian embassy in Beirut were attacked by supporters of Assad, equipped with belts and knives. The

incident left three protesters hospitalized and was not followed up by local authorities, said the activist. Luckily for those in the States, the State Department issued a statement about local dissidents based in the Land of the Free. The statement condemned acts of intimidation against protesters expressing their right to speak, alluding to reports that Syrian embassy personnel in DC was surveilling the demonstrators, taking their photographs and sending them back to Damascus to take vengeance on their families. But perhaps most jarring was last August’s incident at Place Chatelet, in the middle of Paris, as shabiha, the term given to label violent supporters of the regime, attacked peaceful protesters and attempted to murder several by running them over in a car, a violation that is to be pursued in French court, according to Eid. He witnessed the event. But it has not stopped him or his companions from going back to the streets. “It’s the least we could do compared with what they deal with inside... and while we help deliver their voice, we also keep them abreast of happenings here, from which they are typically cut off,” noted the 28 year old about the two-way street relations between protesters inside Syria and the web of activists overseas. According to him, the three-day summit last June in Antalya, Turkey, that gathered opposition members from a variety of backgrounds, was a strong push for those inside. The conference, whose final statement called for the passing of Assad’s power to the vice-president, as stipulated in the country’s constitution, also saw the formation of a 31-member council. “We’ve created our own virtual society, and the regime can’t seem to understand or control it,” said Eid of the elaborate international network of Syrian dissent. “This society has decided to topple the Assad regime and won’t stop before achieving its goal.”

H A C K E T T. C O M

E S S E N T I A L LY B R I T I S H

FOCUS

The Viral Revolution TRENDS talks to Mark Turrell, founder of Orcasci, an ideas and products agency, about the ‘science of spread’ and its role in the Arab Spring. By Aline Sara Beirut

ark Turrell is the founder of Orcasci, an agency specializing in the “spread” of behaviors, ideas, and products. Born in Canada to South African parents, Turrell grew up in England and now lives between Europe and the States. It seems natural that today the scope of his work is global. Rather than using his knowledge and experience for lucrative means, he is helping change the world. Turrell talks to TRENDS about the science of spread, how he got into the field, and how it plays out within the unprecedented Arab Spring. What is the science of spread? The Science of Spread is the study of social networks and network propagation. Combining the science of spread with 26 TRENDS | October 2011

the science of people provides individuals with new and engaging opportunities to spread products, services, ideas and behaviors at a scale and speed impossible until today. How did you become interested in this field? I’m interested in behavioral science and I’ve long been interested in entrepreneurship. I started my proper entrepreneurial work around software technology. I was very interested in data analysis and human psychology. It’s very important to understand what drives people and motivates them. My life totally changed in 2008 at the World Economic Forum in Davos, where I had won an award for technology planning. I knew I didn’t just want

to be some software guy. I really wanted to change the entire world for better. In 2006 I had created a company called Imaginatik which pioneered the use of crowd sourcing to solve problems. I had been developing new research around the science of spread, completing research on neuroscience, behavioral science, network science, complex systems and emerging behavior. Over the months I met a number of fascinating people. In the meantime, I gained experience in managing dictatorships, an Imaginatik collective intelligence record, and had been building this understanding of how things spread, but what I had actually created is a lens of how human beings and systems behave and how things spread. In 2010, I created Orcasi.

October 2011 | TRENDS 27

FOCUS

Getty/Gallo Images

To begin with these places have to be internally driven. I think that with Syria the fundamental reason why Syria has not put enough pressure on Assad is the lack of a unifying national symbol and name. In Libya it became very obvious what side you were on, the green flag for Gadaffi, and the old pre-revolutionary flag for the opposition. And these flags were everywhere. Kids at night would put up posters, and you had stories of people in Tripoli spray-painting cats so you could clearly see who’s on which side. In Syria, at least today, the Syrian protesters carry the same flag as the people who are killing them. That will change in my opinion. I think Assad is gone – the only question is whether it’s before the end of the year or not, and whether he’s a dead man.

“I created the microscope to look at how the human being works on a small scale” How has the science of spread played out during the Arab Spring? To understand what is happening, looking back in history is important. In 1660 a Dutch scientist spent years writing academic papers about things moving around in his glass of water. They thought he was crazy. It turns out this man had invented the microscope. The small things had always been there, but the human eye lacks the capacity to see them. It doesn’t mean they weren’t there. What I did with my science of spread and my previous work is concentrate on brain power. I created the microscope to look at how the human being works on a small scale. 28 TRENDS | October 2011

In Egypt, for example, you had 80 million people – 20,0000 protesters who were actively agitated. What the regime was trying to do was prevent the spread of the activation – so they turned off both the Internet and the phone system, which only further agitated. From then on I knew Mubarak was gone. It was about the phones not working, angering people who just wanted to make a phone call to their child in school, for example. A few days later Mubarak was out. Most people didn’t realize it would tip into other fields either. And they were all wrong. How do you see things panning out in countries such as Syria?

How do you compare the situations in Lybia versus Syria? All the situations are different and all of them in the future will be different, so you end up with a sub-set of tactics to be used. In Syria there is systemic effort to document the abuses and propagate them. That infrastructure of capturing what was going on was actually prepared months in advance. I’ve been working with Syrian activists since Deraa popped. I reached out to them. The spark looked totally random – and I thought this looks like contagion, so I got in touch with activists. My philosophy is how can I help, and as a human rights issue, how can we help? My first [action to help] was around media contacts, increasing awareness on what was going on, but there have been other things. As for Libya, I’ve been very active, involved, among other things, with the NGO Global relief in Libya. The first two aid boats into Misrata were crowdsourced through a German organization. The first type of help needed was medical supplies and humanitarian relief, so we helped coordinate medical relief.

Reuters

FOCUS

“. . . we will be seeing an increase in the concept of fairness and transparency” It was a situation in Libya that the world hadn’t experienced before. How do you envision the future of the region? Despite reservations at the beginning of the NATO intervention, Libya is a success story. But because it’s so close to Iraq and Afghanistan which are now a catastrophe, there was fear [of foreign intervention]. But this was ultimately a popular uprising. I think Libya will need to adopt more transparency and I think it could become a real beacon [of positive development]. As soon as Assad falls in Syria, we will have revolutionary ruffling within Iran. Next year, in all likelihood, Ahmadinejad will try to do all he can to stay in power. So, Iran will tip. There is also a possibility of change in Israel before the end of the year. 30 TRENDS | October 2011

It is also worth looking at the type of revolution. For example, some parts will be women’s rights. Historically speaking, it was a small nucleus of activist, usually elite women, who had decided they wanted to vote. So they managed to convince the other women to want something that hadn’t previously wanted. That gives you an insight into tactics when applying the human microscope. Does your agency tackle post-revolution challenges, such as those in Egypt? We are active in Libya. I’ve assembled a network of world experts in technology, water side, civil society, philanthropy and will have more news on that as it gets put together. There is enough groundswell that they never want it to happen again. That hasn’t quite happened this nicely in Egypt, but I think there are enough

agitated people that when really bad things start to happen, people start going back to the streets again. But I don’t think Egypt has found its focal direction. I also think that notions of extremism has much to do with the press and people wanting to influence and deliberately create mischief. In the subsequent months of the Arab Spring, we will be seeing an increase in the concept of fairness and transparency. The other thing is the demographic bulge of young people in the Middle East; The average age is 22, whereas the average age in Russia is 27. Going back to psychology and neuroscience of the young brain, young people tend to have fewer inhibitions. They are also hyper social, hyper socially sensitive. What this means is that this notion of spread begins to work. Right now you don’t want to be isolated. It’s fairly easy to imagine the Syrian situation where 15 want to hit the streets, with 5 staying back. Well now you’ve got huge pressure to go.

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Tension Rising The Arab Spring and the power play between America and Iran has given birth to a more dangerous situation, with a rise of tensions between Sunni-Shia relations. By Zeinab Charafeddine and Gareth Smyth Beirut

ast month in the Lebanese village of Wadi Khaled, on the Syrian border in the northern region of Akkar, 27-year-old Abir was mourning her brother, whom she says was tortured and killed before his body was delivered to the family. But her other brother remained, hidden, in their village of Tel Khalakh, just across the border in Syria. “Their only crime was participating in the demonstrations asking for freedom,” she said. “We have been oppressed for 30 years, so the people exploded asking for change. My husband left because he knew the authorities wanted to kill him, and we came with him.” Abir, her husband and three children are among nearly 3,000 refugees the United Nations has registered in Leba-

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non. Many are living in schools or other makeshift centers. Also in Wadi Khaled, Ahmad Abdul Karim, 22, said he had fled with his wife and 10-month-old son after he was one of 75 soldiers who refused to fire at protestors leaving Friday prayers. Across the Middle East throughout 2011, thousands of such human dramas have unfolded. On March 19 hundreds of young men in Benghazi marched out from the city to meet a full-scale assault from troops of Muammar Gaddafi. Among those who fell that day was the ‘citizen journalist’ Mohamed Nabbous, killed by a sniper three months before his first child, Mayar, was born. Such ‘ordinary’ Arabs have helped shift the geopolitics of the region, sending politicians and leaders here and in

the wider world into frantic calculations over ‘national interest’, access to energy reserves, and how best to rally supporters, or undermine rivals, with appeals to religious and ethnic solidarity. “Iran is attempting to rescue friendly Syria from a civil war scenario and disintegration into tiny puppet entities,” said Mohammed Sadiq Husseini, an Iranian analyst, to the Russian journalist Yelena Suponina, describing August’s visit to Moscow foreign minister Ali Akbar Salehi. Meanwhile, as America’s leaders applauded the wave of democracy, a poll by Zoghby International in August put president Barack Obama’s approval rate at under 10 per cent in every Arab country surveyed, lower even than that of President George W Bush. Ninety-

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Fast-changing realities have unsettled those who see the Middle East as a bipolar battleground five percent of Egyptians viewed the US unfavorably, as did 68 percent of Saudis. It is five years since the Iraq Study Group, commissioned by then president George Bush, noted that “all key issues in the Middle East – the Arab-Israeli conflict, Iraq, Iran, the need for political and economic reforms, and extremism and terrorism – are inextricably linked”. Setting a course through the maelstrom is not easy. Fast-changing realities have unsettled those who see the Middle East as a bipolar battleground – between the United States and Iran, between Israel and Iran, or between Sunni-led and Shia-led states. Great, and not so great powers, see both dangers and opportunities. Iran welcomed protests in Egypt as an Islamic wave, and then cried ‘conspiracy’ when they 36 TRENDS | October 2011

reached Syria. The GCC was alarmed by change in Egypt and sent troops into Bahrain, but by August they demanded president Assad stop the “killing machine and end the bloodshed” and withdrew his ambassador from Damascus. Sanguine observers have highlighted many ironies. “On the same day Abdlrahman Al-Naimi [founder of Waad, the opposition group] died in Bahrain, the monarchy’s security forces, most likely Pakistanis, killed a 14-year- old boy Ali Ahmed Al-Shaikh,” Ali Al-Ahmed, director of the independent think tank, the Institute for Gulf Affairs, told TRENDS. “Meanwhile, the Bahraini King Hamad was in Paris attending the Friends of Libya conference. [French president Nicolas] Sarkozy is shameless. The difference

between falling and standing dictators is the western backing. Everything else is the same.” The west’s policy is three-fold, Ahmed Moussalli, professor of political science and Islamic studies at the American University of Beirut, told TRENDS: “One, there is a level of finishing regimes that are not useful for them anymore, as we have seen in Egypt, Tunisia and Libya. Two, as in the case of the Gulf, [they aim] to put their hands on the major resources these countries have. Three, [they aim at] weakening Iran and its allies and those who oppose Israel, by any means.” Mr Moussalli believes sectarianism, especially between Sunni and Shia, is increasing as a result. “We are going to pass through a very difficult time,” he said. “The US is making its wars through local groups. They are using the Muslim Brotherhood in Syria, but they are at the same time opposing it. The US is trying

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“Iranian leaders view the future of Syria in the context of developments in Libya” to repartition the whole region into ethnic and sectarian states – Sunni, Shia, Berber, Kurdish, etc.” Saudi’s decision that a change of regime is likely or desirable in Damascus may have ended several years of working with Syria to achieve compromises in Lebanon. Michael Young, a critic of Syria and a defender of Lebanon’s confessional system, last month warned in Lebanon’s Daily Star newspaper of the danger of sectarian civil war, urging the main Sunni and Shia leaders in Lebanon, Saad Hariri and Hassan Nasrallah, to “open channels to one another, and very soon”. Sectarian tension is also high in Bahrain, where the government, having routed opposition protestors, has continued to carry out arrests while hiring agencies such as Bell Pottinger, Qorvis, and Sen38 TRENDS | October 2011

tis International to convey a message in western capitals that the country is dealing with Iranian subversion. For Iran, delight at the toppling of Egypt’s then president Hosni Mubarak has given way to caution, even if the official line remains that regional turbulence is inspired by Iran’s 1979 Islamic Revolution. “Iranian leaders view the future of Syria in the context of developments in Libya,” a former Iranian political prisoner, told TRENDS. “They think the UN sanctioning intervention by Nato in internal affairs of countries sets a worrying precedence.” Tehran is thinking ahead to the possibility of regime change in Syria, said the former prisoner. “The Islamic Republic is afraid that friendly Alawis will be replaced by hostile Sunnis, who would join

the much of the rest of the Arab world in confronting the Islamic Republic; and that, as a side effect, Syrian extremist Sunni groups, already active in Iraq, would further try to undermine Iran in Iraq.” Similar calculations have been behind Nouri Al-Maliki, Iraqi prime minister, offering support to President Assad. He said in a speech in August that the ‘Arab spring’ would benefit Israel. But Maliki is also likely to agree to 3,000 US troops remaining beyond December’s deadline for withdrawal, and he surprised US officials recently when he announced that Iraq wanted to purchase 36 F-16 fighter jets, double the number originally proposed. This is a small part of the regional arms build-up. Tension is good for sales, and the Middle East’s total military expenditure was already $111bn in 2010, according to the Stockholm International Peace Research Institute, with Saudi Arabia accounting for nearly half.

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“Taking a risk is better than ensuring failure through a continuation of the same policies” UK daily The Times recently reported that British arms exports to the Middle East jumped by around 30 per cent yearon-year between February and June, including sales to Libya, Bahrain and Saudi Arabia. Arms sales to the UAE rose to £9.3m from under £2m last year. But this is dwarfed by US sales. Since overtaking Israel as America’s main client in 2009, Saudi Arabia alone has agreed contracts put in the region of $60bn, including new F-15 fighters, naval vessels precisionguided bombs and Hellfire air-to-surface missiles. Such sales make the Arabian Gulf one of the world’s most militarized regions. Anthony Cordesman, of the Washington-based Center for Strategic & International Studies, has estimated the Gulf Arab states are outspending Iran by ten 40 TRENDS | October 2011

to one. The disparity helps explain Iran’s efforts to improve its large inventory of ballistic missiles – especially the Shahab, developed from Scuds bought from North Korea, which has a range of more than 1500km. An arms race – coupled with tension between Sunni-led Arab states and Iran – raises the hurdles for resuming dialogue. Writing in the New Atlanticist at the end of August, Hossein Mousavian, the former Iranian nuclear negotiator now at Princeton University, argued Obama’s “policy of ratcheting up pressure on Iran through new sanctions, hinting at a readiness to take military action, and supporting covert sabotage of Iran’s nuclear program” had “left Iran with the impression that the US has no real interest in thawing relations.”

Mousavian pointed out that the rhetoric of president Mahmoud Ahmadinejad, including his questioning of the holocaust had “increased tremendously the political cost to American politicians of being seen as soft on Iran”, just as the US widening sanctions and building up its military forces near Iran had “raised the cost to the Iranian side” of approaching the US. “Engagement might well fail,” Mousavian wrote. “But without a genuine test during which hostilities are put on hold, there is no way to make this judgment. Clearly, this will be risky for leaders on both sides, but taking a risk is better than ensuring failure through a continuation of the same policies, and thus the same escalation.” The first recommendation of the Iraq study group back in 2006 was for a “comprehensive New Diplomatic Offensive to deal with the problems of Iraq and the region”. That has not happened. Instead, tensions have increased and the machinations of states deepened.

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Europe, Immigration, Racism, and Security As the number of illegal immigrants crossing into Europe rises, so does racism and anti-Islamic sentiment. TRENDS investigates. By Iason Athanasiadis Istanbul

amidullah stepped off the airplane onto the Istanbul airport tarmac with the air of arriving royalty. This 30-something Afghan had received the kind of preferential treatment on the way over to make anyone, even an illegal immigrant, feel regal. At Kabul International Airport, friends working at the national airline had checked him in off-line. He had spent the next five hours sunk in an empty row sipping soft drinks and watching Central Asia scroll by on the flight screen. But nothing hid the fact that he was going to Istanbul to become yet another in a ballooning statistic of illegal immigrants seeking to break into Europe over its porous eastern border with Turkey.

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“Istanbul is where the holy relics of their holinesses Ali and Muhammad rest, where the Sufi saints Rumi and Shams al-Tabrizi died (sic), the most splendid Aya Sofya mosque and the home of the shawarma sandwich,” Hamidullah said, reciting the sum total of his knowledge about Istanbul. For his foray West Hamidullah chose to outfit himself in designer spectacle knockoffs and a heavy metal Tshirt with a cross emblazoned on its front. He had spent the past few years running a nightclub in Moscow and living it up in Pakistan before returning home to sell off a family property in Kabul and join his family in Germany. In this, he was part of a typical Afghan demographic heading West: relatively well-off, literate and viewing illegal mi-

gration not so much as a last-ditch option but rather a legitimate gateway towards upward mobility. “I’ll spend two months in Kabul, maybe meet a Turkish girl that I can marry and then find a smuggler to take me into Greece,” Hamidullah confided as he got off the airplane and embarked on his adventure. Hamidullah was as ignorant of Europe as he was of the powerful anti-immigrant feelings he was likely to encounter once there. His family who had lived in Germany since the Nineties chose not to tell him of the sharp change in public sentiments towards immigrants in the past decade. But the first country in the Schengen zone was Greece, a country where the arrival of thousands of new immigrants every week for over

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Greece is increasingly an EU entry point for illegal immigrants from the Middle East and South Asia a decade has combined with a debilitating economic crisis into a noxious new anti-immigrant climate that contributed to the rise of nationalist, anti-Muslim parties. Although EU authorities are unhappy with aspirational illegal immigration such as Hamidullah’s, they find more disturbing the efforts made by members of terrorist groups to penetrate into Europe. Their fears have been augmented by the Arab Spring which has Western intelligence officials concerned that the collapse in central authority across several of Europe’s Arab neighbours will lead to fewer tip-offs from their Arab counterparts and greater potential for terrorist attacks against the West. 46 TRENDS | October 2011

“The help we were getting from the Egyptian intelligence service, less so from the Tunisians, but certainly from the Libyans and Lebanese, has dried up,” said former CIA officer Michael Scheuer. “Either because of resentment at our governments stabbing their political leaders in the back, or because those who worked for the services have taken off in fear of being incarcerated of worse.” Although Al-Qaeda may remain a threat, whatever remains of that organization’s operational backbone is more likely to be found in Iran, Yemen or within European countries than in Afghanistan and Pakistan. And despite some ex-Taliban commanders residing in European countries, the movement is not known to have planned a widening of its attacks into the West. This

disinterest in mounting assaults outside of Afghanistan is one of its main distinguishing features from Al-Qaeda-style groups willing to strike internationally. Nevertheless, European intelligence services are increasingly disturbed by the prospect of an increasingly troubled region affected by unpopular Western military and political interventions and cultivating resentments that mature into anti-Western strikes. A 2009 State Department report on terrorism reported that Greece is increasingly an EU entry point for illegal immigrants coming from the Middle East and South Asia. In 2008 and 2009 an explosion of illegal immigrants entered Greece through the Aegean Sea, with 100,000 arrested, the majority from the Arab World and Southeast Asia. “The effect on immigration is one of the least understood and appreciated after the ‘Arab uprisings’,” said Joshua Walker, a Transatlantic Fellow at the German

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Half of all European respondents said there were too many immigrants, study found Marshall Fund in Washington DC. “It has the potential to go either way depending on how the EU responds.” One important interdiction according to a study on Islam in the Balkans by Greek researcher Ioannis Michaletos was that of Anwar Mazrar, a leading al-Qaeda operative in Europe who was arrested in 2005 on the Greek-Turkish border. Michaletos notes that about 20 Arab fundamentalists were arrested with Greek passports in their possession elsewhere in Europe. Another high-profile arrest was that of Abu Sanjat, an Iraqi suspected of being a ringleader of Al-Qaeda in Iraq and involved in attacks in Baghdad. “I do not think the EU intelligence services have what it takes to interdict Islamists on European borders,” said Walker. “Par48 TRENDS | October 2011

ticularly given how easily ‘homegrown’ Islamists in Europe operate and move back and forth, I find it implausible that the EU can shut itself off.” This may be what extremists such as Anders Breivik, the Norwegian who went on a killing spree in July, may want. A spectacular terrorist strike inside the EU will boost support for self-styled European guardians of the Continent. Studies show that those openly expressing feelings of racial superiority are a booming demographic. A report by the Berlin-based Friedrich Ebert Foundation titled Intolerance, Prejudice and Discrimination: A European Report, discovered that 70 percent of Europeans stated they were positive to immigration but “about half of all European respondents said that there were too many

immigrants in their country and that jobs should be given to non-immigrants first in times of crisis.” A third of those surveyed still hold the view that there is “a natural hierarchy of races,” with whites heading it. In July, Germany’s foreign intelligence chief publicly denied that there was an international far-right wing terrorist network operating in his country. Before going on a rampage that killed 76 people, Breivik had boasted in a 1,500-page manifesto that he was one of up to 80 “solo martyr cells” recruited across Western Europe to topple governments tolerant of Islam. One of the most controversial Muslim European demographics is that of Turkish immigrants who are often charged with failing to assimilate with their host societies. “Turkey’s chances of being accepted into the EU as a member are further diminished,” said Michaletos, the Greek researcher. “And since fewer young Arab male immigrants will have the chance of venturing to Europe to raise capital and defuse the population bomb in their own countries, that may well lead to further social unrest so as to redistribute the inequality of wealth in countries such as Egypt or Morocco.” The Arab Spring could result in any of a number of domino effects, from the collapse of the Schengen free movement zone within the Continent under an onslaught of North African migrants to the development of a Fortress Europe and more violent convulsions across Arab North African and Mediterranean countries undergoing a process of internal reorganization. Even Israel has not been immune to large-scale demonstrations by a disaffected youth protesting the high cost of living. When I next see Hamidullah, his regal air has deserted him. He is still stuck in Istanbul, finds it overly expensive and has held a series of bewildering meetings with smugglers offering different prices and services. “I didn’t realize that reaching Europe would be so complicated,” he laments. “And I’m still not even in it.”

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Eye of the Storm Bahrain has been at the centre of the Arab Spring since the start. TRENDS meets with Samira Rajab, Bahraini Shura Council, to find out where it’s heading next. . . By Christian Malar Paris

hat is the current situation in Bahrain following the revolt from the Shiite majority? It is necessary to clarify an important matter relating to the “Shiite majority”. The expression “Shiite majority in Bahrain” is similar to the one promoted by some Iraqis abroad before the AngloAmerican occupation of Iraq. The British-American secret services worked on promoting this expression. Then, the American British occupants supported the “Dawa” shiite party in order to rule. It has ruled Iraq for nine years, and we expect it to stay [like that] for a long time, as long as it is supported by the American power. Going back to the Bahraini majority, we have to affirm that there wasn’t

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any confessional statistic made throughout the country’s history, and until now no side can affirm that the Shiites constitute the majority of Bahraini people. The events of February and March proved this opinion, because during the last two weeks of those events, the radical Shiites controlled the capital by force. During the last three days they spread outside the capital, while the security forces retired from the streets in order to give a chance for the Crown Prince’s initiative of dialogue… Despite that, the radical rioters’ plan did not work because they didn’t have an important popular base. The “Shiite majority” allegations are just a lie promoted by the radical Shiite movement in Bahrain, re-promoted by the Western media. Shiites do not constitute a majority in Bahrain, and not

all Shiites in Bahrain support the Radicals (Shiites) who are loyal to Wilayatal-faqih in Iran. The situation in Bahrain is not completely stable because the radical and rioter groups are still going out in villages during the night and causing riots. The rioters also deliberately harm the security forces and [have] caused deaths and injuries among the security forces… The government is still dealing with these groups through different means, by security confrontation and continuing the dialogue between all parties and accelerating the democratic reform process. What is the situation with the national reconciliation? The radical Shiites in Bahrain have one principal demand: regime change. For

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Iranian cooperation in changing the political and demographical map in Iraq to the benefit of Iran. This, again, confirms that the Iranian role in Bahrain and the Arabian Gulf is supported by the Americans. The most dangerous American declaration is the one about pretending that they fear the repercussions of Bahrain’s events (against the Shiites) on the security of American soldiers in Iraq, under the pretext that Americans have paid great sums of money for Al Sistani and the Iranians to protect their soldiers in Iraq. The Americans only seek their interests and lie in front of the media saying that the American administration defends the people’s interests in the region, and we can see a lot of political banalities in those sayings, which makes the American administration lose its credibility and the trust of others…

“The most important positive is that Bahraini people insist on refusing all kinds of confrontation” Bahraini people the regime constitutes a national legitimacy that protects all confessions and religions, whether Shiite or Sunni or others, and changing any standard in this regime’s form will lead to authoritarianism of confessions, and to dangerous security confrontations. That’s why Bahrainis insist that this demand has nothing to do with the democracy claimed by radicals, but aims at allowing the Shiite political Islam to rule. Radicals see that the regional circumstances supported by Americans are for their advantage, That’s why they refuse any kind of national dialogue that could expose their positions and uncover the Bahraini people’s refusal of their demands… On this ground, the national reconciliation between Sunnis and Shiites is going through ups and downs, and did not reach positive results. The most important 52 TRENDS | October 2011

positive part is that Bahraini people insist on refusing all kinds of confrontation and violence. What is the role of Iran? Iran represents a direct threat to the area. There is another more dangerous threat [to] the American scheme (The New Middle East Strategy), summarized by the American administration’s support in setting up confessional and ethnical microstates in the region, under the pretext of spreading democracy and supporting confessional and ethnical rights. Iran tries to undermine the security and stability in the region by imposing the Shiite hegemony in our country through the spreading and support of the radical Shiite movement. But after nine years of occupancy in Iraq all that emerged during that period is the American-British-

Is Iran provoking a wider sunni-shia conflict in the region? Iran knows how to play its political game in the region. From one side it supports the Muslim Brothers in the terrorist Hamas (Sunni) movement in Gaza, and from another it associates its interests with the terrorist (Shiite) Hezbollah party in Lebanon, under the pretext of resistance against Israel. All Arabs know that these two organizations (Hamas and Hezbollah) do not represent any resistance, but work for putting an end to the resistance. These two parties have succeeded in dividing Palestinians and Arabs for the benefit of Israel. The Islamic Republic in Iran, therefore, plays with these two cards in order to prove that the Iranian revolution supports all liberation movements, while, in reality, the Khomeini republic regime – Persian and Shiite – holds a great hostility against Sunnis and Arabs. These are part of the constants affirmed in their dogmatic publications that we, members of the Shiite confession, know very well. Creating internal commotions in the Arab countries and in Gulf States is one of the most important objectives of exporting the Iranian revolution that was announced by the Khomeini in 1979.

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“The Peninsula Shield Forces are a joint Gulf army – and Bahrain participates in it” Do you feel that there is still a need for the Peninsula shield to be maintained in Bahrain? The Peninsula Shield Forces are a joint Gulf army. One of its major objectives is to protect the security and stability of the region, and Bahrain participates in it through soldiers from the Bahraini army. The redeployment of these forces in Bahrain does not constitute any danger or problem for Bahrainis. These forces can also be redeployed in any other Gulf State. And the lies spread about the presence of the Peninsula Shield Forces in Bahrain are just part of the scheme against the region’s states for the benefit of Iran and the Shiite movement… It is strange how we didn’t hear any criticism about the intervention of NATO forces in Libya, without the permission of the Security Council, while these forces have 54 TRENDS | October 2011

used all kinds of violence and bombing and indiscriminate killings against Libyan people. The Peninsula Shield Forces are criticized while they are accomplishing one of the most important objectives of their creation. Knowing that these forces have not interfered in internal Bahraini affairs, and have not been present in any city or village, they protect vital institutions and terrestrial, maritime and aerial borders, by fear of an unexpected external Iranian intervention against Bahrain. What is the impact of the Arab Spring revolutions on the region? The expression “Arab Spring revolutions” was first introduced by President Obama, and is not an Arabic expression, especially after the negative effects that emanated

from these movements which, in fact, constitute a dangerous chaos, more than revolutions. What happened in Tunisia is, until today, shaded by a lot of ambiguities and cannot be called “a revolution”. What happened in Egypt is still taking the country to more chaos, poverty and dictatorship. This will create a religious terrorism and a division that may lead to dividing the country between religions. Some Libyan (revolutionaries), trained in Europe and the US, entered Gaddafi’s palaces under NATO protection, certainly that could not be called a revolution… revolution does by no means come from outside… For what is carried out with an outside force is nothing but a reconstitution of new dictatorships in the region, without anything to do with oppressed populations who are now experiencing more suffering due to the continuous chaos, from Tunisia to Syria and Yemen. We cannot deny the effect of this situation on the Arabian Gulf region. Is instability in the region caused by Iran, and Israel? It is the international struggle for power that started after the end of the cold war, and that defines the threat centers and the way of dealing with these threats… America declared, since September 11, 2001, the emergence of the terrorist threat to replace the communist threat, and it declared the war against terrorism to replace the cold war. They defined the region of Eurasia, extended from Afghanistan to Eritrea, as the center of this war. But this is the axe of the oil sources and its supply routes. The US decided that the Middle East region needed change. Since 2001 it is doing surgeries designed to change the region by force, under the pretext of supporting democracy. The US and the old European colonial countries are undertaking these “surgeries” in the region in order to ensure the direct control over the oil sources and preserve their power in the international system and save the Western economy threatened with collapse. This is the international struggle for power, and Iran and Israel are pawns used by the American administration according to its interests.

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Private Equity New Realities The days of personal relationships are over as the reality sets in after the global crisis and the region’s private equity firms adopt sustainable and realistic models. By Atique Naqvi Dubai

n the GCC, where the big players in the economy are either government-run entities or family-owned businesses, the private equity firms operating in the oilrich Arab countries have been following a unique model based on personal relationships – very different from the structure in Europe or North America. While finer details of only a few transactions become public knowledge, most of the deals depend on personal and even family ties. The personal network is key to conducting business successfully. Generally, deals are finalized following a close examination of the account books in the developed markets. However, sources in the in-

dustry said several investment deals in the region used to be verbally finalized by seniors in the company, and then executives at the PE firms chalked out a plan to execute those deals and make them profitable for their limited partnership investors (“LPs”) and, ultimately for the Private Equity managers themselves (the “GP” or general partnership). In the current economic climate, however, the role of private equity firms has become more important and the regional firms are graduating to the more sustainable and realistic model followed in the developed economies. Matteo Stefanel, senior partner at Abraaj Capital, which is an investor in

Mediaquest, parent company of TRENDS, said, “The role [of private equity firms] is becoming more pivotal in this tough economic climate, as traditional forms of financing continue to shy away from the market, making private equity the source of capital of choice for companies looking to raise funds to fund and pursue their growth plans.” However, the old business model followed by some private equity firms in this region worked out fine during the boom years until the ripple effects of global crisis hit Arab economies. It’s getting extremely difficult for PE firms to exit their investments in companies in which they invested in 2002 to 2007, because the October 2011 | TRENDS 57

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FINANCE

“There is a significant deal flow, especially if the investor’s value-add is apparent” prices paid at that time were quite steep, while the recession combined with the Arab Spring has severely impacted businesses in the Middle East and North Africa region, making profitable exits that much harder to achieve in the context of today’s low market valuations. An executive associated with a private equity firm said, “We have no option but to wait and restructure our investee companies.” Stefanel said, “The continued turbulence in global markets limits the prospects of IPO exits for PE firms, however, we believe that equally attractive and popular exit routes remain wide open. These include divestments to trade buyers, who tend to have relatively superior access to third-party financing, and potentially secondary sales to other PE firms, who are equipped with adequate amounts of fresh 58 TRENDS | October 2011

capital raised pre-crisis and ready to be deployed in new investments. “Exits in the region have been historically limited, partly because the majority of completed deals are relatively young. “As investments mature over the next two to three years, we expect to see an increase in PE exits. The exit strategy is generally a function of the size of the business and its target sector, the requirements of its future growth plans and the quality and aspirations of its management. These factors help determine whether a business is best suited to be taken public, or be sold to a larger strategic or a financial buyer,” he said. Currently, the dry powder in the GCC market is available, but it’s unable to find instruments where the capital can be employed, said an industry source, adding that the companies that need capital are

holding back as they watch the unfolding of developments in the MENA region, the looming crisis in Europe and abysmal financial figures in the United States. On record, about eight private equity and venture capital deals were closed in the Middle East during the first seven months in 2011. A report by the MENA Private Equity Association said that 24 deals were finalized in 2010, while 46 were signed in 2009. According to industry insiders, that wished to remain anonymous, the size of the industry used to be close to the $6bn in 2008, before dropping significantly and would not get back to this level before 2013. They also said 2011 is one of the worst years for the region’s PE firms. Speaking to Dow Jones, CEO of Qatar’s First Investment Bank, Emad Mansour, said PE firms would like to forget about 2011 and pretend it never existed. Nowadays PE firms are focusing more on existing portfolio companies rather than closing new deals in a bid to save the available dry powder and protect balance sheets amid ongoing market volatility. Investors are also becoming very selective and only firms with solid returns, clear exit strategies and track records are attracting attention, said sources. According to the CEO of Dubai-based Abraaj Capital, Mustafa Abdel-Wadood, while getting buyers and sellers to agree on how to value a business and then obtaining financing for deals were the biggest challenges in 2009 and 2010, 2011 has seen significant deal flow as expectations of both sides have re-aligned. Managing director of The Carlyle Group, Firas Nasir, adds, “I’ve seen a lot of press about deal flow being the biggest challenge for PE firms in the region. I disagree. “Deal flow is plentiful, especially if the investor’s value-add is apparent. I believe the exit is the biggest challenge, which is why it’s a central part of our investment thesis. We focus on the IPO as the primary exit and M&A opportunistically. We prefer to invest in enterprises with attractive business models and the scale to be-

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One of the biggest deals was Abraaj’s stake in Network International for about $545m come publicly-traded companies; ones that are domiciled in countries with liquid public markets – such as Saudi Arabia. Relying on M&A as the sole path to exit can be precarious.” Summing up the PE sector, CEO of Abu Dhabi-based Gulf Capital, Dr Karim El Solh, said, “I think its early days for the region, but we will start to see a level of maturity. In 2005 and 2006 everyone rushed to launch private equity firms, so there were at one point almost 100 different players in the Middle East, which is a staggering number for this region. A large number of players entered the market and that is not healthy. What you are seeing now is a consolidation. A number of players raised funds, which they were not able to deploy or generate attractive returns [for their investors],” he said. Stefanel added: “We believe the current conditions strongly favor the market lead60 TRENDS | October 2011

ers who can bank on their superior record of deploying capital, creating value and generating returns to steer through these difficult times. The gap in the PE market between the leaders and weak performers is becoming more pronounced. This is evident by the fact that about 75 percent of the value of completed transactions in 2010 was related to one transaction, Abraaj’s acquisition of a 49 percent stake in Network International. In addition, we see a polarization of raising capital between SME funds on one side, and multi-billion funds on the other, a trend already apparent in 2010, with 25 percent of total funds raised relating to venture/SME capital. Among the most significant deals in the region in 2011 was Standard Chartered’s acquisition in August of a minority stake in Saudi Arabia’s Construction Products Holding, a subsidiary of Bin Laden Group, worth $75m. This was the bank’s first pri-

vate equity deal in Saudi Arabia and its second in the GCC since the beginning of the Arab Spring. Some of the few home-grown private equity funds have concluded deals outside the region this year, such as Investcorp’s acquisition in June of the Residence Inn Manhattan Beach hotel in Los Angeles, and the purchase in May by Bahrain’s Arcapita of a majority stake in J. Jill, a multichannel specialty retailer of women’s apparel based in the United States. The biggest deal of the year came when Abraaj Capital acquired a 49 percent stake of Network international. The transaction amount was $545m, according to Bloomberg. The sources said that the regional firms are increasingly looking abroad for investment deals because the GCC market is still quite small compared with opportunities available in the developed and emerging markets, including Turkey. Also, the region’s SME sector has failed to gain momentum. The weaker state of the industry in the past few years has also triggered the start of the consolidation, with the few at the top starting to buy the smaller firms. One of the first consolidation deals has been the acquisition of North African private equity platform of Amundi, the French asset manager jointly owned by Société Générale and Crédit Agricole. Abraaj took over management of the $161m SGAM Al Kantara Fund, as well as absorbing the 11-member Amundi investment team. The transaction size was not announced and Abraaj refused to comment on it. However, life has returned to the market with a recent exit from an investment. Abu Dhabi-based Gulf Capital made a successful exit and sold Maritime Industrial Services to London-listed Lamprell in July. Talking to TRENDS, Dr Solh said that his firm is planning to exit two more investments in the next five months. Gulf Capital and another regional private equity firm, Amwal Al Khaleej, sold their stakes in Maritime Industrial Services in a $336m deal to Lamprell in one of the rare private equity exits from the re-

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FINANCE

This unique culture of conducting business in the Arab world involved personal relations and trust gion. Rumors are that Abraaj would also be exiting a hospital deal in Turkey’s Acibadem, which they entered in 2008. Transaction size is rumored to be north of $1.5 billion. The company did not comment when asked. In the past few years private equity investments have seen a sharp drop, with investors backing out of capital calls, sellers demanding higher prices than buyers were

willing to pay, and increasing competition from family groups hampering growth. Simultaneously, the multiplier paid by PE firms has dropped from the 20s, which was the norm before the crisis, to a six to eight in line with other markets. Meanwhile, industry insiders have also raised ethical issues regarding some of the investors who make cash available to the PE firms. A source, who wished not to be

Debt as investment Credit investment is rarely seen in the GCC. Managing director of Gulf Capital’s Gulf Credit Partners, Christopher Baines, said that assetbased lending is much more common, but it is the conventional way of lending. The region is gradually maturing to handle sophisticated investment vehicles as there is a huge gap in the market for MENA financing. The SMEs and family businesses in the region have only two options – either seek a collateralized loan from a bank or take the private equity road. In the first option, assets are

62 TRENDS | October 2011

tied up with the loan and in the second control of the company is at stake. Baines said Gulf Capital’s $300m credit fund is perfect for family-owned businesses that do not want to dilute control of their companies. “The main area of focus would be healthcare, infrastructure, manufacturing and logistics,” Baines said, adding that the fund would be targeting the UAE and Turkey. It will also look at opportunities in other GCC countries, with strong macroeconomic fundamentals such as Qatar and Kuwait.

identified, said that some ‘cowboy investors’ have entered the market with grey money and as transparency, accountability and regulations are still at the nascent stage in the yet-to-mature sector, questions of morality are being raised by executives who have worked in developed markets and are now trying to build their professional portfolios in the Middle East and North Africa region. However, the Gulf Capital CEO said that in his firm there is due diligence before any investment is approved and the firm uses services of globally recognized auditors to get realistic valuations. “We also implement know-your-investors program, before raising capital,” he said. About grey money, the industry insider said the global crisis came at the right time and it is good for the PE firms. Responsible companies use money of responsible investors responsibly, he said, adding that the rogue firms that used grey money will disappear once the dust of the global economic recession settles down. Further, an insider said the capital raising had become much more difficult, as investors and families have become savvier and have hired advisors to help them evaluate each potential investment. The consequence of PE not being able to engineer many exits in the past two years has also delayed capital raising, as investors want to see reasonable returns on IRR, which firms have not been able to provide. The crisis has also had consequences for some LPs in search of liquidity. According to industry insiders, some LPs have been trying to sell their stake in some of the funds they are invested, at a hefty mark down of 60 cents to the dollar. TRENDS contacted some companies that trade on the secondary market for private equity to assess the price paid for funds in the region. All declined to comment. As with all sectors in an economy, the private equity has it own challenges and the jury is still out on the short-term outlook of the industry, but major players moving toward professionalism is certainly a good news for the sector.

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ENERGY

64 TRENDS | October 2011

Arab Oil Eastbound Oil producers in the Arab region are stretching out toward Asia as the Western economies are struggling to keep afloat amid fears of a double-dip recession. By Atique Naqvi Dubai

hen the Paris-based International Energy Agency said in a report in August 2010 that oil is flowing more toward the East rather than the West, several critics said it was a short-term trend. But as the eurozone economies and United States have been continuously wrestling with their finances, the IEA’s report is turning out to be a long-term phenomenon and statistics from other agencies support the new trend. The Energy Information Administration (EIA) of the United States said in a recent report that Saudi Arabia exported an estimated 7.3 million bbl/d of petroleum liquids in 2009 (7.5 million bbl/d in 2010),

the majority of which was crude oil. Currently Asia receives an estimated 55 percent of Saudi Arabia’s crude oil exports, as well as the majority of its refined petroleum product and natural gas liquid (NGL) exports. In 2009, Saudi Arabia exported an average of 1 million bbl/d of petroleum liquids to the United States, (down from (1.5 million bbl/d in 2008), accounting for nine percent of total US petroleum imports. Other major Saudi customers in 2009 included Japan (1.2 million bbl/d), South Korea (850,000 bbl/d), and China (839,000 bbl/d). According to the EIA, the US received 14 percent of Saudi crude oil in 2009, while Europe received four percent and Asia 57 percent in the same year.

Iraq, which exported 1.8 million bbl/d of crude oil in 2009, sent some 45 percent of its oil to Asia, 30 percent to the Western Hemisphere and 22 percent to Europe, said the EIA. When it comes to the UAE, Asia is the biggest client. In 2009 the country exported 2.32 million bbl/d of crude oil. Japan is the main market for UAE petroleum exports, encompassing 40 percent of its export volumes. South Korea and Thailand are the other major destinations for Emirati crude. The EIA report said even the vast majority of Qatar’s oil exports are sent to Asian economies. Japan is the single largest importer, although South Korea is also an important export market. Qatar, which October 2011 | TRENDS 65

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ENERGY

“There is no shortage of oil anywhere. . . current production is at the level it was in December 2010” is the world’s leading exporter of liquefied natural gas (LNG), exported nearly 1,800 Bcf of LNG in 2009. Japan, South Korea, and India were the primary destinations for Qatar’s LNG exports, accounting for about 57 percent in 2009. European markets including Belgium, the United Kingdom and Spain were also key buyers of Qatari LNG, accounting for an additional 33 percent. Kuwaiti exports of total oil amounted to some 1.8 million bbl/d, of which 1.7 million bbl/d was crude oil. In 2010 the Asia-Pacific region received about 1.4 million bbl/d, while exports to the United States totaled 196,000 bbl/d, and Western Europe received around 100,000 bbl/d, said the EIA report. However, there have been concerns in global markets regarding oil exports from 66 TRENDS | October 2011

the Arab countries due to the uprisings in the region. Opec Secretary-General, Abdalla El Badri, said, “These events, as well as the continued uncertainties surrounding the global economy, have obviously had an impact on oil and energy markets. However, oil markets, which are global in nature, have rapidly adjusted, both in terms of volume and quality. There is no shortage of oil anywhere in the world. OPEC’s spare capacity is around 4.5 million barrels a day, even after the recent disruption the oil group’s current production is at the level it was in December 2010.” Speaking about the eastbound trend, El Badri said the Asian region has become, and will increasingly become, ever more important in terms of global economic growth and energy demand. “Asia is home to twothirds of the world’s population, a popula-

tion that is young, and in terms of economy it contributes 36 percent of the world’s gross domestic product and this share is expected to reach 49 percent by 2030. Economically, Asia will be the fastest-growing region over the next 20 years.” While China and India are now back to strong growth rates, several OECD countries are still juggling the need for additional monetary and fiscal policies to support fragile growth and the necessity for fiscal consolidation, he said. “This expected economic growth also translates into Asia’s expanding importance for energy demand, in general, and oil demand, in particular. In fact, the hub for oil demand has been progressively shifting towards Asia in recent years. For example, over the past five years, OECD oil demand contracted by around 3.8 million barrels a day. While Asia, including the Middle East, saw an increase of almost 4.8 million barrels a day over the same period.” The Opec secretary-general said that developing countries are set to account for most of the long-term oil demand increase, with consumption expected to rise to 22 million barrels a day from 2009 to 2030 to reach almost 57 million barrels a day. “And around 75 percent of the net growth in oil demand in this period is in developing Asian economies.” In the medium-term to 2015, OPEC member countries are expected to invest an estimated $290bn in upstream projects, with $120bn billion in Iraq alone, he said. The Middle East has an abundant natural resource endowment: more than 750 billion barrels in proven crude oil reserves and almost 76 trillion cubic meters in proven gas reserves, which is around 56 percent and 40 percent of global totals, respectively. This underlines the ever-expanding interdependence between the Middle East and Asia, not only in terms of oil trade, which continues to grow, but also from a broader economic perspective. For example, between 2000 and 2009, exports to the Middle East from Asia and the Far East increased by around 300 percent, compared to an increase of about 120 per-

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ENERGY

The outlook study said oil would remain the dominant fuel in the primary energy mix to 2035 cent in terms of total world exports from Asia and the Far East. Exports from the Middle East to Asia and the Far East also increased by approximately 180 percent, compared to about 145 percent globally. As the trend indicates, the wind is blowing toward the East and it makes perfect business sense when one examines the earnings from exports. A study released in August by the Organization of Arab Petroleum Exporting Countries (OAPEC) for 2010 indicated that Arab hydrocarbon producers earned about $450bn from crude oil exports in current prices in 2010, but the real income was about $352bn. The real income was the second highest after the record real oil export earnings of around $465bn achieved in 2008, when crude prices soared to their highest average before they tumbled in the wake of the global financial crisis. 68 TRENDS | October 2011

The figures by OAPEC showed that the combined Arab real income was far below the revenue in current prices over the past two decades, taking into consideration global inflation and the weakening purchasing power of the US dollar. Such a gap was a key factor in the large fiscal deficits suffered by most Arab states in previous years before some of them started to record surpluses because of the surge in crude prices and production, according to the report. The rising demand from Asia and emerging markets has also played a crucial part in bringing in the surpluses to the Arab oil producers. A breakdown by OAPEC showed the Arab income in current prices stood at approximately $352.8bn in 2009, while in 1995 prices were estimated at $278.3bn. The peak income of $585.3bn in 2008 was around $456bn in real prices, while in

2007 it stood at $410bn in current prices and $332bn in real terms. The income from oil is set to keep flowing into economies of the producers in the Arab region as long as their reserves are capable to pump out fossil fuels. The International Energy Agency, in its global energy outlook 2035, said that the global primary energy demand would increase by 36 percent between 2008 and 2035, or 1.2 percent per year on average. This compares with two percent per year over the previous 27-year period. The scenario assumes cautious implementation of the policy commitments and plans announced by countries around the world, including the national pledges to reduce greenhousegas emissions and plans to phase out fossil fuel subsidies. Most of this demand would come from Asia. Non-OECD countries account for 93 percent of the projected increase in global energy demand, reflecting mainly faster rates of growth of economic activity. China, where demand has surged over the past decade, contributes up to 36 percent to the projected growth in global energy use; its demand rising by 75 percent between 2008 and 2035 (IEA preliminary data suggest that, although Americans consume more on a per-capita basis, China overtook the United States in 2009 to become the worldâ&#x20AC;&#x2122;s largest energy user). Aggregate energy demand in OECD countries would see a slugging increase. However, by 2035, the US would remain the worldâ&#x20AC;&#x2122;s second largest energy consumer behind China. The outlook study said that oil would remain the dominant fuel in the primary energy mix to 2035. Its share of the primary fuel mix would diminish as higher oil prices and government measures to promote fuel efficiency would lead to further switching away from oil in all sectors. Demand for coal would rise until 2020, declining in the early 2030s. The share of nuclear power would increase from six percent in 2008 to eight percent in 2035. The use of modern renewable energy would triple between 2008 and 2035, its share increasing from seven percent to 14 percent.

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INDUSTRY STORY

72 TRENDS | October 2011

IT Coming a Calling The ever-changing and evolving IT sector has set new parameters of growth in the GCC region due to government support and high consumer spending. By Atique Naqvi Dubai

n the past two decades the information technology sector has seen a drastic advancement and convergence like no other section of business. Computers, laptop, tablet devices, smartphones, cloud computing, the list goes on and on. The dotcom debacle of the late 1990s has failed to halt the growth of the IT sector. The convergence of different technologies has given birth to a sector now known as ICT – information and communication technology. With high purchasing power and consumer spending in the oil-rich Gulf countries, the region has always been a big market for global IT companies. The international market leaders in the IT sector have been keeping a close watch

on the Arab market and are hunting for opportunities to enter the Middle East, especially the GCC. The takeover of Maktoob by Yahoo! is a prime example. The number of Arabic applications for smart phones and tabs has increased considerably in the past five years. Whether it is Apple, Android or Windows, the global IT firms are leaving no stone unturned to win the loyalty of the customers in this region. South Korean firm Samsung has seen its smartphone and tab business grow from 3.6 percent in the Q2 of 2010 to 18 percent in just over a year. Samsung Gulf Electronics Telecommunication Group general manager, Ashraf Fawakherji, said the new-age customer in the

Middle East is using a personal computer, smartphone and a tab, to conduct business, to be informed and entertained. “Ten percent of our global demand of tabs comes from this region,” he said. Besides Saudi Arabia, the UAE and Kuwait are the biggest markets for Samsung’s mobile phones, smartphones and tabs in the GCC. The global IT companies have already opened their offices in Dubai to meet the high demand from this region, and more are on their way. Director of business development at Dubai Internet City and Dubai Outsource Zone, Majed Al Suwaidi, said that IT is the fastest-growing sector in the region. The sector, especially in October 2011 | TRENDS 73

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INDUSTRY STORY

New trends in the sector have emerged in the wake of the global crisis. Security is a major issue... this region, has proved quite resilient in the wake of the global economic crisis, he said. The latest trend in the region IT sector is the development of very niche applications and services. “IT entrepreneurs are developing very specific and specialized applications such as for a restaurant and food business”, said Al Suwaidi. Dubai is complementing outsourcing hubs such as India with its state-of-the-art ICT infrastructure, he said, adding, “We have skilled individuals who are working in specific areas, and this is our specialty.” The prospects look very promising as the government has increased spending on IT projects such as e-government and e-learning, said Al Suwaidi. The global firms that are doing business in the Middle East want to be located near their clients and the UAE, as a safe 74 TRENDS | October 2011

and stable country, is an ideal place for such firms, so a lot of IT companies have opened their offices here, he said. And the Arab Spring is bound to benefit the IT firms based in Dubai, as well. Mahesh Vaidya, CEO of ISIT, a data storage and networking solutions provider, said that due to the recent developments in the region, the day-to-day operations of banks and other firms were affected badly. “At least 10 major enterprises in the Mena region have either shifted or replicated their data in the centers based in Dubai and the UAE,” he said. When it comes to cloud computing, GCC is a bit slow in adapting to it. “Bandwidth is expensive and it is not very stable, if the link goes down there is no point of cloud computing,” said Vaidya. Cloud computing also suffers in this region due to

the lack of stringent security controls and unclear regulation. “There is no general body to regulate data in the GCC,” he said. New trends in the sector have emerged in the wake of the global crisis. “Security is a major issue. We conducted a survey of IT professionals and found that 80 percent of them who lost their jobs during the global recession took the confidential information of the company with them,” said Vaidya. Even small companies, such as event management firms, have faced these problems because employees or people in the IT department take away contact details from the database. However, in a recent IT report the World Economic Forum ranked the UAE as 24 in the world and the first among Arab countries in its use of ICT to enhance competitiveness and development. Qatar, Bahrain, Saudi Arabia and Oman were among the top 50 of 138 countries. In the readiness of individual usage, the UAE was fifth, while Qatar and Bah-

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INDUSTRY STORY

The global smartphone industry is expected to grow by 55 percent by the end of 2011 rain were placed 10 and 15. In the readiness of government usage, Qatar was second and the UAE was third, while Saudi Arabia was 12, Oman was 13, and Bahrain 14 in the World Economic Forum report on IT. The broadband connections in the GCC countries have witnessed a phenomenal increase, said the report. Broadband subscriptions in Saudi Arabia have grown 86-fold from 2006 to 2009, bringing the total number of subscribers to 2.75 million from just 32,000, it said. As the web of broadband widens and strengthens, the experts in the industry believe that tablet computers, or tabs, are the next big thing not only globally but in the GCC region, after smartphones. Vicepresident of Lenovo Group and general manager for Lenovo Middle East and 76 TRENDS | October 2011

Africa, Jack Lee, said that tablets are extremely popular personal technology devices and its usage is growing in their region. “We’ve created a family of tablets that has something for everyone, including entertainment-friendly features and content for consumers, or businessfriendly features to enhance productivity for professionals, as well as security and manageability for IT managers. The IdeaPad Tablet K1 is the first of our new tablet family to launch in the UAE market,” he said. The manufacturers are capitalizing on the increased demand in smartphones and tabs. In Q2 2011, Samsung recorded an increase in its year-on-year operating profit by 43 percent primarily due to strong demand for their tab Galaxy. Also, the global smartphone industry is expected to

grow by 55 percent by the end of 2011 as more consumers embrace the new technology, said IDC’s Worldwide Quarterly Mobile Phone Tracker report. The smartphone vendors will ship a total of 472 million smartphones in 2011 compared to about 305 million units in 2010, it said. Talking about the trend in smartphones, General Manager of Nokia Lower Gulf, Tom Farrell, said that the smartphone penetration in the region is on the rise and the firm’s consumer base is growing. “To date, we have 15 smartphones in the Lower Gulf region, with the E7, E6 and soon-to-arrive high-end N9 smartphone, all having been launched in the past 12 months alone. The Middle East will be one of the first regions globally to offer the much-talked-about Nokia N9 and this shows the regional consumers’ sophistication and demand for the latest and most innovative technology. According to Gartner’s smartphone study, Q2 figures revealed that Nokia sold

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INDUSTRY STORY

Smartphone consumers are becoming increasingly sophisticated and savvy on mobile applications more smartphones than any other manufacturer. With sales of 3.2 million Symbian units, Nokia claimed 41.9 percent of the Middle East and Africa market. Smartphone consumers in the region are becoming increasingly sophisticated and savvy on mobile applications and services. For each individual, if a phone looks and feels beautiful, supports their favorite applications, games and services, and offers great value for money, then there is no reason for not purchasing, said Farrell, he said, adding that Nokia’s aim is to ensure that a wider consumer base have access to a range of smartphones with different options and at different price points. Our smartphone category mirrors this diversity, from the entry level C5smartphone to the high-end businessgeared E7 and the funky and youthful N9, consumers are truly spoilt for choice. 78 TRENDS | October 2011

A major force to consider coming from this part of the world is the sophisticated adoption of social media. Recent political events have seen social media being used as a critical platform, promoting open flows of communication and thus further pegging the facilitating technology as essential to the masses. Smartphone technology, which brings key platforms such as social media to an ever increasing mobile consumer, is endless in what it can offer, he said. One of the strengths to be successful in the region is to flood the market with local content in Arabic. Nokia’s Ovi Store has done just that. “With the recently launched all Arabic Store, Nokia is committed to delivering content that is relevant to local and regional consumers. Most recently, Nokia released a number of Ramadan applications which proved

highly popular. In the second week of Ramadan, we counted more than one million downloads, marking the clear popularity of locally produced content,” he said. It is hard to identify one country as being more savvy then another as consumers’ needs in each country varies. Overall, the Gulf region is considered a techsavvy and high-end market with one of the world’s highest mobile penetrations. “At the same time, the Middle East and Africa being identified as priority market for the latest Nokia N9 innovation reflects the importance of the region to Nokia globally. A major proof point to the popularity of Ovi apps is marked by the volume of downloads in the Middle East, which averages out at an impressive six million a week. Another good example that showcases the regional consumers’ tech savvy behaviour is the growing consumption for Ramadan content. In MEA this year, a dedicated apps-based Ramadan Campaign focused on all aspects of Ramadan – religion, social, entertainment, health and food – topping one million downloads in the first 10 days of the Holy Month. This is clear evidence of the sophisticated behavior of the local consumer. “Our brand is still strong in the Middle East; consumers are spending, our Symbian smartphone range is getting a dramatically better look and feel over the coming month, and we see continued consumer demand for our mobile phones to which we have now added dual sim, for example. We will roll out the new Windows Phone which will really up the ante against our competition,” said Farrell. With smartphones and tabs leading the ICT market in the region, the formula for success, indeed, is the localization of products and services, said the people working within the sector. As the sector grows in the GCC region riding on the government and consumer spending, the challenge would be to find solutions to menaces such as data and identity theft. The industry insiders said that it’s high time that government and private businesses invest heavily in data security

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INDUSTRY STORY

Nokia understands the importance of making the consumer journey in the apps store fun and easy systems to insulate and make themselves immune for the attacks of digital miscreants, who are most of the times, a few steps ahead of security technologies. Nokia is also a truly “local” company in respect to the fact that we have significant presence in the region and are focusing on delivering locally relevant content and services in local languages. This, combined with our new strategy and partnerships for smartphones, positions us well to take advantage of the clear growth that this market offers. Nokia’s Ovi Store has been growing in popularity in the Middle East and Africa, with continuous growth week-onweek. The strong consumer interest is also attracting more developers to develop for the store, allowing them to leverage Nokia’s unrivalled global reach and its potential for their businesses. 80 TRENDS | October 2011

The Nokia Ovi app store offers a variety of local and global apps that caters for sophisticated consumer demands. Is lamic applications available for download from Nokia’s Ovi Store cover a broad range of subjects and include: Holy Quran, Prayer Times, Hadeeth, Qibla Direction, Zakah Calculator, Boyoot Allah, Mozzaker. Social apps available to keep Nokia users in touch include Ramadan Greetings, Whatsapp, FourSquare, Facebook and themes and ringtone apps include TaherQalby, SawomMaqbool, Ramadan Kareem and Nour Ramadan. All applications are available on the Nokia Ovi Store and can be billed directly to user’s Etisalat phone prepaid or post-paid accounts. Nokia understands the importance of making the consumer journey in the apps store fun and easy. Through

Nokia’s partnership with Etisalat, Nokia is the only company that offers consumers the direct billing option, greatly advancing the development and offer of applications and highlighting the value leading operators place in Nokia’s Ovi store. The availibity of Nokia’s Ovi store in Arabic reflects Nokia’s commitment toward reaching out to all communities and creating holistic spaces for free-flowing communication. Further, a recent study from AppsArabia reports that 45 percent of users consider Nokia as their main phone for apps. Lastly, it is important to highlight that the Nokia Ovi Store and its range of apps are compatible with more than 75 devices and the user interface for the applications is in English, Arabic, French and Urdu. One thing we can certainly guarantee is the continued development and innovation of technology. Consumers today are increasingly mobile and require tools that enhance their busy lifestyles. While we are not in the PC arena so cannot comment on its rise or fall, we have certainly observed and experienced an upsurge in the sale of smartphones, particularly in this part of the world. With many of the region’s markets boasting double-figure mobile penetration, consumers are increasingly looking for products that excel in performance and enhance their social standing. Double figure penetration is indicative of a highly sophisticated and advanced consumer of technology, and at Nokia we have certainly seen this through a significant uptake of new technologies. The Middle East is an exciting place to be for mobile manufacturers – consumers here push parameters through quick reactive waves to new technologies. Smartphone technology facilitated much of the open communication during political struggles earlier this year, and the world’s eyes continue to watch for trends set by our ever-demanding and creative consumers.

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COVER STORY

82 TRENDS | October 2011

Age of Discontent A disproportionate large number of young people in the Arab world has been suggested as the root cause of the Arab Spring. TRENDS investigates. By Zeinab Charafeddine and Gareth Smyth Beirut

outh has never been so fashionable in the Arab world. Al Jazeera, YouTube, Facebook and Twitter have brought the tools of globalization to millions of new users. Vendors in Cairo’s Tahrir Square sell T-shirts showing a raised fist and the Facebook logo, a reminder of how social media helped overthrow President Hosni Mubarak. But while activists see the Arab Spring as a surge for democracy and freedom, academics are skeptical, pointing out that many countries have remained tranquil despite unrepresentative governments and limited political rights. “It is not at all obvious to me that the principal failure of the regimes that fell was to

obstruct passage to democracy,” Djavad Salehi-Isfahani, professor of economics at Virginia Tech and visiting fellow at the Brookings Institution, told TRENDS. Some demographers insist the root of the Arab Spring is a disproportionately large number of young people. The median age of the Arab world is 22, compared with 28 worldwide, ranging from 31.6 in Qatar and 30.1 in the UAE, to 18.1 in the Palestinian territories and 17.4 in Yemen. Overall, 60 percent of Arabs are under 25. A “youth bulge” – the term derives from the standard graph of a population age breakdown – typically occurs as a county moves towards slower popula-

tion growth, although it can also result from baby booms. Gunnar Heinsohn, a German sociologist, has argued that such bulges explain historical phenomena including genocides, European colonialism and 20th-century fascism. In a 2009 Wall Street Journal article, Heinsohn applied his theories to the Arab world, where he advocated emigration from Gaza as the only means of reducing tension and violence. “In such ‘youth bulge’ countries, young men tend to eliminate each other or get killed in aggressive wars until a balance is reached between their ambitions and the number of acceptable positions available in their society,” he wrote. October 2011 | TRENDS 83

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The “main source of the fuel” for the Arab uprisings is unemployment among those with degrees “In Lebanon or Algeria, the slaughter abated only when the fertility rates … fell from seven children per woman to fewer than two,” he explained. “In Gaza, however, there has been no demographic disarmament. The average woman still bears six babies…And so the killing continues.” Other academics argue a youth bulge is destabilizing only in a broader context. Ragui Assaad has studied the phenomenon in depth, both in his current

position as Professor of Planning and Public Affairs in the University of Minnesota, and previously as regional director for West Asia and North Africa of the Population Council. “The youth bulge definitely contributed [to the Arab spring], but alone a youth budge does not necessarily result in uprisings or revolts,” professor Assaad, an Egyptian, told TRENDS. “Youth bulges in East Asia have produced high eco-

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Jobs needed by 2020 to absorb young people coming into the market

84 TRENDS | October 2011

nomic growth rather than protests. So a youth bulge becomes a problem only in combination with other factors, in particular economic policies that discriminate against youth and result in them not being able to find jobs, not being able to get married, and so on.” Arab youth unemployment, ranging from 20 per cent to 40 percent, is twice the world average. A major cause is government policies, said professor Assaad. “For example, when they did economic restructuring away from the public sector, they chose to keep public sector workers in jobs for a lifetime. So people at the margin were excluded. Another example would be changing labor market laws to make them more flexible: everybody with a secure lifetime job kept it. There are other cases: in the Gulf, foreign labor is allowed often at the expense of their own nationals, the young people trying to find jobs.” Hence liberalization, pursued hesitantly by many Arab governments since

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“. . . [Social media has] enabled people to connect. This gives them confidence. . .” the 1990s, is no panacea. After all, the Mubarak regime styled itself as businessfriendly in relaxing investment rules and cutting taxes. During the oil-price boom before July 2008, the IMF warned that too much revenue was going into real estate and equities rather than productive sectors, and that an expansion of higher education with no increase in job opportunities was just encouraging graduates’ expectations. Professor Salehi-Isfahani agrees the “main source of the fuel” for the Arab uprisings is unemployment among those with university degrees. “Globalization and the decline of the state sector in most of these countries have reduced the value of higher education, which was formerly 86 TRENDS | October 2011

prized because it could lead to well-paid, secure jobs,” he told TRENDS. Professor Assaad questions the quality of higher education in the region. “It has been so poor that multi-nationals have been avoiding hiring people from public education,” he said. “The young people who are sought after are those educated in private foreign schools or abroad.” But in addition to the “youth bulge” and malfunctioning economies, few doubt the role of politics in the Arab spring. “This is what I call governance and capture problems,” said professor Assaad. “Governance is when governments are ineffective and cannot serve their people properly, that’s what I would refer to as petty corruption. Then there is grand cor-

ruption, which is the capture of the state and the benefits of the economy by a few cronies close to the regime.” And beyond corruption – petty and grand – there has been a lack of democracy and transparency. “That is associated with violations of human rights, and cannot be kept secret anymore because of the wonderful information technology available,” said professor Assaad. The various economic and political factors are found in varying proportions around the region. Professor Assaad agrees with professor Heinsohn that past violence has given Algeria a “tremendous fatigue with protests”. Additionally, most governments in the Gulf have the option of throwing money at problems. In Lebanon and Iraq, other factors are at work, said professor Assaad: “They are basically messy, unstable democracies. There isn’t a single group organized in a position to control government, which is rather made up of a variety of different groups in coalition. I don’t see either Iraq or Lebanon blowing up – they are going to be struggling along in their own messy way.” Hence there is little prospect that the Arab world will follow Eastern Europe in 1989, when regimes fell one after another like dominoes, said professor Assaad. “Outside possibly Sudan, which may see unrest in the form of more civil war and regional violence, I don’t see too many other candidates for an uprising at this point, other than [where there is already unrest] in Yemen, Syria, Libya, Egypt and Tunisia.” The shape of the youth bulge itself varies. In Saudi Arabia, there is a bulge in the 30- to 40-years age group, where there is also a disproportionate number of males, and a second bulge in those under ten. The age profile in Yemen shows a classic pyramid shape – the younger the group, the more people are in it – that has barely changed since 1950. Iran has a marked bulge of 20- to 30year-olds, which results from a high birth rate after the 1979 Islamic Revolution followed by successful population con-

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Back in January young people resented Vodafone cutting protestors’ communication lines trol beginning around 1990. For some years, conservative strategists in Tehran argued ageing baby boomers would become more concerned with the economic issues of settling down with a family than with the demands for social reform that fired reformism under former president Mohammad Khatami. But professor Salehi-Isfahani is skeptical that the ageing of Iran’s “youth bulge” will reduce desire for change. “It is likely to put force behind economic demands, but it is not clear the government is better prepared to deliver on jobs than it was on social freedoms,” he said. “The reverse may be true. Providing greater social freedoms is easy in a way because it requires doing less, whereas providing jobs requires doing more. Iran has one of the worst imbalances in the region between supply of graduates and demand for them.” 88 TRENDS | October 2011

Across all countries, the economic challenge is formidable. It has been estimated that 50 million jobs across the region are needed by 2020 to absorb young people coming into the labor market. Some 700,000 young Egyptians enter the labor market each year. And yet, in the short run, the Arab spring has been bad for the economy. Tourism, which is labor-intensive, has fallen by 50 per cent in Tunisia and the Egyptian ministry of tourism estimates 2011’s revenue will fall by $3bn from $12.8bn last year. While tourism rose five per cent worldwide year-on-year in the first six months of 2011, it fell by 13 per cent in North Africa and 11 percent in the Middle East, according to the WTO. Nor is tourism the only sector hit. The first quarter of 2011 saw a net outflow of foreign direct investment of $163m from Egypt, compared to a net inflow of $656m

in the last quarter of 2010. The Dubaiheadquartered Pan-Arab Research Center has reported a downturn in advertising spend across the region during Ramadan after a general decline in 2010 other than in Saudi Arabia and the UAE. This does not seem to have diminished advertisers’ interest in young people. Billboards in Cairo extol youth, with the faces of small children painted with Egyptian flags alongside exhortations to buy new mobile phones. Some of the interest in youth results from hard research. Zain raised eyebrows in 2007 in splashing $6bn for the third telecoms license in Saudi Arabia, a market with 85 per cent penetration and two established operators – yet Zain’s decision was based on the license including broadband, fertile territory for young Saudis with the resources and hunger to download video clips and games. But there is also instinct in advertisers sensing that young consumers are becoming more assertive. In Qatar this summer, young people used Twitter and Facebook to lobby Qtel, the main telecoms operator, for better coverage and lower prices. Protestors aped the language of the ‘Arab Spring’ in complaining of a “corrupt regime” sending “online thugs against them. In June, a promotional video featuring Vodafone Egypt made by advertising agency JWT sparked outrage at what many saw as an attempt to cash in on the country’s revolution. Vodafone and JWT denied the video – made for “internal purposes” but posted on JWT’s website and on YouTube – linked the Vodafone slogan ‘Power to You’ to protests in Tahrir Square. Back in January, young people had resented Vodafone cutting protestors’ communication lines after ordered by the authorities to switch off its network, and critics set up a site (http:// ihatevodafoneegypt.com) that has expanded to accuse the company of various ills. Barry Brand, head of art for the Middle East and North Africa at M&C Saatchi, believes social media has transformed the business environment. “It enables people to connect it a way they couldn’t before, and this gives them confidence,” he

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“The Arab Spring shows changes are becoming unpredictable. . . It can happen very quickly” told TRENDS. “On Facebook you can have fairly strict control on who you share with, so people can dip their toe in the water when they’re talking about issues. This is safer. People can gather online first, and that, in turn, creates a bigger group who can gather in the physical world. And it can happen very quickly.” This makes it far more important for companies to be transparent and consistent.

“If you’re saying one thing in your communications and doing another in reality, much like the governments that have been toppled,” said Mr Brand, “then people very quickly talk about it and connect the dots.” Marketeers have long targeted the young, just to remain ahead of the curve. In the classic 2004 book How Brands become Icons, Douglas Holt wrote: “A brand emerges as various ‘authors’ tell

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90 TRENDS | October 2011

stories that involve the brand ...Brands become iconic when they perform identity myths: simple fictions that address cultural anxieties... For iconic brands, relevance is not about clothing or haircuts. It’s about keeping up with changes in society.” The Arab spring shows such changes are becoming more unpredictable. With the explosion in social media and a new energy among young people, advertisers are experimenting with “viral” campaigns. M&C Saatchi’s ‘Beirut Duty Free Rocks Airport with Dabke Dance’ (www. youtube.com/watch?v=VEp29GS1VXI) has been seen 1.43 million times on YouTube. In explaining the way the flash mob was organised (www.youtube.com/ watch?v=4PMpNYXa-xU) and the way the message has spread, Mr Brand conveys a great sense of new ground. “Are we targeting young people? Well, we have to create a dialogue, and listen to what comes back. Because if we don’t, we’re in trouble.”

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Food Factor Politics Soaring food prices are a major contributing factor to this year’s political upheaval. TRENDS investigates the food price shocks felt by the Arab region. By Karen Thomas London

lobal increases in the price of food are threatening the region’s poor with poverty and hunger. The wave of protests known as the Arab Spring began with sporadic riots across the region over the soaring cost of living. The World Bank’s food price index reports a 36 percent hike in world food prices in the year to April 2011, threatening a return to the peak food prices of 2008. It reported a 74 percent price increase for maize, a 69 percent increase for wheat, a 36 percent increase for soya beans and a 21 percent increase for sugar. Prices for cooking oil, vegetables, fruit and meat also rose sharply. Several

factors underpin this year’s hike in food prices. Climate change has brought floods and droughts to grain exporting countries, devastating harvests. A 21 percent hike in crude oil prices in the first quarter of 2011 increased the costs of getting commodities to market. Soaring fuel costs have pushed farmers to grow bio-fuels, eating into arable land and feedstock for food production. Arab countries import at least half the food calories that their people consume, according to the World Bank, and are the largest importers of cereals in the world, shipping in 58 million tonnes in 2007. The Mena region desperately lacks water and arable land.

The Mena population has quadrupled since the 1950s to 333 million people and will reach 600 million by 2050. Eating habits are changing too. Middle class and upper class families have replaced grains and vegetables with ‘western’ diets based on meat, dairy and processed foods. This will make the region even less able to feed itself in future. “Today,” says Jane Harrigan, professor of economics at the Food Studies Centre at London University’s School of Oriental & African Studies (SOAS). “The Mena region is the most food-insecure area in the world, with the largest food deficit and a heavy reliance on imports.” October 2011 | TRENDS 93

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Countries from Libya to Qatar are scrambling to buy agricultural land to secure access to food A 2009 study by the United Nations Development Programme (UNDP) reveals a “dramatic” increase in world food prices between 2000 and 2008. Wheat prices increased 200 percent, along with “significant” increases in prices of cereals, edible oils, dairy products and sugar. Between 2000-2006, Arab states ran up a combined food deficit of $110.1bn, according to the Arab Organisation for Agricultural Development (AOAD). In Syria, Lebanon, Yemen, Iraq and Egypt, AOAD reports that double-digit growth in food prices had a disproportionate impact on the urban poor. Harrigan estimates that the 2007/2008 94 TRENDS | October 2011

food price shocks exposed more than four million Arab citizens to malnutrition. Food riots broke out in Bahrain, Jordan, Lebanon, Morocco, Saudi Arabia, Egypt and Yemen in 2007 and 2008. Egypt, Jordan and Syria reacted by raising public sector wages and shored up bread subsidies. While the pressure eased with a slow-down in food prices in 2009, the underlying problem remained. And so the food price hikes of late 2010 kindled a new wave of unrest. Food security is not self-sufficiency. Economists classify desert kingdom Saudi Arabia as food secure, because it has the wealth to feed its people. But Sudan, which was the bread-basket of Africa in

the 1970s, is among the 15 most food-insecure countries in the world. The International Food Policy Research Institute (Ifpri) divides countries into food secure, food insecure and foodsecurity challenged. Ifpri classifies Algeria, Iraq, Libya, Sudan, Syria and Yemen as food-security challenged. It classes Egypt, Jordan, Lebanon, Morocco, the Palestinian territories and Tunisia as food-insecure. Ifpri ranks just seven Mena countries – Bahrain, Iran, Kuwait, Oman, Qatar, Saudi Arabia and the UAE – as foodsecure, being wealthy enough to import food to feed their citizens. Mena countries have struggled to sustain food production. Since the 1980s the World Bank and International Monetary Fund urged regional governments to open their economies to foreign trade. But import-dependence exposes countries to global food price trends and to political pressure. Five supplier countries – Argentina, Canada, the US, the EU and Australia – generate 75 percent of the world’s traded cereals, linking food supply to geostrategic interests. Libya, Syria and Iran have all faced trade embargoes. The Mena region will need to increase its food imports by 60 percent over the next 20 years. But with climate change disrupting harvests, India halted rice exports in 2008. Ethiopia, Russia, Ukraine and Kazakhstan have banned or restricted cereal exports, boosting speculative trading of foodstuffs on the world markets. As global prices soar, it will become impossible to subsidise staple foodstuffs, creating new instability. And so countries from Libya to Qatar are scrambling to buy or lease agricultural land in Africa and Asia to secure access to food. Saudi Arabia plans to invest $3bn in food production in Australia, Senegal, Sudan, Mozambique and the Philippines, setting up agribusinesses to produce wheat, rice and corn for Saudi consumption. Libya, Qatar and the UAE have pursued similar strategies.

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“In the past the Mena region has relied too much on international food markets. . .” Qatar imports 90 percent of its food. In 2008 it launched the Qatar National Food Security Programme. Hassad Food, part of Qatar’s sovereign wealth fund, announced last year that it would invest $700m in overseas land to produce rice, sugar, grain, mean and animal feed. In 2009,it bought 100,000 ha in Sudan to grow rice and wheat. Between 2006 and 2010, developing countries sold 250 million ha to Mena investors, both corporate and government buyers, Harrigan estimates. Such deals allow wealthy oil states to outsource food production. Many land purchase deals promise an injection of capital; pledges to build roads, schools and clinics to benefit local people. But selling farmland to for96 TRENDS | October 2011

eign owners threatens the host country’s food security. Many deals lack transparency, leading to accusations of landgrabbing and corruption, and to disputes regarding ownership. Critics argue that the strategy is shoring up problems for the future, particularly today, when thousands of people face starvation in drought-ravaged east Africa. Land sales have been particularly controversial in Ethiopia, which banned cereal exports after its 2007 food crisis. Today, the World Food Programme (WFP) supplies food aid to nearly six million Ethiopians. Yet the government of Meles Zenawi wants to lease more than three million ha of arable land to foreign investors by 2015.

Neighbouring Sudan plans to set aside a fifth of its arable land to foreign investors. By 2010, Sudan’s Ministry of Agriculture had allocated long-term rights to more than two million feddans to foreign investors from China, Jordan, Libya, Qatar, Saudi Arabia and the UAE. But Sudan is one of the world’s most food-insecure countries. WFP runs its largest programme worldwide in Sudan, feeding more than six million people. A 2006 survey found that nearly a third of Sudanese children were undernourished. “More research is needed on the terms of these deals and how the benefits stack up,” Harrigan concludes. “The issue of food security is a political issue [and] an economic issue. In the past, the Mena region has relied too much on international food markets and this has contributed to... the Arab Spring. Mena governments are... acquiring land. But this move, too, is controversial.”

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Eyeing the Future The geo political consequences of the Arab Spring are vast and profound. At stake: freedom and democracy. By Gareth Smyth and Nader Diab

ver since Mohamed Bouazizi set fire to himself in Sidi Bouzid last December there has been no shortage of opinions on the scope, nature and historical significance of the Arab spring. Enthusiasts have proclaimed a new age in which unrepresentative Arab regimes will fall. al-Hayat opinion page editor Hazem Saghieh wrote in UAE daily al-Ittihad how “the uprisings have set history in motion again after it has been frozen and put aside … and [will] grant people freedom as a primordial human right.” “What has been broken is not just the barrier of fear but, more importantly, the feeling of powerlessness,” wrote Marwan

Beirut

Muasher, former Jordanian foreign minister, in a commentary in June for the Carnegie Endowment for International Peace. “The Arab public has a new sense of empowerment, it will not content itself with being on the receiving end of policies made by its governments or outside forces. The belief that the change can only be brought through violent means has died. There is a sense that change can be done peacefully.” Eric Hobsbawm, the great historian of the French Revolution and 19th-century Europe, has advised caution. In remarks to the The Times in July, he pointed out that while the removal of President Ben Ali and President Hosni Mubarak

was historic, there was no guarantee of a transformation: “Tunisia and Egypt are obviously revolutions inasmuch as existing regimes have been overthrown by mass public mobilizations on the streets. But revolutions are not necessarily successful beyond the moment of overthrow. See the history of 1848 in Europe.” The reference here is to the resurgence of the “old order” in Europe after monarchs initially accepted representative assemblies during the popular protests of 1848-49. Reinforcing Eric Hobsbawm’s warning, confidence in the revolution is waning among Tunisians, who began the Arab spring. Optimism fell from 32 percent in April to 24 percent in August, acOctober 2011 | TRENDS 99

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The Arab spring may mark the end of the pan-Arab aspiration that dominated the 1960s and 1970s cording to a poll by the Applied Social Sciences Forum, and only four million of seven-and-a-half million eligible voters have registered to vote in October’s election for a constituent assembly to reform the constitution. The December and January protests in Tunisia were spurred by high unemployment of 14 percent concentrated among university graduates. But since Ben Ali fled to Saudi Arabia, tourism – which employs 500,000 people and generates nearly $3bn annually – has plummeted by 50 percent, with losses compounded by violence in neighboring Libya, which accounts for two million of Tunisia’s seven million visitors. 100 TRENDS | October 2011

Many argue that the interim government of Beji Caid Essebsi has stalled significant reforms, including curbs on corruption, while many of Ben Ali’s former allies remain influential, especially in the judiciary and security apparatus. The role of Islamists in the Arab spring is also in dispute. Taher Ben Jelloun, the Moroccan novelist, is among those who have proclaimed the end of fundamentalism. “These revolutions are spontaneous and un-ideological,” he wrote in Par le Feu, a fiction honoring Mohamed Bouazizi, published this summer. “They are driven by millions of people who took the streets to say: Enough.”

Having focused on foreign policy for 10 years since 9/11 on a war against Islamic extremism, Washington seems to agree and has jettisoned rulers, including Hosni Mubarak and Muammar Gadaffi, with whom it long co-operated with against “terrorists”. Leon Panetta, the new Secretary of Defense, announced on a trip to Afghanistan in early July that al Qaeda was close to “strategic defeat”. But many argue that Islamists, albeit “moderate” ones, will be the main political beneficiaries of change. “It has been obvious for a long time that the Islamic Movement has been the main opposition, whether in republics or monarchies,” Ahmed Moussalli, Professor of Political Science and Islamic Studies at the American University of Beirut, told TRENDS. “The Islamic movements have been the main players stirring the people. Now, the West has reached a point where they are no longer resisting the Islamic movements, insofar as they can still secure their interests. In that sense, the West, especially the US, are riding the waves of Islamic movements, especially Ikhwan, the Muslim brotherhood, which for a couple of decades have changed their discourse, and accepted democracy and human rights, and who no longer see the West as an ideological opponent, but rather as a political force they may reach agreement with.” But the Arab spring may mark the end of the pan-Arab aspiration that dominated the 1960s and 1970s. Opposition to borders created by colonialism has been left in the hands of minority groups, including the Kurds, and mavericks such as British journalist Robert Fisk. Chibli Mallat, visiting Professor of Islamic Legal Studies, Harvard Law School, argues that the desire for Arab unity will be transformed by detachment from politics dominated by tyrants. “Arab unity is returning to its long-lost and original enlightened form, that of freedom and democracy,” he told TRENDS. “Dark pan-Arabism is dead. Long live enlightened, tolerant, varied, creative Arabism, the one the world knew in the 1930s.”

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Mallat argues against the notion of an ‘Arab Spring’ and speaks instead of a ‘Middle East Revolution’ Accepting borders, even if originally drawn up by colonialists, is a necessity, Mallat argues. But he advocates expanded cultural and economic links. “Secessions are a disaster, including in Israel-Palestine,” he said. “One of the indications for the Revolution bearing fruit is the espousal by the new regimes, when they stabilize, of the freedom of movement across the region. Then Arabs can relate to each other freely, as will Kurds, Jews, Armenians and others.” Indeed, Mallat has argued against the notion of an ‘Arab spring’ and speaks instead of a ‘Middle East Revolution’ that takes in non-Arabs. “Iran and Israel, the Kurds, are part of the ongoing Revolution,” he said. “So it’s factually wrong to talk about just ‘Arab’. Just as importantly, 102 TRENDS | October 2011

this is a Revolution, Spring is a nice but empty metaphor.” Here, the evidence is mixed. The ‘green movement’ in Iran has failed to regain momentum, despite the reopening of a number of reformist newspapers closed after the unrest following the disputed 2009 presidential election. In Kurdish northern Iraq, street protests have encouraged the ruling Kurdistan Democratic Party and the Patriotic Union of Kurdistan into talks with three opposition parties. Nawsherwan Mustafa, who heads the main opposition group, Goran, has proposed reforms to separate government from the KDP and PUK. “My estimation is that KDP and PUK are playing for time,” Salam Abdulqadir, who teaches political science at the Hu-

man Development University in Suleimaniya, told Trends. “They are talking to Goran to show the public they are interested in listening to others and so keep the situation calm.” With so much recent Middle Eastern history defined by Arab-Israeli relations, the consequences for Israel of the Arab spring are hotly disputed. Demonstrations of 400,000 people in early September was the largest in Israel’s history, bigger than those demanding withdrawal from Lebanon in 1982 – focused on calls for “social justice” in contrast to the neo-liberalism of recent governments, including the current administration of Benjamin Netanyahu. The demonstrations began with young people pitching tents in central Tel Aviv to demand affordable housing. Once the encampments spread to several cities – with demands for tax reforms, cheaper supermarket goods and better public services – the term ‘tentifada’ suggested a link with

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“What is happening is true co-existance. Arabs and Jews together, shoulder to shoulder” the Palestinians uprisings. Some banners, including ‘Walk Like an Egyptian’, linked the movement to the Arab spring. Shahin Nasser, an Israeli-Arab, told a rally in Haifa: “What is happening here is true co-existence, when Arabs and Jews march together shoulder to shoulder calling for social justice and peace.” Research by the Israel Democracy Institute suggested 80 percent of Israelis supported the protest movement. “I have come to the conclusion that this is not an Arab-Israeli conflict but a 100-year-long civil war,” he said. “ If nonviolence takes root as the exclusive means to change – and let’s remember that nonviolence as a massive popular movement came to the region with the [Palestinian] Intifada of 1987 – then the conflict will 104 TRENDS | October 2011

enter an altogether new dynamic that ends up with a constitution embracing IsraelPalestine in one federal state.” But many Israelis, alarmed by the prospect of a UN vote to recognize a Palestinian state and by Iran’s nuclear program, see the Arab spring as a step towards uncertainty and danger. The Knesset’s foreign affairs and defense committee last month argued that a UN endorsement of Palestinian statehood could unleash violence, and the Israeli army has issued fear gas and stun grenades to settlers in the West Bank. And Major General Eyal Eisenberg, commander of the ‘home front’, told a press conference in Tel Aviv: “After the Arab Spring, we predict that a winter of radical Islam will arrive.”

The underlying fear is that representative Arab regimes would reflect the hostility towards Israel felt by their populations. “They further fear that if the nascent democracies assume an Islamist character, Israel will not only be facing Hizbullah and Hamas, but a plethora of new versions of these organizations,” wrote Egyptian analyst Abdel-Moneim. “Tel Aviv is in an awkward position; it cannot be perceived to be the obstacle to the historic transformation poised to merge with the global process of democratization that began with the fall of the Berlin Wall. “It will be difficult for Israel to choose. It could take advantage of the opportunity to prove that its democracy is capable of dealing with other free and democratic countries. Unfortunately, those familiar with the workings of the Israeli political system and how its various parties interact, know that this will not be that country’s preferred choice.”

COVER STORY

106 TRENDS | October 2011

Still in Bloom? The Arab Spring appears to be losing its original luster as economic realities set in, employment hopes fade, and nations second-guess their once-vigorous movement. By Jay Akasie

New York

n his recent World Bank essay, Steen Jorgensen says that one of the distinct advantages of the Arab Spring was that the tumultuous events brought into clearer focus the long-standing challenges of inequality and unemployment across the Arab world. “It is clear that in the medium term only a dynamic, market-based economy can generate good jobs for the unemployed and, importantly, the underemployed. It might seem tempting in the face of popular pressures to expand the public sectors further, but it is not feasible and not desirable,” says Jorgensen. What Jorgensen proposes is fairly radical for nations whose peoples have known nothing but centrally planned, social-

ist-style economies that revolve around totalitarian leaders. He predicts Arabs affected by the Spring are not going to wait for a “medium term” especially because the private sector in their countries is commonly equated with political cronyism and “crony-capitalism,” as he terms it. The masses are accustomed to a “few well-connected elites” who “make a lot of money, and the rest very little,” he says. The key question being asked across the Arab world, according to the World Bank’s Jorgensen, is this: How do governments provide immediate relief, but relief that leads to development – relief that sets the country on a positive path of growth that benefits the many and not only the few?

Sadly, many young, educated Arabs have to look to securing jobs in Europe and North America because of the lack of opportunities in their own countries. The Gulf is an obvious exception. Fueled by massive oil wealth, the issue facing the countries of the GCC is quite the opposite: Natives of those countries are encouraged to take advantage of the free education and government-backed jobs so readily available to them, but the sheer wealth of many of those nationals encourages conspicuous consumption and profane, nouveau riche lifestyles, rather than a focused work ethic. In other parts of the Arab world, even female university graduates face 30 percent unemployment rates. “The nearterm economic costs of the Arab Spring October 2011 | TRENDS 107

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... there has been a huge outflow from European banks into American certificates of deposits are manifesting in disruptions to industrial production, trade, worker remittances, foreign direct investment, and importantly for Egypt and Tunisia, a sharp, 45 percent decline in the number of international tourist arrivals during the first quarter of the year,” says the World Bank’s Mick Riordan in his recent paper. “An example of the potential impact of a sustainable fall in tourism: should Egypt’s tourism revenues fall by 18 percent during the year, calculations based on multipliers for the industry prepared by the World Travel and Tourism Council suggest a 1.2 point loss of GDP. Similar results might apply to Tunisia, Morocco, Jordan, and Lebanon.” In the broader view of the World Bank, if these political events and economic externalities are followed by sound transi108 TRENDS | October 2011

tions to better governance structures, then looking forward, they should provide a unique opportunity to change the Middle East and North Africa’s political and social landscape, according to Riordan. The economic costs of transition, he says, should begin to diminish, while the benefits of reform start to accrue. “Under the assumption that some form of ‘normalization’ takes place across countries – a revival in domestic demand becomes feasible, as does the ability of countries to participate in a rebound in international activity, through good trade, tourism, and investment flows,” says Riordan. What hasn’t helped the Middle East’s economic prospects is that Europe and North America are still mired in recession – and the risk of contagion is spreading.

Amid the lackluster performance of the $15trn American economy, the price of gold has rallied to new highs. So has the Swiss franc as investors flee to perceived safe havens. Perhaps most telling of all is the M1 economic indicator, a somewhat little-known set of data recorded by the St. Louis Federal Reserve Bank in America, that measure cash deposits in banks. It seems there has been a huge outflow from European banks into American certificates of deposits and Treasuries, a stark indication that the elite of Europe is clearing its holdings out of continental banks and into American institutions because of Europe’s troubles. This scenario doesn’t help the Middle Eastern economy – not even the usually dependable Western appetite for oil. Plus, any expectations that a return to normalcy could result from a tourism rebound must first be tempered by realities in Libya and Syria, two countries where the Arab Spring is taking a sharp detour. True, rebels have taken control of Tripoli from Gadhafi forces, but the Libyan strongman is still at large (correct at time of going to press) and doubts remain about just how effectively the new regime can bring the vast potential of Libya’s oil economy back into form. It’s been four decades, after all, since the world experienced Libyan oil fields even near full operating capacity. The newly established National Transitional Council is doing its best to ensure that stability comes to Libya. But that is a daunting task even for the most zealous group of rebels. “NTC officials recently claimed that the country could produce 0.5 to 0.6 million barrels a day within weeks, compared to 1.6 barrels a day pre-conflict,” says the Merrill Lynch economist Francisco Blanch. “While this figure may be technically feasible, it appears somewhat optimistic in the light of the military, economic, social, financial, legal, and political challenges that the country faces.” Outside the merely technical aspects of bringing Libya’s output back on line, it is important to keep in mind that the fighting rebel groups and the NTC comprise a very

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Syria is. . . what the World Bank views as an Arab country with unresolved social unrest broad spectrum of opinions, according to Blanch. Many of Libya’s 140 tribes might have shared the common goal of ousting an oppressive incumbent dictator, he says, but they might have a harder time agreeing on how to govern Libya. “Libya may face insurgency and sabotage by former regime loyalists which could play a significant part in prolonging the recovery of oil production after the fall of the old regime,” Blanch says. Then there is the question of the future of Syria. Reports vary, but many suggest that as many as 2,200 people have been killed so far as the regime of Bashar Al-Assad attempts to suppress uprisings. Syria is a potent example of what the World Bank views as an Arab country with a laundry list of unresolved social unrest and economic problems. Syrian per capita income 110 TRENDS | October 2011

is among the lowest in the Middle East, and it also has one of the youngest populations in the region. According to Blanch, Syria has a high degree of ethnic fractionalization not unlike Libya and Afghanistan. Not to mention its neighbor Iraq. “Should the Syrian regime fall, it may be hard to contain infighting among the rebel group in an ensuing power struggle. Moreover, the vested interests of power players such as Iran, Saudi Arabia, Turkey, and Israel could further complicate matters,” says Blanch. The potential power vacuum and the resulting scramble to fill it mean oil price volatility could reach never-before-seen levels. A beacon of hope is that the wealthy Gulf nation-states are now more militarily significant than most of Europe, an advantage

should military power be required to quell an ugly spat in Syria. During the Libyan campaign, for example, the UAE and Qatar both fielded larger air forces than Spain, the Netherlands, Belgium, Norway, and Denmark – even Canada. “The term ‘Arab Spring’ is not that helpful as it conflates the unique experiences of various countries, some of which have heretofore not been particularly Spring-like,” says the World Bank’s Paul Barbour in a recent essay. “For investors, … this means there is significant diversity in the types and scale of risks. Political risk in some countries may be overpriced due to investors lumping all countries in the region together.” Tourism, for example, plummeted in Bahrain but actually has risen since January in Morocco, according to Barbour. That’s not necessarily a bad development, because the petro-monarchies of the Gulf tend to distance themselves from messy political uprisings – save for Bahrain, of course. Yet they are nevertheless connected to the story of economic growth in the greater region. It is a fact that the United States directly determines more than 20 percent of Canada’s gross domestic product – whether or not Canadians even are aware of this fact. Much of the same occurs among the countries of the Middle East and North Africa where the wealthy Gulf nations-states are concerned. Consider Kuwait, for example. This tiny nation-state’s gross domestic product rebounded from the 2009 debt crisis in the Gulf, rising by 16.9 percent in 2010 to KWD35.6bn. The National Bank of Kuwait expects its home country to see GDP grow by another 27 percent this year. Of course, oil prices help, but so do massive government spending programs. “The share of the oil sector in GDP increased slightly in 2010 given high international oil prices and a modest recovery in crude oil production. Although high oil price levels are likely to keep the sector’s contribution to GDP above 50 percent, the government’s development plan should help boost activity in the non-oil

Getty/Gallo Images

COVER STORY

Oman’s GDP is expected to expand by 2.9 percent, thanks to high oil prices and increased production sector in the next few years,” according to the NBK’s recent economic report. Oman is another Arab economy with a stable outlook. Moody’s Investor Services expects Oman’s GDP to expand by 2.9 percent this year, thanks to high oil prices and increased production. “Amid wider political unrest in several countries in the Middle East and North Africa, Oman saw sporadic demonstrations in February 2011, which lasted for a short period. The government responded to the process by announcing various social measures and the political unrest in the country is unlikely to significantly affect either the economy or the growth prospects of the domestic banks,” according to Moody’s. Omani banks maintain solid levels of core liquid assets in their books, which provide them with a large cushion to cov112 TRENDS | October 2011

er short-term liabilities. These core liquid assets – which comprised cash, placements with banks, certificates of deposits, and other liquid assets – accounted for some 25 percent of total assets at the end of last year, according to Moody’s. “Omani banks have adequate earnings generating capability, partly benefiting from a low-tax regime, healthy interest-rate margins of three- to four percent and a relatively low cost base, as population concentration implies that a small branch network is needed to reach the local population,” says Moody’s. Speaking of reaching the local population, author Johnny West has written a new book based on his experience living in the Mena region during the flowering of the Arab Spring earlier this year. What he found is that the ability of the local populations of various countries to reach their fel-

low citizens was crucial in determining the path of revolution. “Sometime,” says West, “hype is justified.” “After a few months kicking around the revolutions, hanging around in the small towns and back streets of North Africa and speaking to everyone you could imagine, I’ve come to the conclusion that the original hype is correct. These are Facebook – Internet, mobile telephone, social networking – revolutions,” he says. West says that ‘Nabil,’ a professor at Kairawan University, captured the zeitgeist of many who became enthralled with the power of social networking. “I honestly think Wikileaks had something to do with our revolution,” said the professor to the West. “It’s not that people didn’t know the facts already. But now it was in front of us, in our faces. We knew that the Americans knew. And we knew that they didn’t think a lot of Ben Ali, whatever they said in public … Humiliation. It had become humiliating to have a president like Ben Ali.” At last month’s Mena Private Equity Summit in Dubai, chief executive of the Qatar First Investment Bank, Emad Mansour, took part in a roundtable called “The Investment Outlook for Mena Businesses, Private Equity, and Capital Growth,” which tackled topics such as the performance of private equity funds, the value of local funds versus global funds, and the anticipation of spend in Mena infrastructure, health, energy, and education sectors. “While the financial crisis slowed down the appetite for private equity deals, the Arab Spring will certainly create more opportunities for investments due to better corporate governance and transparency,” Mansour said. Therein lies the promise of the revolutions of early 2011: political and social movements that have for the moment appear to have lost their vigor and sense of purpose. But the fact that the leading financiers in the region can speak with renewed optimism about transparency and corporate governance suggests the seed of revolution has been planted and is awaiting another period of growth.

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Viral Views Making News TRENDS partners with Fisheye Analytics to assess the online impact of the Arab Spring in Saudi Arabia, Qatar and the UAE.

he idea of social media as a catalyst and vehicle for information in mass movements is becoming a predictable tale. Law enforcement and other authorities reluctantly shrug their shoulders in the face of Internet petitions, Facebook parties, riots, rumors and all manner of incidents across the globe. Today we are witnessing the empowering ability of social media throughout the Arab Spring. Starting with Tunisia,

114 TRENDS | October 2011

several uprisings have shaken the region provoking the fall of autocratic regimes and putting the spotlight on the grievances of the Arab people. Social media platforms such as Twitter and Facebook have become natural information channels and an important means of mobilization at the centre of the upheaval. In response, Egyptian authorities temporarily blocked the Internet and Syria has attempted to do the same. Even UK prime minister David Cameron has threatened to shut down

social media platforms following the recent riots in the UK. The flip side of the backlash against social media is that these new technologies put more information in our hands than ever before. Online discussions tend to be structured and evolve in systematic ways. Governments, with the right tools and know-how, are in a better position today than ever before to listen and assess online conversations regarding everything from civil campaigns to policyrelated sentiments.

TRENDS teamed up with Fisheye Analytics to assess the reactions to revolutions in three of the richest countries in the GCC: Saudi Arabia, Qatar and the UAE. The results of this social media and mainstream news monitoring ranges from excitement and hopes in Egypt and Tunisia, skepticism and scrutiny in Bahrain and Yemen and burgeoning anxiety about Libya and Syria. What or who drove these patterns? Measuring the social media footprints of every article from the three GCC countries gives us an insightful glimpse into state-of-the-art media analytics. Gauging the size of an issue can be crucial when that issue has implications for national security and politics. In the case of the Tunisian revolution, of the three states, Saudi Arabia was the most inspired. The news Zine El Abidine Ben Ali, the ousted Tunisian president, fled to Saudi Arabia and the announcement of his trial on June 20 inspired 4,580 news articles, blog posts, and tweets between mid-May and the end of August. Indeed, as the trial started, Saudis saw fellow Arabs holding their ruler accountable for the first time and debated intensely over whether he ought to be extradited. The issue was clearly present, but to understand the ex-

tent to which it was ‘important’ to the Saudi public, Fisheye sized the total discussion on the extradition. Approximately 20 percent, or 1,042 articles, of the total discussion on Ben Ali comprised calls for his handover. Furthermore, a social media impact analysis showed that the topic went viral as those 1,042 articles were collectively shared on Facebook, Twitter and via email and other mediums 11,802 times. Skepticism Egyptian and Tunisian revolutions were viewed positively and with hopefulness by Qataris, Saudis and Emiratis. On the other hand, the Bahrain revolution divided commentators, especially those in the surrounding states. The blogosphere was peppered with accounts of the ‘Twitter wars’ between pro-opposition activists and ‘regime loyalists’ who had heated debates that unfolded in a slew of tit-for-tat posts. Fisheye’s powerful filter confirmed that online activists were highly passionate about Bahrain, showing that the retweet ratio for the Bahrain revolution, at nine re-tweets for every original tweet – was much higher than that for the Libyan and Egyptian revolutions, which were 8-to-1 and 4-to-1 respectively. A high ra-

Why social media matters It has never been easier to create a blog or publish your own online newspaper. Media content is proliferating at an incredible rate. There are huge volumes of information and misinformation on the Internet. The challenge is to understand what is ‘important’ and what is just ‘noise’. If people react to a certain point of view – if they share it, debate it or read it, we

detect their interest. Just one article from a credible commentator can be passed on and discussed tens of thousands of times. We analyse how often each article is shared across social networks such as Facebook, how often texts of that article are copied and how often it is tweeted. This is a true measure of how “viral” or “important” an article is.

22 comments, 104 likes and 204 shares on Facebook, tweeted 3 times

One article calling for Ben Ali’s extradition received 366 comments, likes and shares on Facebook and a tweet from a Saudi Twitterer using the popular Arab Spring slogan to demand Ben Ali’s Extradition

@Maryamalkhawaja: prominent supporter of the opposition

@Marwa_Dossary regime supporter Tit-for-tat posts on Twitter were common in discussions about the contentious Bahrain revolution October 2011 | TRENDS 115

COVER STORY

Mapping of online mentions in the GCC of Iranian involvement in the Bahrain revolution tio is symptomatic of Twitter discussions that are complex and potentially contentious as individuals propose tweets to others alongside their own consenting or dissenting opinions, as opposed to merely relaying news using the medium. Heavy scrutiny of the events in Bahrain also produced a clear line of speculation that Iran had been a motivating force in the revolution. To ascertain how dominant this trend was, we used detailed search terms to identify all articles that alluded to Iran’s involvement. The argument that Iran had everything to gain from a change of regime in Bahrain acquired an extremely strong following with the topic overshadowing general coverage on the revolution by a factor of 5.7 (52,892 articles discussed possible Iranian meddling compared to 9,198 that generally discussed the revolution) and being shared 116 TRENDS | October 2011

across all social networks more than half a million times: No doubt highly viral and worth addressing. Anxiety and fear An examination of online discussions on the Libyan revolution again produced very different results. This time a current of anxiety underlined many Internet conversations. Qataris were exceptionally vocal. This was no surprise as Qatar has been at the forefront of the push in the Arab League to implement a No Fly Zone over Libya. However, throughout the three countries, sympathy for the Libyan rebels was widely shared. Saudi Facebookers even set up a Facebook page entitled “Saudis for Libya” that quickly garnered 5,950 likes. As we digged further, alerts appeared on the growing prominence of ‘NATO’ in

Saudis expressed their support for Libyan protestors and rebel forces on Facebook

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“NATO is hijacking the Arab Spring.” A blogger slams NATO’s actions in Libya

Negative sentiment trends in online news, blogs and social media online discussions. NATO’s involvement was found to be heavily criticized. Plotting the sentiment of all the articles that mentioned NATO’s involvement from the three GCC states, it became clear that each time there were reports of civilian casualties there was a negative dip in sentiment. This might explain why Arab government had not been too vocal in supporting the Libya campaign. A total of 24,825 articles criticizing NATO’s involvement in the revolution from Qatar, Saudi Arabia and the UAE were shared and commented on just over 350,000 times. This significant virality, higher than in the two earlier examples shown in this article, underlines the extreme anxiety and scrutiny gulf citizens are directing at the situation. However, by far the most dominant theme surrounding Libya, and increasingly Syria, is the concern that the unrest will drag on indefinitely and possibly fragment into sectarian clashes. 118 TRENDS | October 2011

Going by the number of mentions of the apparently unending quagmire that is the Libyan revolution, netizens are disproportionately discussing this above all else. 83 percent of all online mentions of the Libyan uprising in Qatar, Saudi Arabia and the UAE were related to the ‘war dragging on’. And internet discussions continue to flare up in peak months after the first protests. From Tunisia to Bahrain to Libya, opinions among Qatari, Saudi and Emirati Internet users were varied and divergent. Fisheye found there has been no one singular established perception of the Arab Spring, but rather a multi-faceted confluence of ideas with many conflicting opinions and sentiments. Understanding not only the major trends in these discussions, but also how much each is commented on, shared or supported is key to effectively harnessing the huge volumes of information at hand.

Discussion of the Libyan war is dragging on, compared to total discussions on the Libyan revolution

The utmost concern for bloggers and social media activists in the three GCC states is the apparently endless unrest in Libya About Fisheye Analytics A media intelligence company, Fisheye Analytics specializes in analyzing all media – traditional news, social networks, videos and TV – in order to know how the ideas that impact you are spreading. They build bespoke media analytics systems for corporates, governments and non-profits worldwide. Sign up for a free trial at fisheyeanalytics.com Fisheye Analytics is represented in the Mena region by dotmena, a Mediaquest company.

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More in the Pipeline With an ever-increasing population, fuel efficiency has become a major objective for energy companies. TRENDS looks at what’s in store. By Syed Hussain Dubai

he energy conservation law states that energy can neither be created nor destroyed – it can only be transformed. Much of this transformation takes place from clean to unclean type of energy, which has resulted in the pollution of our atmosphere and natural resources. Efforts are under way worldwide to contain the harmful effects of energy usage, especially reducing the carbon imprint. According to Paris-based International Energy Agency, achieving a 50 percent reduction of CO2 emissions by 2050 will require an investment of $316trn, 17 percent more than “business as usual.” However, smart grids could reduce CO2 emis-

sions by 0.9 to 2.2 Gt per year by 2050, said IEA analysis. In 2030, 10 percent of global agricultural and forestry residues could provide roughly 50 percent of the biofuel demand forecast in the IEA World Energy Outlook 2009 450 Scenario, which looks at what needs to be done in the energy sector to keep the global temperature rise at around 2°C above pre-industrial levels, it said. Some of the hard facts reported by the energy Agency are: s %VERY YEAR OF DELAY IN GLOBAL EFFORTS TO mitigate climate change adds an extra $500bn to the clean energy investment needed by 2030. s 4RANSPORT ACCOUNTS FOR ABOUT ONE QUAR-

ter of global energy use and energy-related CO2 emissions. In the absence of new policies, transport energy use and related CO2 emissions are projected to increase by nearly 50 percent by 2030 and by more than 80 percent by 2050. s .EARLY PERCENT OF ELECTRICITY IS GENerated from fossil fuels: coal (42 percent of generated power globally in 2007); gas (21 percent); hydro (16 percent); nuclear (14 percent); oil (six percent); and nonhydro-renewables (two percent). As a result, electricity accounts for 40 percent of global energy-related CO2 emissions; these emissions will grow by 58 percent globally by 2030 unless new policy measures are introduced. October 2011 | TRENDS 123

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Energy investment has plunged. Companies are cutting back on spending on refineries s )NDUSTRY ACCOUNTS FOR APPROXIMATELY one-third of global final energy use and almost 40 percent of total energy-related CO2 emissions. Over recent decades, industrial energy efficiency has improved and CO2 intensity declined in many sectors, but this progress has been offset by growing industrial production worldwide. Projections of future energy use and emissions show that without decisive action, these trends will continue s %NERGY INVESTMENT WORLDWIDE HAS plunged over the past year in the face of a tougher financing environment, weakening final demand for energy and lower cash flow. All these factors stem from the financial and economic crisis. Energy companies are drilling fewer oil and gas wells, and cutting back on spending on refineries, pipelines and power stations. 124 TRENDS | October 2011

Many ongoing projects have been slowed and a number of planned projects have been postponed or cancelled. Businesses and households are spending less on new, more efficient energy-using appliances, equipment and vehicles, with important knock-on effects for the efficiency of energy use in the long term s )NFORMATION AND COMMUNICATION TECHnologies and consumer electronics now account for 15 percent of global residenTIAL ELECTRICITY CONSUMPTION 4HE )%! EStimates that energy use by these devices will double by 2022 and increase threefold by 2030 s 4HE WORLD S CAR mEET IS EXPECTED TO TRIPLE by 2050 with 80 percent of this growth occurring in developing economies s %XCLUDING TRADITIONAL BIOMASS USE the share of renewable energy in glo-

bal primary energy demand is projected to climb from seven percent in 2006 to 10 percent by 2030. World renewablesbased electricity generation â&#x20AC;&#x201C; mostly hydro and wind â&#x20AC;&#x201C; is projected to rise from 18 percent in 2006 to 23 percent in 2030 s #HINA AND )NDIA WILL ACCOUNT FOR PERcent of the increase in global primary energy demand by 2030, with both countries more than doubling their energy use Besides some of the alarming figures put forward by International Energy Agency, the energy sector has been facing a decline in investment for projects focusing on exploring new forms of energy due to the liquidity deficit experienced by much of the developed economies. 4HE 53 BASED %NERGY )NFORMAtion Administration said that economic growth assumptions have been lowered substantially and the forecast assumed THAT 53 REAL GROSS DOMESTIC PRODUCT (GDP) is likely to grow by 1.5 percent this year and 1.9 percent next year, compared with 2.4 percent and 2.6 percent, respectively, in the previous report released earlier this year. World oil consumption weighted real GDP will grow by 3.1 percent and 3.8 percent in 2011 and 2012, respectively, compared with 3.4 percent and 4.1 percent in the last outlook report BY THE 53 GROUP With weaker economic growth and lower petroleum consumption growth, %)! EXPECTS THE 53 AVERAGE RElNER ACQUIsition cost of crude oil to rise from an average of $100 per barrel in 2011 to $103 per barrel in 2012, compared with an increase to $107 per barrel in 2012 in the earlier report. Regular grade gasoline retail prices fell by 40 cents per gallon from their peak this year of $3.97 per gallon on May 9 to $3.57 per gallon on June 27 following a decline in crude oil prices. Gasoline retail prices stabilized in July and August with weekly retail prices averaging between $3.58 per gallon and $3.71 per gallon, but are projected to fall to an average $3.47 per gallon in the fourth quarter of 2011 after refiners switch production

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Improving energy efficiency is a powerful strategy for energy supply, climate change mitigation. . . from summer grade gasoline to lower cost winter grade gasoline. .ATURAL GAS WORKING INVENTORIES ENDED !UGUST AT TRILLION CUBIC FEET 4CF about five percent, or 144 billion cubic feet (Bcf), below the 2010 end of August level. EIA expects that working natural gas INVENTORIES WILL APPROACH LAST YEAR S HIGH LEVELS BY THE END OF THIS YEAR S INJECTION season. Global coal supply disruptions, particularly in Australia, and growing deMAND IN #HINA HAVE HELPED BOOST 53 coal exports for the first half of 2011 to a 29- year high of 54 million short tons (MMst), an increase of 35 percent compared to the same period in 2010 and double 2009 levels. EIA expects coal exports to weaken, totaling 45 MMst in the second half of 2011 and 87 MMst in 2012. 126 TRENDS | October 2011

However, in the medium to long-term the energy demand will increase and pose new challenges. CEO of Petrobras, Brazil, JosĂŠ Sergio Gabrielli de Azevedo, said the long-term prospect of increasing energy demand is very challenging. It can contribute to high production costs and complex geopolitical issues, thus reinforcing the trend of rising prices and volatility. On the other hand, rising demand creates incentives for the development of new and promising alternative technologies. Indeed, the persistent quest for access to energy sources and energy security shapes national policies. Demand for alternative energy is growing at a fast pace, although from a small base, and the pursuit of a low carbon economy is likely to escalate further as a result of increasing social pressure.

â&#x20AC;&#x153;Challenges associated with energy production and consumption prompt the human mind to be creative. At the core of current international negotiations to fight climate change, the world energy system stands out, as it is responsible for 75 percent of the total greenhouse gas emissions,â&#x20AC;? he said, writing for a World Economic Forum report. 4HE GLOBAL POPULATION WHICH IS EXpected to grow from 6.6 billion today to more than eight billion in the next 25 years, is likely to keep the energy-demand engine running. With rising incomes, people will want access to energy services, including heating and cooling, electricity and mobilITY 0ROVIDING THESE SERVICES TO THE WORLD S growing population is challenging enough, but doing so while reducing GHG emissions and increasing the security of energy supply multiplies that challenge. Improving energy efficiency is a powerful strategy for energy supply, climate change mitigation and energy security. Although becoming more energy efficient is less tangible than exploring deep in the ocean for oil and gas, building power plants or designing new forms of renewable energy, increasing the efficiency of energy use addresses concerns about reliable, low-carbon energy as surely as any of these other investments. In fact, using less energy to complete the same task reduces GHG emissions and is often the least expensive way to do so. With respect to energy security, efficiency can be implemented locally and regionally and can be easily accomplished by rich and poor countries alike. Moreover, greater efficiency in their own operations is a major objective of energy companies themselves. Energy efficiency is sometimes described as the â&#x20AC;&#x153;fifth fuelâ&#x20AC;?, in addition to oil and gas, coal, nuclear and renewables. â&#x20AC;&#x153;Energy efficiency will be the single most important source of energy availaBLE TO THE WORLD S ECONOMIES IN THE YEARS TO COME v WROTE 2EX 4ILLERSON IN HIS PERSPECTIVE %NERGY %FlCIENCY n 5NLEASHING the Power of Ingenuity.

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COVER STORY

128 TRENDS | October 2011

Running on Empty? The finite fresh water resources in the region are infinitely stressed due to climate change and inefficient use, making for an uncertain future. By Syed Hussain

Dubai

ater is life, and life is water. The old adage reflects an absolute truth, which may or may not change in the future. The use of water is so necessary people generally do not realize the exceptional difficulties Earth may face in the future due to the continuous decline of fresh water sources. Global research groups have compiled data, which might turn into a nightmare if the right steps are not taken in unison. As one of the worldâ&#x20AC;&#x2122;s driest regions, water scarcity critically affects the Mena regionâ&#x20AC;&#x2122;s socio-economic condition. The amount of water available per person is expected to fall by 2050 by more than half due to growth and climate change

trends, says a World Economic Forum report. With agriculture accounting for more than 85 percent of freshwater withdrawals and energy-intensive desalination being the only scalable source of water supply in the region, more integrated approaches to water management are required, particularly in linking water scarcity to food and energy security. The impact of declining quality and quantity of water will be increasingly severe in the forthcoming years. Water is so heavily interlinked with other parts of the value creation system (in particular through agriculture, food and energy production) that water scarcity is a fundamental systemic risk for both businesses and societies. The way in which decision-

makers manage this risk will have a direct impact on economic growth and the socio-economic well-being of societies as competition for water from various sectors is set to increase, it said. Supply of water for domestic and industrial use comes from existing natural freshwater resources and/or from desalination or the reuse of waste-water and overall demand for water is driven by rapid economic and population growth. This leads to competing water requirements for industrial, energy and agricultural production as well as household use. The WEF report says that current trends will force tough choices and trade-offs on how to manage water resources, testing the ability of governments in the MidOctober 2011 | TRENDS 129

Reuters

COVER STORY

The price of water in the Mena region is more often well below the natural resource value dle East and North Africa region to counteract a very real and increasing risk to growth and socio-economic stability. The direct impact of water scarcity is likely to lead to an increasing cost of water, lower quality of life and negative health outcomes, depressed agricultural yields and shortages of food, constraints on water-dependent industrial and energy activities and environmental damage. The indirect impact raises more serious concerns and leads to domestic social tensions over water distribution, geopolitical tensions over access to trans-border water resources, economic and environmental costs of maintaining water supply and decreasing energy security through energy needs for maintaining water supply. According to World Bank estimates, the Mena region has a per capita water 130 TRENDS | October 2011

availability of around 1,100 cubic meters per year (compared to a worldwide average of 7,000) making it one of the most water scarce regions in the world. While almost all countries in the region face water scarcity, the Mena region is exposed to these challenges in different ways: countries such as Iran, Lebanon or Morocco have varying water supplies and mainly face an internal distribution challenge; hyper-arid countries, particularly in the GCC, face extreme renewable freshwater shortages while trying to support extremely high levels of water consumption through the desalination of sea water; and countries such as Iraq or Egypt rely on transboundary water bodies that require international cooperation for water resource management.

Against this, the region has to sustain a rapidly growing population with increasingly water-intensive consumption habits. At current levels the MENA region has to sustain almost five percent of the worldâ&#x20AC;&#x2122;s population with less than one percent of the worldâ&#x20AC;&#x2122;s renewable freshwater resources. Combined with robust economic and demographic growth, increasing living standards and urbanization, these trends directly translate into rapidly growing water consumption and a further reduction of water resources. Looking at the global figures worldwide, about 97.5 percent of all water is in oceans. Only 2.5 percent is fresh water. Of that fresh water about 68 percent is in glaciers, about 30 percent is ground water. The rest is to be found as permafrost, atmospheric humidity, and surface water in the form of rivers, lakes, soil moisture, plants and animals. Professor at National Defense University and Georgetown University in Washington, DC, Dr Paul Sullivan, said in a research paper that Mena region has the highest percentage extraction of renewable freshwater by far than any other region, and the drier parts of the GCC are some of the highest on the planet. There is very little renewable water in the region and the demands for water are increasing rapidly. The price of water in the Mena is more often than not well below the natural resource value of the water, and often it is overused and wasted due to its relatively low cost. However, the use of water in the GCC has been improving in some areas with improved irrigation techniques, but a lot more needs to be done, he wrote. The massive changes that have happened in places such as Saudi Arabia, the UAE, Qatar, and the likes have been astonishing and much is to be admired, but much water was also wasted along the way in some perpetually water-stressed areas. It can seem to the outsider somewhat odd that for the driest of the GCC countries the largest use of water has been in agriculture. Reusing pol-

Grapheast/ AFP

COVER STORY

The UAE – a country not known for its downpours – has attempted seeding clouds to make it rain luted water is possible, and many in the GCC are taking the importance of reusing water quite seriously. This has been one very vital step forward. Saudi Arabia and others in the region have also built small dams to capture whatever runoff there might be in some places. In a less dry climate, such dams might capture enough to make a difference. In Saudi Arabia only a very small proportion of its water needs are found in this way. Nearly 90 percent of the surface water to be found in the Mena region is found in reservoirs, but most of this is not in the GCC region, said Prof Sullivan. There are no major rivers or rain currents in most of the area to make this happen, except in Iraq. However, Iraq relies on Turkey and others for about 50 percent of its water. Making new water is another solu132 TRENDS | October 2011

tion to the problems the GCC faces. The UAE has even attempted seeding clouds to make it rain in a country not exactly known for downpours. One of the most important trends in the GCC region has been in desalinization. This is one way to turn the seawater into usable fresh water. It is energy intensive and expensive. Ways to install energy-efficient desalination units have to be found as the region faces fast-depleting reserves of underground water. The Intergovernmental Panel on Climate Change anticipates a further significant reduction of water levels in the region. Their estimates suggest rainfall declining by 10 percent to 25 percent, run-off declining by 10 percent to 40 percent and water loss through evaporation increasing by five percent to 20 percent. These trends could make the

amount of water available per person in the MENA region fall by more than half by 2050. The Mena region is therefore particularly sensitive to the way water is managed and more vulnerable to water risks than other regions. World Bank estimates that inefficient water management already costs Mena economies 0.5 percent and 2.5 percent of GDP every year, and the trends suggest a rapid increase of this risk in years to come. Responding to the challenges will impose tough choices on water allocation and new levels of cooperation between different stakeholders of the water system. Governments in the region have to work more toward ensuring a smooth supply of fresh water. However, the impact of policy in one nation can have an impact on the water security of others. There is a need for governance at all levels – global, regional, national, local, as well as at the catchment level – plus a need for links between them all.

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COVER STORY

134 TRENDS | October 2011

Injection of Funds Prescribed Demand for high-quality healthcare in the Middle East sees immense investment opportunities in the region. TRENDS investigates. By Syed Hussain Dubai

aughter is the best medicine says a recent report compiled by researchers at Oxford University. People feel less pain after a good laugh because it causes the body to release chemicals that act as a natural painkiller, it said. Healthy people are generally happy people and vice versa, but the challenging issues faced by the healthcare sector globally are no laughing matter. When it comes to the GCC, the healthcare system is not as challenging as in the wider Middle East, but itâ&#x20AC;&#x2122;s hungry for investment. In its study consultancy firm Grant Thornton said the Middle East is likely to face an unprecedented surge in demand for healthcare products

and services in the next few years. Socioeconomic development, characterized by increasing income and access to modern amenities and services, has led to changes in the populationâ&#x20AC;&#x2122;s nutritional and lifestyle habits, increasing the prevalence of lifestyle-related medical conditions such as obesity, heart disease and diabetes. Also, as living standards improve, healthcare providers (mainly governments) are faced with heightened expectations for more, better quality services, it said. Many countries in the region are setting standards in providing the very best healthcare service, not only for the growing local population but also for expatriate workers and patients from across the

region seeking the best medical care, the study said. Adding that given the current economic situation, there does not appear to be any reduction in the appetite for, nor supply of, capital for healthcare-related projects in the region. It seems that investors are willing to bet that the demographic, economic and social forces driving demand for high-quality healthcare in the Middle East are unstoppable. The regionâ&#x20AC;&#x2122;s healthcare market is expected to continue growing over the next few years, compared to the low growth predicted in the mature markets of the US and Europe. Reduced public investment at home and a hostile environment of healthcare cost containment is making the Middle October 2011 | TRENDS 135

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COVER STORY

Healthcare spending has risen in nominal and per capita terms in nearly all countries in the region East more attractive to Western healthcare companies, says the study released in 2009. The region offers immense investment opportunities because the public sector healthcare facilities in the Middle East are finding it increasingly difficult to keep up with the growing demands of their people. In Kuwait, the Ministry of Health said nearly 1.6 million patients had switched from public hospitals to private hospitals in 2007 because of the poor quality at governmentrun hospitals, said Grant Thornton. According to Dubai Health Care City officials, Arabian Gulf citizens spend an estimated $25bn a year receiving treatment elsewhere and they are the life and blood of medical tourism markets such as Singapore and India. The residents in the region traveling abroad for medical treatment is supposedly 136 TRENDS | October 2011

due to the relatively rich countries such as Saudi Arabia, the UAE and Kuwait spend a small proportion of their GDPs on healthcare. While this proportion rose in most countries between 2000 and 2006, from 2.3 percent to 4.3 percent in Qatar, for instance, and 5.6 percent to 6.3 percent in Egypt, most of the countries that spend the lowest on healthcare actually saw this proportion fall, revealed the study. Kuwait, for example, spent just 2.2 percent of GDP on healthcare in 2006, down from 3.1 percent in 2000. However these figures do not reflect absolute reductions in healthcare investment. Healthcare spending has, in fact, risen in nominal and per capita terms in nearly all the countries in the region. In many countries this increase was combined with high rates of economic growth, such that health

spending was unable to keep pace. For instance, in Kuwait, per capita health spending actually increased by 52 per cent between 2000 and 2006, from $523 to $796, but in the same period fell by 29 per cent as a proportion of GDP. Looking beyond the GCC, Iraqâ&#x20AC;&#x2122;s healthcare system has almost collapsed after the fall of Saddam, while the sector is under stress and its future is unclear in Egypt, Tunisia, Libya and Syria. A World Health Organization (WHO) report listed the major health issues faced by the people around the world. Among them malnutrition remains common in many parts of the world. According to recent estimates, 115 million children under five years of age worldwide are underweight. In Africa, there was an increase in the number of underweight children â&#x20AC;&#x201C; from 24 million in 1990 to 30 million in 2010. In Asia, the number of underweight children was estimated to be even larger at around 71 million in 2010. About 178 million children globally are too short for their age group (stunted) compared to the WHO child growth standards, with such stunting being a key indicator of chronic malnutrition. As growth slows down, brain development lags behind, and as a result stunted children are more likely to learn poorly. Stunting rates among children are highest in Africa and Asia. The WHO report said that child mortality continues to decline worldwide. The total number of deaths of children under five years old fell from 12.4 million in 1990 to 8.1 million in 2009, but 40 percent of all deaths among that group occurred in the neonatal period in 2009. Pneumonia and diarrhoeal diseases were the two biggest killers accounting for 18 percent and 15 percent of all deaths respectively in 2008. Most child deaths due to pneumonia could be avoided if effective interventions were implemented on a broad scale and reached the most vulnerable populations, it said. The most recent estimates suggest that the number of women dying as a result of complications during pregnancy and childbirth has decreased by 34 percent â&#x20AC;&#x201C; from 546,000 in 1990 to 358,000 in 2008. Al-

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Reuters

COVER STORY

“By 2025 treatment demand will rise by 240 percent and costs will rise fivefold to US$60bn” though such progress is notable, the annual rate of decline of 2.3 percent is less than half of the 5.5 percent needed to achieve the target of reducing the maternal mortality ratio by three quarters between 1990 and 2015. Almost all maternal deaths (99 percent) in 2008 occurred in developing countries. A growing number of countries have recorded decreases in the number of confirmed cases of malaria and/or reported admissions and deaths since 2000. National control efforts have resulted in a reduction in the estimated number of deaths from almost one million in 2000 to 781,000 in 2009. The estimated number of cases of malaria rose from 233 million in 2000 to 244 million in 2005, but decreased to 225 million in 2009. A total of 11 countries and one area in the WHO African region showed a reduction of more than 50 percent 138 TRENDS | October 2011

in either confirmed malaria cases or malaria admissions and deaths between 2000 and 2009. In other WHO regions, the number of reported cases of confirmed malaria in 32 countries decreased by more than 50 percent, says the report released this year. The annual global number of new cases of tuberculosis continues to increase slightly as slow reductions in incidence rates per capita are offset by population increases. In 2009 prevalence was estimated at 12 to 16 million cases, with an estimated 9.4 million new cases. An estimated 1.3 million HIVnegative people died from tuberculosis in 2009. Mortality due to this disease has fallen by more than a third since 1990 and if the current rate of decline is sustained at the global level, the WHO’s Millennium Development targets of halving tuberculosis prevalence and deaths by 2015 could be achieved.

The number of people living with HIV worldwide continues to grow, reaching an estimated 33.3 million people in 2009, 23 percent higher than in 1999. In 2009 there were an estimated 2.6 million new infections and 1.8 million HIV/AIDSrelated deaths. In 2009 the estimated number of new HIV infections was 19 percent lower than in 1999. The increasing number of people living with HIV reflects in part the lifeprolonging effects of antiretroviral therapy (ART). As of December 2009 ART was available to more than five million people in low-income and middle-income countries. An additional 700,000 people received treatment in high-income countries in 2009, bringing the global total to almost six million. One of the trends that is fast-catching in the healthcare sector is mHealth. A World Economic Forum report said one of the most promising opportunities for positive socioeconomic change lie in the scaling of mobile health and mobile financial services (MFS). In fact, more people today have access to a mobile phone than to clean water or the electric grid. By 2012 it is estimated 1.7 billion people will have mobile phones but no bank account. Of those individuals, approximately one billion will also lack access to healthcare systems. Providing services in an affordable and sustainable manner for these individuals is a significant challenge. While reduced costs and advances in network coverage are accelerating, the underlying business models to sustain this growth are unclear, the WEF report said. Predicting the future, Grant Thornton quoted McKinsey saying that by 2025 the need for hospital beds will more than double to about 165,000, and “treatment demand” will rise by 240 percent. Healthcare costs will rise fivefold to US$60bn. In fact, a potent combination of high population growth, rapid economic growth and openness to global capital, expertise and innovation will make the Middle East a major growth centre for the healthcare market over the next few years.

PERSPECTIVES

Of Fathers and Sons As Colonel Muammar Gaddafi’s regime crumbles, few await a new era in Libya more anxiously than the novelist Hisham Matar. By Karen Thomas London

ike every other Libyan political exile, novelist Hisham Matar – born in New York, raised in Cairo and based in London – has watched events unfold first with hope, then with fear and now, finally, with relief. Matar is an internationally acclaimed novelist. But Gaddafi’s Libya cast a long, dark shadow over his family. When Matar was just 19 his father disappeared in mysterious circumstances. Now, as the ousted regime spills its secrets at last, Matar hopes to find out what happened to his father, Jaballa Matar. In 1990, Jaballa Matar was a former diplomat turned businessman who had 140 TRENDS | October 2011

fallen out with the Gaddafi regime in the late 1970s after resigning from Libya’s permanent mission to the United Nations in New York. The son of an Ajdabiya trader who had fought against Italian colonial rule, Jaballa campaigned for political change, joining the National Front for the Salvation of Libya. In 1979, when Matar was just nine, the family fled Libya for exile in Cairo. There, they were safe for a while: relations between Egypt and Libya were hostile in the 1970s and 1980s, but times change and the Gaddafi regime had long tentacles. In 1989 Egyptian president Hosni Mubarak invited

Gaddafi to Cairo and agreed to swap dissidents. On the afternoon of March 12, 1990, Jaballa Matar went to answer the door of the family home in Cairo and vanished. Two years later, in a letter smuggled out of Tripoli’s brutal Abu Salim prison, he wrote to tell his wife and two sons that Egyptian intelligence agents had bundled him into a car and onto a plane bound for Libya. A second letter and a taped message arrived in 1995. After that came silence: no letters, no tapes, no news. In 1996 the Gaddafi regime shot dead an estimated 1,200 political prisoners after

October 2011 | TRENDS 141

PERSPECTIVES

“The success of the revolution will be an opportunity to find out [about] my father” a riot at Abu Salim. For years, the Matar family feared the worst. Hisham Matar moved from Cairo to London, studied, found work as an architect and married. But he was always restless, his father’s absence ever-present, never resolved. Eventually he started to write poems that explored his feelings of uncertainty and loss. That early poetry evolved into a best-selling debut novel. The Country of Men explores the way a father’s political activities affect his family, seen through the eyes of a 142 TRENDS | October 2011

small boy aged nine. The novel was a worldwide success, translated from English into 22 languages and nominated for the 2006 Man Booker Prize. This year, Matar has published his second novel. Anatomy of a Disappearance delves even deeper into absence, loss and the secret lives of families. In it, a teenage boy struggles to deal with losing his father, who is abducted from a mystery woman’s apartment in Switzerland. The more Nouri, 14, delves into his father’s disappearance, the less he realises he knows about his

father’s life. Both novels deal with secrets, evasions and unanswered questions. But recent events show that life can deliver more twists than fiction. Shortly after Matar finished writing Anatomy of a Disappearance, a witness came forward to say that his father may still be alive. The former political prisoner claimed to have seen Jaballa Matar in 2002. The authorities had moved Jaballa from Abu Salim months before the 1996 massacre to another Tripoli jail. As the dust settles on Gaddafi’s regime, Matar hopes – at last – to find out his father’s fate. “All of my time and thinking has been consumed by the events in Libya,” Matar admits. “For me, emotionally, my father

and my country are deeply intertwined. The success of the revolution will be an opportunity to find out what happened to my father and to engage with a place that has meant so much to me, at last.” Anatomy of a Disappearance is and is not about his father, Matar acknowledges. While the characters and the events are fictional, the book taps into its author’s life, feelings and memories. “Writing is a balance,” Matar says. “It’s not authentic to push away the idea that life and art are linked. Emotionally, writing must draw from your own experiences. But I wanted to write about loss, about disappearance, in a way that meant something to readers who had not experienced those things. “Fiction is the extent of what an author can say: no less and no more... It takes time for personal experiences to brew and to transform themselves into ideas or into an aesthetic that goes beyond individual experience.” Matar’s grandfather, Jaddi Hamed, was a well-known folk poet who joined the resistance movement against Mussolini and survived a bullet wound. But it never occurred to the young Matar to become a writer himself. “My grandfather took part in the Libyan revolution, where poetry played an important role as a means of popular self-expression,” he says. “And I grew up in a family that had a great love for books and reading and took great delight in language. [But] there was no example in my family of anyone being a writer in the sense of making money from getting published. I had the sense that writing was like drawing breath; that to work as a writer would be as unlikely as getting a job breathing.” He dabbled in music, studied, became an architect but continued to feel unsettled. After writing poetry for several years, he completed his first novel in 2000. But throughout it all, his sense of displacement never wavered. This year’s events may bring some resolution, at last. “The condition of being an exile is an

active one,” Matar says. “Things change so fast, it leaves you with a landscape that exists only in your imagination. Your sense of your own country shifts, then shifts again. The events in Libya make so many things possible now that seemed impossible before – ideas of returning, perhaps of opening a school.” For Matar, Gaddafi represented another kind of father: a father who thought he knew best for his loved-ones, whose distorted view equated fatherly love with absolute control. Gaddafi was prepared to slaughter his own people ‘zenga zenga’, alley by alley, Matar says, rather than surrender his authority and power. “I don’t think you can be a dictator without feeling love for your people,

yet at the same time feeling contempt for them,” he says. “Like the Italians, our former colonial masters, we Libyans are not very interested in society: we care only about family. And the thing about families is that you either love them or you hate them. “The best thing about getting rid of Gaddafi is that we will finally think of ourselves as a society and not as a family. The best hope for Libya’s future is that we get to hold these people to account – that we put them on trial. The process of justice would be educational in itself and the Libyan people deserve that chance. “We deserve to see our tyrants judged and to conduct that process with honour.” October 2011 | TRENDS 143

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render the best service to our clientele by supplying only watches of the highest class.” Lange still upholds this commitment to the ethics of the artisan, because this alone creates a little piece of eternity in an ever-changing world. Indeed, A. Lange & Söhne timepieces still feature quality hallmarks that were once the norm in highend watch making, but which were

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144 TRENDS | October 2011

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LETTERS TO THE EDITOR LETTER OF THE MONTH

18 rue de Varize – 75016 Paris Tel: +(33) 1 47 66 46 00 Fax: +(33) 1 43 80 73 62 www.trendsmagazine.net E-mail: editor@trendsmagazine.net Founder: Yasser Hawari

Family values Your cover story Family Misfortunes about one of the most high profile financial misappropriations was timely and well researched. The story exposes how vulnerable family business can be if there is no proper accountability and transparency. Although family businesses are quite successful across the globe, and safe and immune from the swinging stock markets, family-owned companies can at times be risky due to adventurous behavior of some family members. When family members are part of a business, they generally have inside information about the functioning of the company. In this scenario, if a family member on the board opts to bring the company down, intentionally or unintentionally, it is quite easy. The classified corporate information is likely to be used for personal gains or to exercise influence within the family business. To avoid disputes such as between the Saad Group and Ahmad Hamad Al-Gosaibi & Bros. Co., the top executives should look into the accounts and any irregularities should be informed to the owners immediately.

Mike Levey (Dubai, UAE) Dirty politics Re: Doom and Gloom in Kuwait. While good politics and politicians make a country, dirty politics can destroy even a healthy and wealthy country. Kuwait has proved to be quite a stable and peaceful country for a long time, but the recent infightings are a cause of concern, not only for its neighbors, but for distant powerhouses such as the United States as well. Kuwait is a major producer of crude oil, and any sign of instability is likely to send shivers around the international markets. The politicians have to exercise their rights with caution and brainstorm to put aside trivial issues and plan about the long-term future of their country. They should learn from the mistakes of the US. The political deadlock between Republicans and Democrats over raising the debt ceiling brought shame to the US Congress and nothing else.

Dan Rockworthl (Kuwait) Fashionable hospitality Re: Hotel Fashionista. The entry of hotels Have something to say? Email us your thoughts at editor@trendsmagazine.net; send a letter to: The Editor, TRENDS, GCC: DUBAI MEDIA CITY, AL THURAYA TOWER 2 OFFICE 2402/05, DUBAI, U.A.E. TEL: +(971) 4 391 0760 – FAX: +(971) 4 390 8737

designed by international fashion houses such as Missoni and Armani in the Gulf region brings glad tidings to the tourism sector of this region. The signature lifestyle hotels will help attract tourists from across the world experience the luxury. The mix of Arab hospitality and global design is, indeed, a recipe for success.

Ahmed Al-Rawi (Qatar) Gender issues Re: Beginning of the End of the Gender Revolution. The revolution witnessed in Egypt is not just a political revolution, but also a social, economic and cultural revolution. Hopefully, the change in regime is good news for women in Egypt. In the name of Islam, some may suggest women can not lead a country, but that’s wrong. Remember Benazir Bhutto who led Pakistan for years? Once the elected government comes to power in Egypt, more women are expected to be part of the ministries and other key departments. This will be an inspiring feat for the entire Arab world. I hope the historical changes that are taking place in the Middle East and North Africa will provide immense opportunities to the largely neglected group in this region – women.

Rayyan Khan (Oman)

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September 2011 | TRENDS 145

THE LAST WORD WITH JP MORGAN The three-year-old Al Hilal Bank, with its unique operating model, became profitable in 2010 despite the challenging economic environment. Mohamed Jamil Berro, CEO of the Abu Dhabibased Islamic bank, speaks with Atique Naqvi of TRENDS about the smooth sailing of his bank.

here are several Islamic banks in the region, so what were the reasons behind launching Al Hilal Bank? The idea for the bank was first floated in 2007, when the regional and global economy was performing really well. Then Abu Dhabi has its 2030 vision and it was a time of growth; also the size of the market was growing quite rapidly. There were four basic reasons behind launching a new bank. First was the participation in the realization of the Abu Dhabi 2030 vision. Secondly, there was a need for a financial institution that could contribute to the growth of Islamic banking in the country and region. Thirdly, the demand for finance from businesses was increasing and the market needed an Islamic institution that can cater to the needs of the ever-growing firms. Last, there were gaps in products and services in the Islamic finance sector, which a new bank, like ours, would be able to bridge. Even global banks such as HSBC and Citibank have Islamic windows or subsidiaries. Are you more Islamic than them? I cannot say that we are more Islamic than them, because all Islamic banks and even subsidiaries have a panel of well-respected shariâ&#x20AC;&#x2122;a scholars, who oversee the operations of such banks. Like others, we have a panel of shariâ&#x20AC;&#x2122;a experts as well. How has Al Hilal Bank grown since its launch? Although the idea of the bank was float146 TRENDS | October 2011

ed in 2007, we launched our operations in June 2008. It was a very difficult time. In September 2008, after the collapse of Lehman Brothers, the global recession became a reality and even regional financial institutions faced liquidity problems. Things were looking really scary, globally and locally, in late 2008 and early 2009. We have grown a lot since the launch to become a major player in the market. We are number 11 among the 23 local banks. We became a profitable bank in 2010 and launched operations in Kazakhstan last year and we also launched our insurance arm Al Hilal Takaful in 2009. As a three-year-old bank we have done a lot and made a name for ourselves in the market. Now corporate banks and customers recognize our bank as a strong player in the market. Who are the major investors in Al Hilal? The Abu Dhabi government is the major investor. It has invested through Abu Dhabi Investment Council. We are not looking to raise funds through IPOs as I do not subscribe to that view regarding Al Hilal. Why is the Islamic banking and finance sector in the GCC not as sophisticated as the sector in Malaysia? There is nothing that is stopping the sector in this region to achieve that, but you have to keep in mind that Islamic banking and finance is a relatively new sector for this region. Malaysia started much earlier than us and the sector there has evolved into a much more mature section of the economy. However, we are catching up fast. The sec-

tor is growing rapidly in the UAE as we have people equipped with the right skills, technology and services, but what we need is a little more time to evolve into a sophisticated Islamic banking market. Your bank started operations during difficult times, how did you manage to sail through? In my view we were lucky to have launched the bank just before the crisis hit economies locally and globally. If we had launched earlier, then probably weâ&#x20AC;&#x2122;d be exposed to the more toxic side of the market, and if we had planned to launch the bank later then we might have postponed it due to the challenging market conditions. Strategically, we had a good operating model. We entered the market when other banks were leaving the market as they were struggling to find solutions to the problems. When the other banks got busy with themselves and started looking inward, Al Hilal was out in the market looking outward and tapped into the available opportunities. What is your area of focus and what percentage of your business comes from corporate and retail banking? We are a general bank and have a healthy 60-40 split respectively. Our focus is basically to be the mirror of the UAE economy, especially Abu Dhabi. As we have got a lot of time to think about the problems, which other banks were facing, we did not focus on just one sector. No one sector is more than 20 percent of our financing business.

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