Trends | June 2009 | Trouble in Tourism by MediaquestCorp.

June-August 2009 / N° 132

LIBYA

EGYPT

An old school creates a new school of thought

Cairo’s café culture is falling out of fashion

IT’S TIME TO SHAPE THE FUTURE. WELCOME TO FORWARD LIVING.

Trouble in Tourism Rough economic conditions mean a longer off-peak season for the region’s hospitality sector

Napoleon Bonaparte, from 1798, a client of Breguet.

Labor Mobility

Bahrain’s radical new sponsorship laws cause a regional rethink

Jacques Chirac

rr or

On Palestine, Yasser Arafat’s last words and George W. Bush

’s en m Ye

e h t in

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June-August 2009 / N° 132

LIBYA

EGYPT

An old school creates a new school of thought

Cairo’s café culture is falling out of fashion

IT’S TIME TO SHAPE THE FUTURE. WELCOME TO FORWARD LIVING.

Trouble in Tourism Rough economic conditions mean a longer off-peak season for the region’s hospitality sector

Napoleon Bonaparte, from 1798, a client of Breguet.

Labor Mobility

Bahrain’s radical new sponsorship laws cause a regional rethink

Jacques Chirac

rr or

On Palestine, Yasser Arafat’s last words and George W. Bush

’s en m Ye

e h t in

ve wa

es ris c of

f l u G

s ct pa im

e th

Classique Collection - Date, Phases of the Moon and Power Reserve - 7137BA A MediaquestCorp Publication

w w w. b r e g u e t . c o m

Canada . . . . . . . . . C$ 7.50 France . . . . . . . . . . . . € 4.57 Germany . . . . . . . . . € 6.14

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

REV_CVR GF_ 11_06 OPPS1.indd 1

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

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JUNE-AUGUST 2009 • ISSUE 132 • WWW.TRENDSMAGAZINE.NET S.C.C Arabies, 18 rue de Varize, 75016 Paris, France Tel: +(33) 1 476 64600 • Fax: +(33) 1 438 07362 E-mail: editor@trendsmagazine.net

COVER STORY

TRAVEL AND TOURISM TRENDS takes an in-depth look at the challenges facing the hospitality and travel sector, and presents an exclusive interview with the CEO of Rotana hotels.

82 INTERVIEW

TRENDS

The GCC’s single-currency dream proves elusive. “The Beirut Four” go free, but for how long? The fight against Somali piracy turns diplomatic. Lebanon votes on its relationship with Syria.

JACQUES CHIRAC 35

The former French premier talks to TRENDS about Palestine and Israel, the war in Iraq and Yasser Arafat’s final words.

YEMEN

MANUFACTURING

A CALL TO ARMS

HEAVY LIFTING

The Middle East’s poorest country is struggling to hold itself together, and its neighbors on the Gulf are becoming worried.

The global recession is forcing GCC countries to focus on the unglamorous world of heavy industry. But do they have enough resources?

IRAQ

JOB MOBILITY

GET OUT OF JAIL KURD

BAHRAIN LEGAL

The political prisoners of Kurdistan are free of Saddam’s regime, but still fighting for compensation over their lingering scars.

The tiny island kingdom has begun to change the way Gulf states look at employing expatriates, by allowing foreign employees more mobility.

June-August 2009 / TRENDS 3

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JUNE-AUGUST 2009 • ISSUE 132 • WWW.TRENDSMAGAZINE.NET S.C.C Arabies, 18 rue de Varize, 75016 Paris, France Tel: +(33) 1 476 64600 • Fax: +(33) 1 438 07362 E-mail: editor@trendsmagazine.net

SPECIAL REPORT

THE SAUDI ECONOMY TRENDS investigates whether the kingdom will be able to handle challenges created by the global economic crisis.

PRIVATE EQUITY

INTERVIEW

THE TURNAROUND

PAUL KRUGMAN

Gloomier economic conditions call for different strategies, as private equity players move funds into new investments.

The Nobel Prize-winning economist tells TRENDS where the financial crisis came from and where it’s headed.

104

LIBYA

CULTURE

SCHOOL OF THOUGHT

GOOD BOOKS

As it emerges from isolation, the North African petrostate is looking to its Greek community to internationalize local education.

Despite its political turbulence, Beirut is being recognized by the United Nations for something else – its bookishness.

116

INTERVIEW

PERSPECTIVES

ERIC VON HIPPEL 94 4

The Sloan School of Management professor and innovation guru says the digital age is challenging traditional wisdom about intellectual property.

TRENDS / June-August 2009

BYE BYE BELLY DANCING 124

Cairo’s famous nightlife is losing out, not to conservative thinking but to Western partying.

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THE GCC

THE VALUE OF UNITY

Michael Coronel

By Jonathan Howell-Jones Dubai

n May 20, the UAE pulled out of the proposed monetary union (single currency) for the GCC. The news came a few days after WAM reported that UAE Vice President Sheikh Mohammed had expressed “reservation” about the decision to headquarter the central bank to manage this currency in Riyadh, noting that, from the outset, the UAE was intent on basing the operation within its borders. Saudi Arabia’s King Abdullah responded almost a week later in an interview with Kuwait Arabic newspaper alSeyyasah in a conciliatory manner. Considering the politeness that came with the UAE’s withdrawal, the king believes this step is not intractable. “The atmosphere for reviewing the monetary union agreement is open and the UAE has an alert leadership ... We do not doubt they are keen to maintain a strong Gulf (Cooperation) Council.” “The coming review before the implementation would resolve what had been disputed,” he said. 8 TRENDS / June-August 2009

The decision to pull out reflects the fact that centralizing and unifying elements of the GCC will be fraught with such problems in the future. Much of this stems from creating an equitable framework for each nation, a hard-to-balance task. The single currency is seen by observers and politicians as a means of creating greater interdependence among the GCC states – the basis for improving political unity. It also mirrors the formation of the EU single currency, when Germany and France wished to foment greater unity and mutual reliance. Nevertheless, while monetary union is an economic objective, it is also an optional tickbox on the political checklist of goals designed to form greater unity within the GCC, says Marios Maratheftis, chief economist of Standard Chartered Middle East. “No matter what happens to the common currency, we’re still part of the GCC and we’re willing to cooperate with our GCC neighbors – and that’s the right way to go,” he says. “Polit-

ical cooperation is essential, and monetary union is not necessary to achieve that.” There is also the issue that most of the GCC states have parity with each other on exchange rates anyway, as all (except Kuwait) are pegged to the greenback. Kuwait removed the dinar from the dollar peg in favor of a basket of currencies in 2007, creating further wobbles over monetary union at the time. Yet this is a tactic other Arab nations would do well to adopt, argues Paul Krugman, professor of economics at Princeton University and Nobel laureate in economics. The real problem is therefore political, not economic, explains Giyas Gokkent, chief economist at National Bank of Abu Dhabi. As all sides try to come together, each must relinquish some elements of power to contribute to greater unity. “It involves some degree of sovereignty loss, because you abdicate policymaking from a national level to a super-national level,” he says. “I think there is a fear amongst some members that the GCC institutions may be dominated by one country or a group of countries.” While Saudi Arabia has the largest economy in the region, with a GDP of 1,308 billion Saudi riyals ($349 billion), the UAE is the second largest, with a GDP of 476 billion dirhams ($130 billion), and the larger financial sector to boot. But, while a diplomatic solution is feasible (one option is the formation of a commission to launch the central currency in Riyadh followed by the central bank’s establishment in the UAE), the credibility of the proposed integration of the GCC is reduced. “The question people will keep asking themselves is, ‘what will happen the next time the GCC has to face difficult decisions?’” says Maratheftis. “And there will be many more difficult decisions to be made in the very near future.” Two major problems underpin this loss of credibility. First, this problem was aired in public before it could be resolved – breaking the local tradition of solving problems behind closed doors. Second, the smaller economies in the GCC will not be so likely to succeed with such tactics in the future. The prospect of GCC institutions locating in Manama, Muscat or Kuwait City seems rather unlikely, at best. I

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LEBANON

NIGHT OF THE GENERALS

Getty/Gallo Images

By Nathalie Bontems Beirut

ust a few weeks away from parliamentary elections on June 7 that will pit the current parliamentary majority led by Saad Hariri against the Hezbollah-led opposition, even minor events could tip the balance in favor of one side or the other. In this context, the release on Apr. 29 of the four top security and intelligence generals Mustafa Hamdan, Jamil Sayyed, Ali Hajj and Raymond Azar, is an earth-shattering development. The four had been arrested in 2005 in connection with former Prime Minister Rafik Hariri’s murder, and at the recommendation of the UN’s International Independent Investigation Commission (IIIC) they had been jailed for three years and seven months without being charged. By mid-April, Lebanese judge Sakr Sakr had already lifted arrest warrants against the four, but had ordered they remain in jail pending a decision on their fate by the Hague-based Special 10 TRENDS / June-August 2009

Tribunal for Lebanon (STL), which had been handed authority on the case by Lebanon in early April. This decision by pre-trial judge Daniel Fransen at the recommendation of prosecutor Daniel Bellemare, came two weeks later with immediate effect, sparking much media and public fanfare. Although, as Bellemare wrote in his submission to Fransen, they could still be indicted later on if evidence implicated them, the pretrial judge declared that at this stage, the generals “cannot be considered as either suspects or accused persons. … The evidence collected thus far is not sufficiently credible to maintain the detention,” said Fransen. Since then, the four – who always claimed their innocence – have been hailed as heroes. The night of the generals’ release, Hezbollah released a statement welcoming Fransen’s decision, after the “arbitrary detention imposed by the [majority] and which took place by

politicizing the judicial system.” The apparatchik described the generals’ arrest as a “charade and a big scandal.” More importantly, Hezbollah said that this “ important event” would allow for a “decisive revision of the nation.” Upon his release, Sayyed – who rumors say could be asked to step up as a minister if the opposition were to win the polls – denounced a “conspiracy.” To contain the wave of condemnation and prove its own credibility, the Higher Judicial Council expressed “its willingness to bear its responsibility in facing any deficiency committed during judicial practices.” But as election day looms closer, this release may have a serious impact on how the Lebanese will vote. “Our detention was politically motivated and was exploited for four years by the majority [the pro-Western ruling parliamentary coalition]. So it is perfectly normal that the tables are turned now,” said Sayyed. No wonder political reconciliation is at a nadir. For his part, majority leader Hariri declared that this decision was “a step toward achieving justice” and that “this is a response to those who said that the tribunal was politicized,” referring to accusations from the opposition that the STL was a pawn in the hands of the United States. Lebanese Forces leader Samir Geagea said that the release of the four generals scored a point for the majority and not the opposition, because the opposition “has been marketing for years that the tribunal was politicized.” However, without the STL as a central point of its electoral platform, and faced with virulent accusations of having misled the Lebanese public, the majority coalition now more than ever needs arguments to rally swing voters and reassure its own troops. Hezbollah, on the other hand, which repeatedly asked for the release of the generals, can further mobilize its constituencies because of this victory. Amid electoral fever, few realize the STL is back to square one, without suspects or any prospect of identifying any. It seems justice for the victims will not take place anytime soon. I

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SOMALIA

LOST AT SEA By Ian Munroe Dubai

t seems like an easy problem to fix. Somali bandits are fishing for ransom money at sea by hijacking slow-moving ships between the Horn of Africa and the Arabian peninsula. To stop them, navies from around the world have sent warships to police the area – but the pirates have redoubled their efforts instead of giving up. There have already been more attempted hijackings so far in 2009 than in all of last year, despite the military flotilla that has been collecting in Somalia’s backyard. European legal experts are even warning that the military approach could backfire. In one instance, the Danish navy caught five Somalis in January after they allegedly attacked a Dutch-flagged ship. Now the accused pirates are awaiting trial in the Netherlands, and several of them have said they’ll seek asylum in the liberal European state rather than return to beleaguered Somalia. A prominent Dutch legal expert has warned his government to treat the case 14 TRENDS / June-August 2009

carefully because it could encourage Somalis to use capture as a way to migrate to rich Western countries. “These trials may trigger other pirates to let themselves be arrested on purpose,” lawyer Geert-Jan Knoops told Volkskrant newspaper. “The Dutch justice department must be cautious.” The same advice could apply to the German government, which is being sued by lawyers representing a Somali national recently captured by the German navy. The man was sent to Kenya for trial on piracy-related charges (as have more than 50 other Somalis this year). But because of Kenya’s spotty human rights record, the civil case stipulates that Germany is obliged to try its former captive at home. On top of legal problems, the roots of Somali piracy make it even harder to fight. Somalia has been plagued by civil war since 1991, and fishing boats from Europe to South-East Asia took advantage of that conflict for years by fishing

the African state’s territorial waters illegally. The UN envoy for Somalia has said foreign companies also dumped large quantities of toxic, including nuclear waste off the Somali coast (when the 2004 tsunami hit, rusting barrels of the stuff actually washed on its beaches). With no coast guard or navy to lean on, local fishermen armed themselves to chase off the perpetrators. Those armed patrols have since evolved into a lucrative way for organized gangs to make money in a deeply impoverished, chaotic country. Somali pirates have been paid an estimated $80 million in ransom so far in 2009, and a microeconomy has sprung up around their exploits. A recent UN report from the northern Somali city of Eyl, a pirate haven, sheds some light on how exactly those proceeds are divvied up. Sea-borne militia get a third of the money and they share it equally among themselves (although the first pirate to board a besieged vessel gets a double share, or a new vehicle). Whoever handles the money gets a fifth of it. The “sponsor” receives a third. Guards who patrol the pirates’ turf on land get 10 percent, as do local community leaders. If a pirate is killed during the operation, his family is even paid compensation. Those involved with the hijackings can earn thousands, even tens of thousands of dollars in a country that had a per capita GDP of only $281 in 2007. There are few indications of the extent of poverty in Somalia, due to the lack of government. But UNICEF estimates that at least 15 percent of those living in central and southern parts of the country suffer from acute malnutrition. The roots of Somali piracy and the depressed local economy are no excuse for capturing and threatening to kill innocent people at sea. But they do suggest that stamping out the problem will be hard, maybe impossible, without helping the country to get back on its feet. The Italian government has said it will host a meeting of Somalia’s governing and opposition parties in mid-June, to search for ways of abolishing piracy by stabilizing the African country. With any luck, that meeting will mark a turning point towards lasting solutions and away from gunboat diplomacy. I

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SYRIAN-LEBANESE RELATIONS

FOR OR AGAINST

Corbis\AFP

By Nathalie Bontems Beirut

n June 7, Lebanon elected a new parliament in what are shaping up to be crucial elections. The Western and Saudi-backed current majority, labeled “March 14” (for the date mass protests on the street called for Syria’s withdrawal), won the elections, beating the Hezbollah-led opposition, “March 8” (for the earlier and smaller protest supporting Syria). These elections aligned Lebanon to the West instead of opposing it on the trail of Iran and Syria, despite heavy political mobilization by Hezbollah. But what also depends on these elections is the kind of relationship Lebanon will have with Syria, often dubbed its “big sister.” The enmity between the two countries’ governments has been strong since the assassination of billionaire and former Prime Minister Rafik Hariri in February 2005, openly blamed by March 14 on Syria, then Lebanon’s power broker for 15 years. Although Syrian troops withdrew from its small neighbor following the murder, Syria remains very influ16 TRENDS / June-August 2009

ential in Lebanon, not only through its staunch allies, among whom Hezbollah stands strong, but also by way of a series of agreements that were mostly signed during Syria’s reign over Lebanon. One example of this is the Fraternity, Cooperation and Coordination Treaty (FCCT) signed in 1991, that codifies cooperation between Lebanon and Syria in all fields from media policy to defense strategy. Another is the Syrian-Lebanese Higher Council, established in 1991 under the FCCT, whose purpose is to “set up the general policy of coordination and cooperation between the two states.” Their validity and legitimacy could be questioned once embassies are formally up and running between Syria and Lebanon. Or, on the contrary, they could prevail, stripping the embassies of all meaning. Although Nasri Khoury, secretary general of the Syrian Lebanese Higher Council, declared that “the FCCT and the agreements it produced are established truths,” Syrian President Bashar

al-Assad declared that “Syria is ready to annul the Higher Council if the Lebanese demand it.” While March 14 may well demand just that, these agreements are not only binding at a political level, they also have a vast economic dimension, and give Syria a strong hold over Lebanon. One example is the sharing of the Assi river waters, giving a maximum 80 million cubic meters (MCM) to Lebanon out of its total of 400 MCM. Depending on who leads Lebanon, agreements on trade, customs, and telecoms between the two countries will be tackled or left alone. Maybe more importantly, other decisive aspects of these relations lie in crucial issues that are still left pending: what position will the new parliamentary majority adopt regarding the Special Tribunal for Lebanon (STL), established by the UN to try the killers of Hariri? The Lebanese Parliament hasn’t yet ratified the Memorandum of Understanding that will define the capacity of the STL, and the opposition is still reviewing the power it would give the international community over Lebanese institutions and indicted individuals. If anything, March 8 will continue to pugnaciously oppose the legitimacy of the STL. Yet with the release of the four generals (page 10), Syria (which consistently denied any involvement) seems off the hook. Neverthelesss, any attempt to put it back under suspicion, via Hezbollah for example as a recent report by German paper Der Spiegel suggests, will be seen as a way of reigniting sectarian strife. Similarly, the two countries still have to agree upon a clear definition of their common borders in order to ascertain Lebanon’s sovereignty. The smuggling of goods and weapons is yet to be addressed, but the clear definition of borders would also allow Lebanon to settle the issue of the Shebaa Farms, which are still occupied by Israel (on the grounds that it hasn’t yet been proven that these territories are Lebanese). As long as Syria refuses to provide Lebanon with proof of its sovereignty over Shebaa, the farms will offer the perfect justification for Hezbollah’s arsenal, and continue to bolster Syria’s indirect influence on a new West-aligned Lebanon. I

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Focus-Yemen

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Focus: Yemen

The Great Divide Yemen is under threat from a wave of crises, forcing affluent Gulf states to consider how best to help a neighbor in need. By Ian Munroe Dubai

he remote, mountainous stretch of desert between Yemen and Saudi Arabia seems an unlikely place for a political tug-of-war. But for years now, the Saudi government has been trying, in fits and starts, to fortify the 1,300 kilometers of barren land where the two countries meet. In 2003, Riyadh began building a 10foot high security barrier there, as part of a drive to crack down on terrorist attacks at home (after Saudi authorities traced explosives from recent attacks back to its southern neighbor). But Yemeni President Ali Abdullah Saleh argued the fence violated a threeyear-old border agreement, so construc-

TRENDS / June-August 2009

tion stopped. When building resumed briefly in 2008, it reportedly sparked a standoff between Yemeni border guards and Saudi troops. The border-security issue is still far from settled. Last month, Riyadh was said to be in talks with the Germanbased aerospace and defense company EADS about a multibillion-dollar plan to make its southern boundary less porous. Details of the plan remain scarce – but Saudi Arabia has clearly become very worried about security threats arising from the tip of the Arabian peninsula. “Border security on the Yemeni frontier is one of the kingdom’s greatest concerns,” says Christopher Boucek, an

associate at the Carnegie Endowment for International Peace in Washington. He believes that Yemen has become infamous in the region, “as a pathway for bad things; if it’s guns, if it’s drugs, if it’s illegal migration, if it’s cash or bombs – everything.” In stark contrast to neighboring Gulf states – which have been busy setting up new home industries and buying up overseas investments, experts say that Yemen is in palpable danger of becoming trapped in a downward spiral. As that realization dawns on GCC states, it’s changing the way they engage with the Arabian peninsula’s most troubled country.

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Culminating crises. Since north and south Yemen united in 1990, the government in Sana’a has become accustomed to defusing crises. When Saddam Hussein invaded Kuwait in 1990, Yemen voted against the United Nations using force to repel Iraqi troops, and promptly had much of its foreign aid cut off. In 1994, a civil war broke out in the south that killed thousands of people. And in 2000, al-Qaeda bombed the USS Cole while it was docked at the port of Aden, killing 17 American sailors and curtailing Yemen’s tourism industry – a key economic driver. But in 2009, Sana’a is facing what many fear is an overwhelming conver-

gence of problems. “Yemenis will say, ‘we’ve been through bad things before and we’ll deal with this.’ But they haven’t had a series of crises culminating at the same point,” Boucek says. “Now two or three or four are all going to culminate at the same time. That’s what makes the current situation so devastating.” Poverty is a familiar affliction for the country’s 22 million people, 60 percent of whom live on less than $2 a day. The UN Food and Agriculture Organization has dubbed Yemen the Middle East’s most ‘food insecure’ territory. Yet the population is expected to double before 2030, and major cities like Sana’a are running out of water.

To make matters worse, the economy is fending off collapse. Oil, which funds 70 percent of the national budget, is expected to run dry within a decade. Tourism, a second crucial industry, is shrinking as political instability and isolated terrorist attacks keep foreigners from visiting the country’s ancient walled cities, medieval mountain forts and famous mud skyscrapers. President Saleh’s government is also wrestling with three big political problems. A Shi’a Zaidi sect in the north – that Sana’a has accused of conspiring to replace local elected councils with an Islamic imamate government – has been clashing with state-backed forces. June-August 2009 / TRENDS

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Focus: Yemen

In the southern governorates, an increasingly violent secessionist movement has created a national crisis Hundreds of people have been killed there since 2004, and thousands more have been displaced. In the southern governorates, an increasingly vocal – and violent – secessionist movement has created a national crisis over the past few months. In the largest show of unrest since 2006, several hundred thousand people held protests there in March to commemorate

the outbreak of civil war in 1994. Many southerners say the central government has marginalized them economically and politically, and one of President Saleh’s former allies, an influential southern sheikh, recently declared his support for the southern-secessionist cause. Sana’a is taking the situation seriously enough that it recently sent troops and tanks to southern towns. In May, the

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First al-Qaeda attack on Americans when US troops are bombed in an Aden hotel.

Blast kills 17 US sailors as al-Qaeda attacks USS Cole, moored in Aden.

Eight Spanish tourists die in al-Qaeda suicide bombing at Queen of Sheba temple in Yemen.

TRENDS / June-August 2009

Ministry of Information also closed down eight Yemeni newspapers that had been covering the sometimes violent rallies, sparking criticism from press freedom groups. President Saleh has also promised new government reforms to allay southern protesters. “Yemen, Allah forbid, will not divide into two partitions, south and north, but into villages and small states,” Saleh warned at a rally on Apr. 27, in an attempt to diffuse the crisis. “People will be fighting with each other from door to door and from window to window.” Last but not least, al-Qaeda announced in January that it’s consolidating regional operations on Yemeni soil. Thanks to Riyadh’s success at banishing al-Qaeda from the kingdom, and stoked by extremist fighters returning from Iraq, Yemen is “becoming terror central on the Arabian peninsula,” says Kamran Bokhari, director of Middle East analysis at Stratfor, a US-based global intelligence firm.

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‘The problem in Yemen is the government fights three conflicts – the south, the north and terrorism’ Over the past few months, the group has carried out headline-grabbing attacks on foreign tourists. In May, its leader, Naser Abdel Karim al-Wahishi, broadcast a message stating that he supports the country’s southern separatists, and demanding that Yemenis join forces to topple the government in Sana’a. New relations. Next door, GCC countries worry that Yemen’s converging

problems will bleed across its borders. “They’re very concerned,” says Nicole Stracke, a researcher in the Security and Terrorism Department at the Gulf Research Center, a Dubai-based think tank. “The problem in Yemen is the government basically fights three conflicts – the south, the north and terrorism – and the resources they have are limited,” she adds. “Now with the oil price going

410,000

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Average number of barrels of oil produced per day in Yemen in 2004.

Average number of barrels of oil produced per day in Yemen in 2007.

Average number of barrels of oil produced per day in Yemen in 2008.

TRENDS / June-August 2009

down and the recession, their resources are going to be even more stretched.” Yemen’s resource gap means President Saleh, who has governed the country since 1978, is unable to crack down on many of the criminals who use the country’s ungoverned areas for nefarious ends. Yet al-Qaeda’s local leadership has not just threatened the government in Sana’a, but Saudi Arabia and the other Gulf states. “Yemen’s lack of capacity makes it the problem of the next country down the road. In this case, the GCC,” Boucek says. “The concern is, ‘how do we absorb what’s happening there?’” One way is by throwing money at Yemen’s problems. At a donors’ conference held three years ago in London, the Gulf states pledged $2.5 billion to help bolster Saleh’s government (with Saudi Arabia making the largest donation promise by far). But Sana’a has only received a $12 million of the promised cash, according to the World Bank, mainly because of rampant corruption.

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King Abdullah has reportedly promised Yemen’s president support in combatting al-Qaeda Yemen ranked 141 out of 180 countries on Transparency International’s latest corruption index. So once the money leaves donors’ hands there are no guarantees as to how it will actually be spent. Regional integration is another approach. But ties between the Gulf countries and their south-Arabian cousin haven’t always been strong. In the case of Saudi Arabia, for example, “there is a history of complicated relations” with

Yemen, says Letta Tayler, a researcher on terrorism and counterterrorism with Human Rights Watch. “We hope that doesn’t block genuine efforts at cooperation on what is clearly a regional problem and needs regional solutions.” Relations seem to be improving though. In August 2008, Qatar helped broker a peace deal between Sana’a and Yemen’s restive northern Shi’a Zaidi sect. When a local terrorist group attacked

5.5 POINTS

3.5 POINTS

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Oman’s score out of 10 on Transparency International’s 2008 corruption index.

Saudi Arabia’s score on Transparency International’s 2008 corruption index.

Yemen’s score out of 10 on Transparency International’s 2008 corruption index.

TRENDS / June-August 2009

the US embassy in Sana’a last September, killing 17 people, Saudi King Abdullah invited Yemen’s president to Mecca and reportedly promised him support to combat al-Qaeda-linked groups. More recently, Saudi leaders have said they’re with Sana’a “all the way,” and “without reservation.” In May, Oman also revoked the citizenship of a former Yemeni leader for supporting recent protests and calling for an independent southern state. Arabian countries are taking baby steps to bring Yemen into the GCC, too. In spite of such efforts though, Stracke says it won’t be Yemen’s resource-rich neighbors that decide how its problems play out, but Yemenis themselves. “It’s whether there’s enough capacity within Sana’a,” she says, “not whether the Arab neighbors are doing enough.” “At the end of the day, you can only pour so much resources into something that has capacity. Can Yemen hold itself together and use external help from neighboring Arab countries to turn things around? That’s the question.” I

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Focus: Iraq

Prisoners Of Conscience Kurds languished for years in prison under Saddam Hussein’s regime. Today, they seek compensation for their wasted lives and irreversible injuries. By Tanya Goudsouzian Sulaimaniyah

arefoot children play boisterously on the narrow dusty roads along the way to a gated edifice in the suburbs of Erbil. For the men and women who frequent this building, the children’s laughter may provide some comfort, a sense that the sacrifice of their own innocence might not have gone in vain. The Political Prisoners Generation of Kurdistan was established in February 2007 to help rehabilitate individuals who spent years in Ba’athist prisons during the heady days of the Kurdish resistance against the Iraqi regime. Ahmed Mam Rasool, deputy head of the organization, looks far older than his 36 years. He was detained in September 1989 when Ba’athist security agents dis28

TRENDS / May 2009

covered he was involved in clandestine activities in support of the Kurdish resistance. It was the kind of thing one might have dismissed as student activism – distributing leaflets, and providing medicine and foodstuff to rebels hiding out in the mountains. Rasool, a man of slight stature, recalls the beatings he endured and the brutal interrogation tactics used to extract information from him about Kurdish guerrillas. He claims he told them nothing, and was thrown into a tiny cell in which he could not even stretch out his legs. He spent one month and six days in this cell, and was released intermittently for torture sessions. “They would hang me up from my legs, with my hands tied behind my

back, and give me electric shocks on my nipples and genital area,” he recounts. Though released a little over a year later in 1990, Rasool’s body still carries the scars of the ordeal – but the residual psychological scars cannot be showcased so easily. The Political Prisoners Generation of Kurdistan has a two-fold mandate: to archive Kurdish history through the oral testimonies of former prisoners, and to safeguard their legal rights. Rasool says they have nearly 12,000 members now, and the number is rising. According to Rasool, the Political Prisoners Generation of Kurdistan offers counseling for those former inmates who underwent grueling psychological physical torture. They have

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There are many handicapped and mentally disturbed people, traumatised by their abuse centers in Erbil, Sulaimaniyah, Dohuk, Kirkuk and Mosul. Suleiman Khalid Ashgayi, president of the organization, is working to garner more support from human rights groups operating in Iraq. “We have so many handicapped and mentally disturbed people because of the abuse they suffered in prison. We hope those organizations will help us solve these problems,” he says. “Our organization was set up

before our counterparts in Baghdad, but as they are affiliated with the government, they receive a great deal more assistance. Ours is a private grouping made up of volunteers.” Ashgayi also points out that a law passed in February 2008 entitles all former political prisoners to 800,000 Iraqi dinars ($700) with an additional 100,000 Iraqi dinars for each year spent in prison. But this has yet to apply to the members

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Saddam Hussein uses chemical weapons against the Kurds in northern Iraq.

Iraqi Kurdistan is designated a UN safe haven after the campaign to liberate Kuwait.

Kurdistan denies allegations from Amnesty International that it has secret prisons.

TRENDS / June-August 2009

of the Political Prisoners Generation of Kurdistan in Erbil. According to Ashgayi, 12 percent of the organization’s members are women, some of whom were only released in 2003. “Former prisoners in 15 areas of Iraq are benefiting from this stipend, but not those in the Kurdistan Region,” he laments. Ashgayi, 55, was captured in 1987 and detained for a little over a year at the Balda Security Office in Erbil, due to his father’s activities in the Kurdish resistance. “When a man went to take up arms in the mountains they would come to take his wife or children. Sometimes, even if your in-laws were Peshmergas (Kurdish fighters), they would still take you,” he said. A grisly past. The Balda Security Office in Erbil has now been converted into a base for the Kurdish security apparatus, Asaish. But for those who suffered unspeakable pain within those walls, the makeover does not eliminate the building’s grisly past.

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‘I have sympathy for those who get caught because of their political beliefs’ In the same vein, the grand reopening in February of the scandal-ridden Abu Ghraib prison, now renamed the Baghdad Central Prison, has been met with skepticism. Iraqi authorities have promised that the Baghdad Central Prison will offer “decent conditions for inmates – including a gym, computer chatroom and hair salon.” The Baghdad Central Prison now houses 3,500 inmates, with plans to

increase capacity to hold 15,000 prisoners by the end of 2009. But despite this attempt to draw a line under the past, average Iraqis – and many in the rest of the world – feel that a fresh coat of paint cannot erase the memories of those graphic images of the sinister incidents which took place in 2004 at the hands of a small group of US soldiers, who may or may not have been acting on orders from above.

TALEBANI

HUSSEIN

GRANER

A Kurd and founder of the PUK party, Jalal Talebani became Iraqi President in 2005.

The former president’s request for a table tennis table in his cell was turned down.

US soldier Charles Graner was given a 10year sentence for his conduct at Abu Ghraib.

TRENDS / June-August 2009

Rasool says that the mere mention of prison sends shivers up his spine. “No matter what the case of the prisoners, when you mention any prison, I shiver. It hurts all over,” he says. “I hope that the community will act so as to prevent the mistreatment of political prisoners in the future.” “I have sympathy for those who get caught because of their political beliefs. If they have a different way of thinking, they should be dealt with through dialogue – not torture,” said Ashgayi. Human chattel. Back in the 1980s, when Saddam Hussein reigned supreme, uppity Kurds were rounded up like chattel by Ba’athist intelligence servicemen, to stand trial at the Revolutionary Court of Iraq. The Mukhabarat (Iraq’s former state security agency) captured Azez Sabir Abdulla, 40, in September 1985 while at his home in Erbil. It came as no surprise to him, or anybody who knew him, as he had been a Peshmerga whose activities were closely monitored for some time.

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Prisoners were tortured with electric shocks and whips, then forced to sign confessions “They took me to Dieray Amin (Security Administration) in Erbil at midnight and tortured me with electric shocks and whipping,” he says. “There were rooms, each crammed with 25 detainees, and still more in the corridor. Each time they brought out someone who had been tortured, we would see his body covered with blood.” “For many of the detainees, it would be six or seven months before they were given a chance to bathe. But one day they took us into a hall and ordered us to take off our clothes to prepare for a col34

TRENDS / June-August 2009

lective bath. They gave us ordinary laundry detergent, but when we began to wash ourselves with it, they beat us with cables so that we all developed a painful skin allergy,” says Abdulla. He adds: “They would force us to sign confessions for crimes we didn’t commit and they would make us name any name. After someone signed such a document, they would be shot dead.” Abdulla remembers his hearing at the Revolutionary Court in Baghdad, with Chief Judge Awad Hamed al-Bandar presiding. “The court hall had two

doors. If you passed through one of these doors, you would spend many, many years in prison, but if you passed through the other, you would never be heard from again,” he says. “Before my group entered the hall, several people had already passed through the door of death and I heard somebody from the prosecution say: ‘We’ve done enough shooting for the day and these guys are too young.’ So that’s how we were spared execution, but each were given very long prison sentences.” Abdulla, who was released a year later in the general amnesty of 1986, staunchly opposes the use of torture tactics against detainees – whatever the circumstances surrounding their arrest. “I think everything can and must be done in a peaceful way. I don’t even believe extremist Islamist fighters should be tortured,” he says. Jihangeer Hamad Ahmed, 49, was captured in 1985 in Shaqlawa for his involvement in rebel sleeper cells, and was released three years later in a general amnesty. He did not wish to discuss his time in prison, which pains him to this day. “Torture should not be condoned under any circumstances, whatever the nature of the crime, but especially if a man has been taken in for his ideas and beliefs,” he says. “To this day I suffer from the aftershocks of the torture I endured in prison.” Beyond the nightmares and mental anguish, members of the Political Prisoners Generation of Kurdistan share another grievance. “Nobody has done anything for us, except for the Kurdish regional government that pays the rent of our building,” says Abdulla. Ahmed concurs: “in the center and south of Iraq, former political prisoners receive monthly pensions, and they are given the opportunity to reclaim all that they lost, whether their jobs or their studies. They are also compensated for physical handicaps they suffer as a result ... They are given mortgage loans of up to 30 million Iraqi dinars ($0.03 million), or provided flats to live in. But when it comes to our rights, the government is always dilly-dallying.” I

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The French Connector Jacques Chirac, the former president of France, tells Christian Malar about his experiences dealing with the Middle East, the consequences of September 11 and his views on the Gulf war.

t has been 61 years since the formation of Israel. Is peace possible between Palestine and Israel in the Middle East today? War and clashes bring about only hardships and no solutions. Officials should begin to understand that reality. It progresses, it pervades slowly and today we ought to persuade them even more. There will be no solution for the Middle East without mutual respect for one another. It is obvious that Israel has the right to claim territory. It is also obvious that the Palestinians have the right to a homeland and thus we must relentlessly push for such a solution.

You knew Yasser Arafat well. Do you think he missed the opportunity to bring peace to the region? It is very easy to rewrite history. What I know is that Yasser Arafatâ&#x20AC;&#x2DC;s thinking evolved and that he very gradually became a man of peace. I believe in his final days, he started to share my perspective. Can you recall a notable moment you shared with Yasser Arafat? I had many notable moments with Yasser Arafat. I can talk about worst and best moments with him. We did not always approve of his views and I can even say that we clashed very often. However, things evolved, and in his final years,

our lines of thoughts concurred. It is with great emotion that I held his hand when he was dying. What were his last words? They were words of peace. Do you think the September 11 attacks triggered a clash of civilizations? First, it was a shock for everyone when it happened. I was on a trip to Rennes and I immediately returned to Paris. I realized right away it was a major event. It was traumatic for the whole world, a new dimension of terror. That is why we had to grasp its true meaning and draw conclusions from it. June-August 2009 / TRENDS

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‘I understand the reactions of George W. Bush but there was no ‘Axis of Evil.’ There were bearers of evil.’ What are those conclusions, in your opinion? First, that we must not and should not be tempted to talk about a clash between the West and the Muslim world. It is a major error we were able to avoid. Those who fell into that trap were quickly denounced. There was no opposition between the West and the Muslim world. This was simply an act of terror

planned by a terrorist group, with significant consequences, both psychological and material. When George W. Bush talked about the ‘Axis of Evil’ that included the Muslim World how did you react to it? I understand the reactions of George Bush but there was no ‘Axis of Evil.’ There were bearers of evil, groups acting

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Chirac is elected President of France on May 7 1995 and reelected May 5 2002.

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TRENDS / June-August 2009

in an evil manner, that had to be tracked, sanctioned and eliminated with all necessary means. But this should not be seen as representatives of one world facing another. In 2003, you spearheaded international opposition to war in Iraq launched by the US under the Bush administration. Do you still consider this a mistake? And more importantly, do you see any peaceful future for Iraq today? There are two points to make here. I believe this war was a mistake and had no justifications. It was an error since it bore major negative psychological consequences in the Arab world. It was not justified since the cited motives were obviously unfounded. I mean the existence of harmful weaponry, dangerous arms in this part of the world. It was a false pretense, and an ill intentioned one. That is why that war was useless and harmful for me.

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â&#x20AC;&#x2DC;What is obvious is that there are problems today with Iran, but we hope they will subsideâ&#x20AC;&#x2122; The US launched the war against Iraq without taking UN into consideration. In that sense, is there any use for the UN system anymore? One must not overlook the positive consequences of the UN activities in many regions and in solving numerous conflicts. So it does play a positive role. However, in any such activity you will definitely note difficulties and even failures. Yet, the UN, with all the impediments it faces, remains as a whole an essential element of peace and stability in today's world. Back then, did you have tense conversations with George W. Bush on Iraq? No, there weren't any tense discussions. Our views did not always converge but when I disagreed I would state my point of view. And he would, or would not, take that into account. 38

TRENDS / June-August 2009

Do you perceive that George H.W. Bush had a greater understanding of politics than his son? I am in no position to judge foreign heads of state. I have known George H. W. Bush, whom I profoundly respected and appreciated, for he was a man of culture and intelligence. I knew his son less, and therefore I will not judge him. Was the 2003 war the closing chapter of a unipolar world dominated by the US after the breakdown of the Soviet Union? And is the election of President Barack Obama the first step towards a multipolar world with the G20 being proof of this? Yes, it is certain that the world is moving towards less American domination. However, this does not mean that the US economic and political clout will weaken. The development we see today in the

Eastern part of the world, in China and India, shifts the decision-making power to these regions. This goes hand in hand with a historic reality. Here lie the most ancient civilizations, the oldest humanfriendly cultures. It is thus legitimate for them to retrieve their old positions. Do you look at nations like Pakistan, Afghanistan, and Iran as issues of major concern today? History is known for seeing threats against peace wherever they are least expected. So, I cannot tell you where tension will rise and risks will ripen all of a sudden. What is obvious is that there are problems today with Iran, but we hope they will subside. You stepped down as president of France on May 16, 2007. How can one rebuild a normal life after leaving the Elysee Palace? Simply by conserving the same set of ambitions and values and by living them differently. I

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Business Briefs

TECHNOLOGY

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Amadeus launches its Yemen operation

Abu Dhabi registers 12pc rise in passenger traffic

SANA’A – Amadeus, a technology and distribution solutions provider for the travel and tourism sector, has expanded its reach in the Middle East with the launch of its local operations in Yemen. Amadeus Yemen is a joint partnership with Yemenia Airways, the national carrier, which accounts for 55 percent of reservations made by travel agencies in Yemen. The new company commenced operations at the beginning of this year. “Amadeus Yemen will be investing heavily in the market in the coming years with the objective of enhancing the services that travel agents receive today by competing GDS (Global Disitribution Services),” Abdulfatah Altwait, the general manager of Amadeus Yemen, said. “We have a sound organization ... to deliver ‘best in class’ on-site support to travel agents. The technology backbone of Amadeus is by far the best in the industry and hence agencies opting for Amadeus would have a better advantage through technology to become more competitive, efficient and productive in the market,” Altwait added. Amadeus says that having the national carrier as a partner will benefit the travel agencies by allowing them to access preferred airline content and the latest functionalities available. Amadeus’ customers include travel providers, travel agencies and travel buyers.

ABU DHABI – April 2009 traffic figures for Abu Dhabi International Airport show a 12 percent increase in passengers travelling to, from, and through the airport compared to the same month in the previous year, the Abu Dhabi Airports Company (ADAC) said. Aircraft movements also increased by 5 percent. Conferences and exhibitions held in Abu Dhabi during the month, such as Cityscape Abu Dhabi, were attributed as some of the main contributing factors to the passenger traffic increase. Other factors included the arrival of new Sudanese airline, Sun Air, with three weekly flights between Abu Dhabi and Khartoum, and Etihad Air-

TRENDS / June-August 2009

ways commencing daily flights to Melbourne, Australia. London remained in the top position as Abu Dhabi’s busiest route, with Bangkok in second position. Doha was the third-busiest destination, followed by Bahrain in fourth place, making Jeddah the airport’s fifth-busiest destination for the month. According to figures, origin destination passengers increased by 13.7 percent during the month of April. The Indian subcontinent continued to see strong growth with competitive pricing and high volume workforce traffic. Traffic to and from India increased by 29.2 percent, while UK traffic increased by 15.1 percent. Pakistan was Abu Dhabi’s third-largest market for the month of April, with an overall increase in traffic of 13.9 percent. Australia continued to see strong growth, becoming the airport’s ninth largest market after a traffic increase of an amazing 35.4 percent as a result of Etihad’s new daily route into Melbourne.

MERGERS AND ACQUISITIONS M&A activity in MENA region slumps 66pc in Q1, says E&Y DUBAI – Mergers and acquisitions deals in the Middle East and North Africa decreased by 66 percent in the first quarter of 2009 compared to the same period last year, Ernst & Young’s quarterly Middle East update on mergers and acquisitions has revealed. The report, which compiles publicly available deals and values across the region, said that merger and acquisition activity had fallen both in terms of number of deals and disclosed values. A total of 140 deals were announced in the first quarter of 2008 against 47 in the first quarter of 2009. Within these, outbound deals fell from 48 deals in Q1 2008 to 11 deals in Q1 of 2009, a drop of 77 percent, and the number of inbound deals also fell from 20 in Q1 of last year to 5 in Q1 2009, reflecting a drop of 75 percent. Domestic (MENA) deals fell 57 percent, from 72 to 31 in Q1 2008 and Q1 2009 respectively. “The drop in the number and value of deals in the Middle East is reflective of the global economic recession and follows the trend in worldwide M&A activity. Deals within the MENA region have fallen by 57 percent,” said Azhar Zafar, the head of mergers & acquisitions at Ernst & Young Middle East. However, inbound and outbound deals into and from MENA have fallen in excess of 70 percent, showing that investors are looking inwards and are more cautious with cross-border deals.

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declines of 16.9 percent and 16.5 percent respectively. At the other end of the spectrum, Israel’s property market posted the highest increase globally, 10.9 percent, followed by the Czech Republic at 9.9 percent. According to the report, the world’s bestperforming markets during the global economic crisis are small and have “fewer structural imbalances.”

LOGISTICS

Michael Coronel

Dubai World Central set to go live in 2010

AVIATION Flydubai unveils aircraft prior to launch DUBAI – Budget carrier flydubai unveiled its new liveried fleet of Boeing 737-800 aircraft at Dubai International Airport on May 18 in preparation for starting operations on June 1. The carrier will initially fly to Beirut, Amman, Damascus and Alexandria in the first month of its operations. The flydubai aircraft will have 189 seats available per aircraft with 10kg allowances for hand luggage, but passengers will have to pay for checked-in luggage of up to 32kg, seat selection and in-flight cuisine. Its chief executive officer, Ghaith al-Ghaith expects the new airline to improve opportunities for passengers to fly more easily within the region. “We are very confident flydubai will bring a fresh approach to the budget airline sector and change the way people travel. By keeping things simple we will be able to provide an easier and more affordable travel experience. This will mean more people can get together with family and friends more often,” he said. The airline will operate out of Terminal 2 at Dubai International Airport. Flydubai will operate with a fleet of 54 Boeing 737-800 aircraft, worth about $4 billion, which it ordered at the Farnborough Airshow in July 2008.

PROPERTY Dubai is second-worst performing property market DUBAI – Prices in Dubai’s property market slumped by 32 percent between March 2008

TRENDS / June-August 2009

and March 2009, according to a report by UK property broker Knight Frank. The emirate “is in a mess,” said Nick Barnes, head of international research at Knight Frank to We b s i t e T h e K i p p R e p o r t . “ A l o t w i l l depend on developers and how long they can hold on before getting into fire-sale territory.” Furthermore, analysts predict that Dubai’s prices will continue to fall in 2009. A recent report by Swiss finance house UBS said it expects a 57 percent to 70 percent drop in prices from the market’s peak, from 1,850 dirhams per square foot to 500-800 dirhams per square foot. Dubai’s market slump is second only to Latvia’s, which saw a 36 percent drop in prices, and is followed by Singapore’s at 23.8 percent. The United States and Britain are in fourth and fifth place, having suffered

DUBAI – The Dubai Government’s singlelargest urban land development project, Dubai World Central (DWC) – the 140 square-kilometer urban aviation city under construction in southwest Dubai – will go live in its first phase of operation when DWC-Al Maktoum International Airport opens in June 2010, Sheikh Ahmed bin Saeed Al Maktoum, the chairman of Dubai Aviation City Corporation said. “Our vision for Dubai is to be an unparalleled global commercial, trade and transportation hub with a unique integrated multimodal logistics platform in DWC which will change all known air, land and sea transportation parameters.” At the core of this airport city will be the world’s largest airport, DWC-Al Maktoum International, which, once operational next year, will not only draw business and trade to it but also create huge residential and commercial opportunities. “While we have extended the opening date of the project to accommodate all related construction, licensing and regulatory standards, we have not lost sight of the long-term vision of Dubai’s most strategically important infrastructure development, which is designed to support Dubai’s aviation, tourism, commercial and logistics requirements until 2050 and beyond,” he said. Meanwhile, Dubai Logistics City (DLC), a core component of DWC’s multi-modal proposition, has begun licensing completed warehouses and logistics offices and handing over facilities to tenants to commence operations on site.

TELECOMS Vodafone Qatar hails success of Mega-IPO DOHA – Vodafone Qatar announced that its Initial Public Offering (IPO) on April 12-26 raised $1 billion and, at the time of the closure of the subscription period, it is the

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largest in the world in 2009 so far. Globally, there have been 11 IPOs of more than $50 million per offering in 2009, that raised $2.1 billion in total. Vodafone’s IPO in Qatar raised around $1 billion or almost half of all of these other IPOs put together. “The result is amazing. Qatar has demonstrated again that it is the leading global economy with this very strong and successful result,” said Grahame Maher, the chief executive officer of Vodafone Qatar. Eighty-two thousand Qatari national individuals subscribed for 65 percent of the shares, and 35 percent of the shares were taken up by 273 institutional investors, resulting in a 100 percent subscribed IPO. A significant number of the Qatari national population are now shareholders in Vodafone Qatar, which is now 77 percent Qatari owned. Vodafone Qatar’s shareholders will play a significant part in helping Vodafone “make a world of difference for the people in Qatar.” Vodafone Qatar is the holder of the second public mobile telecommunications networks and services license in the State of Qatar, granted on June 29, 2008.

ENERGY Dong Energy, Masdar to build 630MW offshore wind farm LONDON – UK’s power and gas company Dong Energy and Abu Dhabi-based Masdar, a wholly owned subsidiary of the Mubadala Development Company, have announced that they will invest 2.2 billion euros in building the first 630MW phase of the London Array offshore wind farm in the Thames Estuary. Once complete, the scheme will be the world’s largest (and the first 1GW) offshore wind farm, a joint statement said. The project

will supply enough power for around 750,000 homes – or a quarter of Greater London homes – and displace the emission of 1.9 million tons of carbon dioxide every year. The announcement comes after the UK Government’s recent proposal to increase its support for offshore wind power. The partners are satisfied that the project is now financially viable and are keen to push ahead with construction and to produce the first renewable power in 2012. “The decision to build the London Array offshore wind farm is a very significant cornerstone in Dong Energy’s strategy to increase the proportion of electricity generated from renewable energy sources,” said Anders Eldrup, the chief executive officer of Dong Energy. Dong Energy has built approximately half of all offshore wind farms in operation in the world today. Entering into the world’s largest offshore wind farm project further strengthens the company’s leading position in this field.

TRADE Middle East intra-regional trade up 28 percent: DIFC DUBAI – Intra-regional trade in the Middle East has grown 28 percent between 2000 and 2007 and now represents 19.3 percent of all trade in the region, an economic note released by the Economics Unit of the Dubai International Financial Centre (DIFC) has said. The report, analyzing World Trade Organization trade data recently released covering the years through 2007, also revealed that Middle East trade was increasingly shifting toward Asia and away from the United States and was showing increased diversification toward non-oil products such as chemicals, travel and tourism. Intra-Middle East trade increased from 15.1 percent of total external trade in 2000 to 19.3 percent in 2007, but is still significantly below intra-regional trade levels in other regions such as the European Union (71.2 percent) and Asia (57.4 percent). This increase in intra-regional trade in the Middle East was led by a doubling in trade of agricultural products, an almost fivefold increase in the trade of fuel and mining products, and a four-fold jump in manufactured goods. Given the shift in trade towards Asia, the report also said it is increasingly important for regional economies to negotia t e f r e e - t r a d e a g r e e m e n t s ( F TA s ) w i t h emerging markets such as China and India, rather than focus their efforts on bilateral I FTAs with developed countries.

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London, Hong Kong, Sydney and Tokyo. Southwell set up and ran the Asia-Pacific business during his tenure with the division. “Philip has an impressive track record that we are pleased to welcome to our team. He will be a great asset to the firm’s growing operations in the Gulf,” said CEO Hassan Heikal. EFG-Hermes now has a direct presence in five of the six GCC nations – Kuwait, Oman, Qatar, Saudi Arabia and the UAE. Established in 1984, EFG-Hermes is the Arab world’s leading investment bank. The firm specializes in Investment Banking, Asset Management, Private Equity, Securities Brokerage and Research.

CNN

IOMEGA INTERNATIONAL

Reme al-Saiegh

Cizar Abughazaleh

CNN has promoted Reme al-Saiegh to sales director for the Middle East and Africa region, based out of CNN’s international headquarters in London. As part of her new role she will be responsible for overseeing CNN’s sales teams across the Middle East, Africa and the UK as well as a network of representatives throughout the region. Al-Saiegh, who has been at CNN International for more than five years, started as a sales executive, then was promoted to account manager and account director before being appointed to her new role. She is one of the key players in CNN 's Abu Dhabi project; in her new role she will be responsible for hiring and managing CNN’s future Abu Dhabi-based sales team, with the aim of strengthening CNN’s Middle East business. The team will be working alongside Media International Services, CNN's longterm representatives in the Middle East.

Iomega International has appointed Cizar Nazeeh Abughazaleh as regional sales manager, Middle East, Africa and Turkey. Abughazaleh has over 10 years of experience in retail and sales, most recently as retail regional director of Aptec Mobile, where he was in full charge of sales and marketing activities for the Middle East. Prior to joining Aptec Mobile, from 2003 to 2006, he was retail account manager at Hewlett-Packard. Previously, from 2000 to 2003, he worked at Al-Futtaim Electronics.

EFG-HERMES Philip H. Southwell Investment bank EFG-Hermes has appointed Philip H. Southwell as chief executive officer for the firm’s operations in the GCC countries, excluding Saudi Arabia. Given the importance of the GCC to EFG-Hermes’ expansion plans, Southwell will also be part of the executive management of the Holding Company. The appointment comes as EFG-Hermes looks to leverage the full investment banking platform across the Gulf region in the wake of its acquisitions in key markets last year. Southwell last held the position of head of global banking for Central and Eastern Europe, Turkey, the Middle East and Africa at Deutsche Bank based in London. He joined Deutsche Bank’s Equity Capital Markets division in 1997, moving among the bank’s offices in

46 TRENDS / June-August 2009

BARCLAYS John Vitalo Barclays has appointed John Vitalo as the chief executive officer of Investment Banking and Investment Management (IBIM) for the Middle East. This new post will be in addition to his existing roles in Johannesburg as CEO of Absa Capital, and his local responsibility in South Africa for Absa Wealth. In his new IBIM role, Vitalo will be responsible for building IBIM’s three businesses (Bar-

clays Capital, Barclays Wealth and Barclays Global Investors) in the region, and will report to Roger Jenkins, executive chairman of Barclays Investment Banking and Investment Management, Middle East. The Middle East region offers substantial business opportunities for Barclays. Many of the largest sovereign funds are based in the region, as well as high-net-worth individuals and leading world-class companies. All these clients are looking for investment management, wealth creation, risk management and financing solutions and advice, which Barclays is in a unique position to provide. “John has a

proven track record of building businesses and deepening client relationships. His appointment will continue the growth of Barclays’ successful businesses in the Middle East for the benefit of our clients,” said Roger Jenkins, the executive chairman of Barclays IBIM, Middle East. For his Africa (including South Africa) investment banking responsibilities as CEO of Absa Capital, Vitalo will continue to report to Maria Ramos, CEO, Absa Group and Benoit de Vitry, head of global markets-trading, Europe and head of commodities and emerging markets at Barclays Capital.

TANMIYAT GROUP Marwan Alahmadi Developer and investment company Tanmiyat Group has appointed Marwan Ibrahim Alahmadi as the new chief executive officer of the group, effective from the beginning of April 2009. The former CEO of KSAbased Zain, and the top executive responsible for heading the teams that launched its operations, Alahmadi is a leading business and technical expert in the telecommunications sector. A Saudi national, he was formerly MTC Group's chief strategy officer

with responsibility for spearheading strategy development, corporate governance and business operations. After joining MTC in 2004, Alahmadi led group initiatives on strategic business planning and participated in transforming the organization from a regional entity into an international telecomm u n i c a t i o n s c o m p a n y. “ D r. A l A h m a d i brings a wealth of experience to us from his years spent in the region’s leading organizations, where he held a portfolio of senior executive responsibilities, and we look forward to his bringing that expertise to Tanmiyat,” said chairman of Tanmiyat Group, Sheikh Sulyman Bin Abdulaziz al-Majed. Besides working for Cisco, Alahmadi held t h e p o s i t i o n o f C E O a t M T C - Vo d a f o n e Bahrain until February 2007. He also worked for Toyota Abdul Lateef Jameel (ALJ) Group where he was director of the IT division. He holds an MSc and Ph.D. in Computer Science from the Georgia Institute of Technology (Atlanta) and a BSc in Systems Engineering from King Fahd University of Petroleum & Minerals.

tomer service in the region. Gorsuch said of the appointment, “This is a terrific opportunity to launch a new range of high-tech sports cars in a territory that will be a major market for McLaren Automotive.” Gorsuch will report to Rob Lindley, McLaren Automotive’s sales and marketing director, who is based at the company’s global headquarters, the McLaren Technology Centre, in Woking, UK. “With his experience in the region in both premium automotive and leisure businesses, he is ideally suited to our plans for McLaren Automotive,” Lindley said. After serving as an army officer, Gorsuch lived in Brazil, Australia, Korea, and Hong Kong while working with the Vestey Group. He joined Bentley in 1998, working initially at the factory in Crewe and then becoming regional director, Middle East, Africa & India, based in Dubai.

TOSHIBA Anil Warang C o m p u t e r m a n u f a c t u r e r To s h i b a h a s appointed Anil Warang as business planning and product category manager. Warang will be responsible for product forecasting, market analysis, supply-chain management and gathering of channel feedback on products. At the same time, he will oversee the management of the just-in-time (JIT) inventory and advance profitability across the entire supply chain. “Toshiba continuously looks at growing its business across the region. The appointment of Anil Warang represents the unwavering commitment of Toshiba to provide excellent business practices and unparalleled support to our partners and our customers,” said Santosh Varghese, regional general manager, Toshiba Gulf Computer Systems Division.

MCLAREN AUTOMOTIVE Ian Gorsuch McLaren Automotive has appointed Ian Gorsuch as regional director of Middle East and Africa in preparation for the world launch in 2011 of the first in the company’s new range of high-tech sports cars. Gorsuch’s first task will be to begin appointing retail partners to market the exclusive British high-performance cars while assembling a sales and m a r k e t i n g t e a m a t t h e c o m p a n y ’s n e w regional base. The location for the Middle East and Africa headquarters is yet to be determined, as are potential retail partners, but Gorsuch is aiming to reflect McLaren Automotive’s quality and performance goals through the company’s marketing and cus-

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DUBAI ISLAMIC BANK Saad Zaman Dubai Islamic Bank (DIB) announced today the appointment of Saad Zaman as the chief executive officer of DIB Capital, DIB’s fullservice investment bank. Saad Zaman, who has been a senior in the GCC investment banking industry for a decade, joined DIB in 2004. He was appointed deputy CEO of DIB Capital Ltd. (formerly known as Millennium Capital Ltd.) in 2007. Prior to joining DIB, Saad was the managing director of Citigroup’s global Islamic banking subsidiary, in addition to heading Citi’s investment banking business for the Middle East, LevI ant and Pakistan.

6/12/09 4:56:34 AM

CATEGORIES BANKING/FINANCE Financial services & products including: banking, insurance, loans, mortgages, mutual funds, money transfers and credit, charge, debit cards. REAL ESTATE Developers: residential, mixed use, commercial and retail. FOOD & BEVERAGE FMCG Food and beverages across all product categories including packaged, fresh, chilled and frozen.

2009

NON-FOOD FMCG Personal care & beauty, household cleaning products, health & wellness.

gemas

TRAVEL, TOURISM & HOSPITALITY Aviation including airlines and airports, cruise ships, amusement & recreation (including malls), country brand campaigns. AUTOMOTIVE Vehicles, auto rental, accessories & services, forecourt retailers, distributors.

mena

MEDIA/INTERNET/CONTENT/PROVIDER Broadcasters, magazines, newspapers, web sites, consumer or trade media, radio and TV stations (inc. networks), out of home.

Twice as effective 5th November 2009 - Madinat Jumeirah, Dubai, UAE For entries, contact: JP Nair, marketing manager, jp@mediaquestcorp.com For sponsorship opportunities, contact: Girish Pillai, senior business development manager, girish@mediaquestcorp.com MediaquestCorp, Dubai Media City, Al Thuraya Tower 2, Office 1901/1902, Dubai Tel: (971) 4 391 0760 - Fax: (971) 4 390 8737

ELECTRONICS/COMPUTERS AV devices including: TV, radio, DVD players, cameras, home theatre systems, electronic multimedia devices and PCs including Notebooks and laptops. BEST NEW PRODUCT LAUNCH Open to any client or agency which can conclusively demonstrate commercial success from the introduction of a completely new branded product or service. BEST USE OF CSR Submissions must clearly substantiate quantifiable, sustainable benefit for the recipients of the activity, as well as demonstrate an appropriate link with the core brand or corporate values. BEST YOUTH MARKETING CAMPAIGN This broad-based category recognises youth targeted campaigns aimed at 8-21 year olds embracing tweens, teens and college -age sub segments. Submissions must demonstrate strong emotional connection with target audiences through robust

GRAND PRIX This award cannot be entered. The award will be presented to the activity judged as the finest example of marketing effectiveness from among the category winners. GEMAS MARKETER OF THE YEAR Companies are invited to nominate an individual who has made an outstanding contribution to the marketing function and raised the standard of marketing within their organisation. The person is someone who, through innovation, strategy and communication excellence, has made a positive impact on the market place, evidenced through clearly quantifiable postcampaign evaluation. It is someone who, in the opinion of the judges, has made a significant contribution to raising the standard of marketing in the Middle East.

DEADLINE FOR ENTRY: 5 PM, 1 OCT 2009 S UP P OR T E D B Y

COSMETICS & FRAGRANCES Controlled distribution premium regional and global brands.

consumer insight and research, innovative and relevant strategies, and communication. Judges will look for clear evidence through increased awareness and sales.

S P O N S O R S

TELECOMMUNICATIONS/MOBILES Network & service providers, mobile communications devices & accessories including PDAs.

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CAPITALS OF INDUSTRY Governments from Riyadh to Abu Dhabi are stepping up efforts to become heavy-industry titans. But do they have the wherewithal to succeed? By Ian Munroe Dubai

n June, Abu Dhabi Polymers Park should begin in earnest to churn out the constituent materials from which plastic goods are made. Armed with a mission to create skilled jobs and attract investment, the 4.5-square-kilometer project, 20 minutes by car from the UAE’s capital city, hopes to attract 60 companies and enough capacity to make a million tons of pliable polymers annually. Compared to the Gulf’s once booming service sectors like finance and tourism, making money by turning oil into plastic is by no stretch the region’s most glamorous economic project. But if local governments have their way, ventures like the multibillion-dollar polymers complex could arguably play an

even more important role in the Gulf’s diversification drive. Regional plastics production will double to more than 30 million tons per year by 2012, according to the park’s senior vice president – part of a broad push to boost manufacturing along the Gulf. Aside from petrochemicals (like plastics), which are the region’s secondlargest export behind oil and gas, local steel and aluminum industries are also heating up. “We’ve had an explosion in domestic manufacturing in the region,” says Raja Kiwan, energy analyst at consulting firm PFC Energy. “Industrialization forms a huge part of their economic development strategies,” he adds, citing govern-

ments in Saudi Arabia, Bahrain, Kuwait and the UAE. King Abdullah Economic City (KAEC), an expansive $80 billion industrial hub being built on Saudi Arabia’s west coast, is the most ambitious among a host of heavy-industry projects that Riyadh is pursuing. Bahrain, home to the Gulf’s most diversified economy, is trying to expand one of the world’s largest aluminum smelters. And UAEbased Emirates Steel Industries recently announced plans to triple production within five years, through an investment of some $7.2 billion. The list goes on, and experts say such plans make perfect economic sense. But a handful of persisting strategic June-August 2009 / TRENDS 51

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Gas prices are fixed at a rate several times below what global supply and demand dictate problems have them asking whether the region’s industrial-strength ambitions are achievable. What financial crisis? Across the globe, 2009 is shaping up to be a dismal year for industrialists. Twenty percent of the world’s crackers (petrochemical plants that turn light hydrocarbons into chemical raw materials) have shut down because of sagging demand, according to the Middle East Economic Digest.

But none have closed in the Gulf, mainly because local petrochemicals firms have access to cheap energy, at stable prices. In countries like Saudi Arabia and the UAE, gas used to feed energy-intensive industries like petrochemicals sells via “what is effectively a government-administered price cap,” Kiwan says. Prices are fixed at a rate several times below what global supply and demand dictate, even in a slow year.

61.8 PERCENT

44.3 PERCENT

61.6 PERCENT

Portion of the UAE’s GDP drawn from industry in 2008, says CIA Factbook.

Portion of Iran’s GDP derived from industry in 2008, says CIA Factbook.

Portion of Saudi Arabia’s GDP derived from industry in 2008, says CIA Factbook.

52 TRENDS / June-August 2009

“That’s why they have a huge competitive advantage,” Kiwan says, adding that despite the financial crisis, it still “seems to be business as usual” for the Gulf’s existing heavy industry. Keen to exploit that cost advantage, Manama, Abu Dhabi, Riyadh and other regional capitals are hoping that embracing industrialization will make their economies bigger and more robust. “You’ve got to look at what are the motivations of Gulf states,” says Jane Kinninmont, an expert on Bahrain and Saudi Arabia with the Economist Intelligence Unit. “One of them is macroeconomic … when the price of oil goes down your economy suffers, so you want to protect yourself against those shocks.” “The other impetus is more a social and political one. The oil industry’s not very labor intensive and all Gulf governments face a domestic unemployment problem, which they want to do something about,” adds Kinninmont, who authored a recent study on the Gulf Cooperation Council’s (GCC) economic

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Under gloomy economic circumstances, the Gulf’s heavy industry seems to be holding up well outlook to 2020. “The hope is that this will be the kind of high-wage job that will absorb their graduates.” Instead of exporting unprocessed primary resources like crude oil, as many poorer countries tend to, supplying petroleum to manufacturers is a straightforward way to boost the value of goods that Gulf firms ship to foreign markets. More jobs also mean knock-on effects, drumming up business for local real estate markets and shopping malls. In other words, it holds the promise of much better returns on investment. Better yet, industrializing could boost economic growth by making Gulf workers more productive. According to a study released last year by the Gulf Investment Corporation and the Conference Board, a non-profit research organization, in 2007, Gulf workers produced only slightly more goods and ser54 TRENDS / June-August 2009

vices per hour of work than they did in 2000. Productivity in the region rose by a miniscule 1 percent annually when, by comparison, it jumped 10.5 percent a year in China over that period. Technology-based industries like manufacturing could help close that gap. “If you look at the kind of GDP growth that China is enjoying today, that could be the Gulf tomorrow,” says Ken Goldstein, a labor economist with the USbased Conference Board. “By building up physical infrastructure, absorbing human capital, there could be a huge burst of productivity,” he adds. “If it’s all done right.” Labor of love. As with many of the Gulf’s development blueprints, however, the devil is in the details. The financial crisis isn’t likely to derail industrialization. “What’s going on right now puts a speed bump – not a solid brick wall – in

front of the strategic plan” to bolster manufacturing, as Goldstein puts it. But some government-led projects have been forced to regroup. Saudi Arabia’s plans to build the world’s largest aluminum smelter have been scaled back as the project’s foreign partner, Rio Tinto, cut its capital investment budget. Dubai Aluminum Co. has also reported a 30 percent drop in sales in the first quarter of 2009, but says it won’t cut production this year. Under gloomy economic circumstances, the Gulf ’s heavy industry seems to be holding up well compared to other parts of the world. Local governments boosted spending to counteract declining foreign investment (the UAE has said it will increase state spending by 21 percent this year), and there are sizeable government reserves to lean on ($432 billion, in the case of Saudi Arabia). More serious problems loom on the horizon though. Kinninmont wonders whether labor problems will discourage

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‘In the Gulf there can be difficulties getting visas for staff, together with shortages of skilled local staff’ manufacturers from choosing to locate in the Gulf, in spite of the low tax rates and cheap energy on offer here. “There can be difficulties getting visas for enough staff, and shortages of skilled local staff,” she says. “There are still impediments to doing business.” Ownership restrictions, opaque government regulations and other bureaucratic headaches persist, and could limit industrial growth. Above all, there’s an open question about how the region’s growing alu-

minum smelters, petrochemical crackers and steel plants will be powered. Qatar’s moratorium on new gas deals stands until at least 2010. The UAE is trying to develop sour gas reserves (a sulfur-rich variety of natural gas) to help fuel industrial expansion. But sour gas extraction and processing is more technically challenging, and it’s unclear when ConocoPhillips, the company heading up development, will be able to begin production. Saudi Arabia is also searching for additional gas

7. 3 P E R C E N T

5.5 PERCENT

3.9 PERCENT

The average annual growth of the UAE’s real GDP, between 1996 and 2006.

The average annual growth of Iran’s real GDP, between 1996 and 2006.

The average annual growth of Saudi Arabia’s real GDP, between 1996 and 2006.

56 TRENDS / June-August 2009

d e p o s i t s o ff s h o r e , w h i c h a r e m o r e expensive to exploit. But recent exploration results there have been less than encouraging. “The problem is not a theoretical one – it’s very much a real concern,” Kiwan says. “Last year, Alcoa was going to move forward with a project but they decided not to because there wasn’t enough available gas. Dubai and Bahrain have been having black outs and brown outs.” If Gulf states (aside from gas-rich Qatar) can’t secure enough industrial energy supplies, it may hamper efforts to draw in manufacturers, slowing the growth of places like Abu Dhabi’s new polymers park. “The supply-demand balance remains tight,” Kiwan cautions. “If they can’t bring new supplies on past 2011-2012, things are going to become a lot tighter.” “Governments have started to realize the problem, but they have to pit economic growth and nation-building versus energy efficiency. And in the short term, I think economic growth trumps all.” I

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Employment

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LABOR’S LAWS LOST Bahrain’s decision to reform the visa system is likely to have far-reaching consequences for employment across the GCC. By Alex Malouf Riyadh

ahrain doesn’t often make the headlines. Sandwiched between Saudi Arabia and Iran, the tiny kingdom makes more headlines for the congestion on the King Fahd Causeway than for its economic might. That all changed at the start of May, thanks to Decree 79 of 2009. The new law, announced by Bahrain’s Minister of Labour Majeed al-Alawai, is aimed at doing away with a sponsorship system for foreign workers that many have claimed is antiquated and open to abuse by the employer. The sponsorship system common across the Gulf, known by its Arabic name, kafala, is the legal basis for residency and employment. Migrant work-

ers receive an entry visa and a residence permit only if a GCC citizen or a GCC institution employs them. In turn, sponsors exercise full economic and legal responsibility for their employees. The sponsorship system, in use for over three decades, has long been subject to allegations of employee exploitation and abuse. Bahrain’s new labor law, which will come into effect in August, will allow foreign workers to switch jobs without the consent of their employer. According to al-Alawai, the law will stop the practice of Bahrainis sponsoring several, sometimes hundreds of foreigners, and charging them a ‘visa fee’ to work with another employer. In effect, the

sponsorship system would no longer be open to abuse. “The end of the sponsor system is the most important aspect of this law, because in my opinion that phenomena does not differ much from the system of slavery and it is not something suitable for a modern country like Bahrain,” said alAlawai. “That system will be broken and eradicated under the new law, because it will end the absolute power which the employer had over the foreign worker.” The reforms put Bahrain at the leading edge of reform. They will also help slow the flow of foreign workers into Bahrain and increase the percentage of Bahrainis working in the private sector, according to the country’s government. June-August 2009 / TRENDS 59

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Employment

‘The more easily people can move posts, the more likely it is you’ll have the right person in the right job’ Archaic system. Bahrain’s decision to scrap its archaic sponsorship system, likened by the US State Department in its 2007 “Trafficking in Persons Report” to “modern-day slavery,” will also have the benefit of making Bahrain a more attractive place in which to work – an important means by which to attract much-needed foreign direct investment, particularly with the financial crisis.

“The change in regulation is positive for the investment environment and labor mobility,” says Monica Malik, an economist at EFG-Hermes. “It will help to reduce the cost and time linked with labor issues.” Simon Williams, of HSBC, agrees. “The more easily people can move between posts, the more likely it is you’ll have the right person in the right job.”

MAY 6 2005

JUL. 30 2006

APR. 16

5,000 citizens jam roads to call for constitutional reforms in Bahrain.

16 Indian nationals die in a fire at the sleeping quarters provided by their employers.

Decree 79 of 2009 is passed, giving greater labor mobility for expatriates in Bahrain.

60 TRENDS / June-August 2009

According to al-Alawai, the new labor laws will prove to be a spur to the country’s economy. He claims that businesses that oppose the reforms will soon change their minds. “There is strong opposition from employers, but we think it is good for the market. It will end the black market for illegal visas and will raise salaries, because workers will have an option to go to employers who will treat and pay them better. It will also help us raise the standard of wages amongst Bahrainis,” he says. “Practically, it will end the sponsorship system and illegal visa system, because those contractors will not be successful. If the sponsor is holding you, holding your passport and not paying your salary, then you can easily just move onto another employer,” he says. For one recruitment expert based in Bahrain, the reforms may not make much difference in certain sectors or at the top end of the market. “People have

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One option the Ministry of Labour is considering is the government sponsoring foreign workers always moved freely between banking roles in Bahrain,” says Rory Adamson, director of Bahrain-based executive search firm Azrek. “For other industries in the private sector, this move should make a difference, but banks have always operated this policy,” he says. The question many are now posing is what will replace the existing sponsorship system, which will lapse in August. Initially, the Labour Market Regulatory Authority – also headed up by al-Alawai – will review workers’ requests to change jobs. However, longer term, one option the Ministry of Labour is considering is the possibility of the government sponsoring foreign workers. Nevertheless, employees are a long way from living in a utopian society. Following demands from the Bahrain 62 TRENDS / June-August 2009

Chamber of Commerce and Industry, an employer will be able to terminate a member of staff’s contract and deport him or her with a month’s notice. The Bahraini government is also considering a cap on the number of foreigners who enter the country. A decision on the proposed cap is expected by the end of the year. This is because the top priorities for Bahrain’s authorities are nationals and employment. The Minister of Labour rebuffed accusations that the reform of Bahrain’s sponsorship system was forced on the country because of pressure from foreign governments. Instead, he argued it’s all about ensuring Bahrainis are in work and earning a decent wage. This will not, however, lead to the introduction of a minimum wage.

“We don’t want a minimum wage because our businesses, industries and services are linked to the GCC economy. Unless a minimum wage is introduced to the whole region it would be a huge disadvantage to our companies. We are instead encouraging market forces to increase the rates, but there will be no legal minimum wage. There will be no minimum wage in our lifetime. If you apply a minimum wage, then by international law we have to pay expatriates and Bahrainis the same and that will cause a big problem for many companies,” says al-Alawai. “The problem of unemployment is not caused by the lack of job opportunities available here. We don’t have real unemployment, so having a [minimum wage] will allow us to address the issue of low wages, which is the main problem,” he says. Regional rethink. Bahrain’s decision may have implications not just for its own citizens and expatriates, but also

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Employment

Debate around the sponsorship system has been simmering for some time in Saudi Arabia for the rest of the Gulf. Qatar has set up a committee to look into scrapping the sponsorship system. Saudi Arabia, a country that hosts over eight million foreign workers, is doing the same. So there are major implications for business. Results of a report conducted by the Riyadh Economic Forum into the state of the kingdom’s economy, claim that the sponsorship system for expatriate workers curtails competitiveness and hampers human resource development.

The report, which was submitted to King Abdallah, added that Saudi Arabia’s immigration regulations and recruitment policies were not attracting outstanding and competent workers; instead, the sponsorship system promoted the employment of low-productivity job seekers. In effect, the study concluded that the sponsorship system requires radical reform. Already, Saudi business leaders have begun to discuss the subject in pub-

$1.8 BILLION

$1.9 BILLION

$2.5 BILLION

Foreign direct investment in Bahrain during 2007, according to the United Nations.

Foreign direct investment in Jordan during 2007, according to the United Nations.

Foreign direct investment in Lebanon during 2007, according to the United Nations.

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lic and many are urging the Saudi government not to follow Bahrain’s lead. “[Labor reform] is a very serious issue and the media should not stir up the labor market by attacking and criticizing businessmen and entrepreneurs who have the right to protect their business interests,” says Abdul Mohsen Al-Moushegah, chairman of the Al-Moushegah Group of Companies, a Saudi construction and engineering conglomerate. “Many of us have invested huge amounts of money in hiring and training foreign workers. We pay them well, and treat them as equals. We cannot just allow them to jump from one job to another,” he says. Nevertheless, Bahrain-based recruiter Rory Adamson believes that reform would bring about a measure of common sense to a system that many believe is out of date: “I recently recruited an expat worker – who was already in Saudi – into another bank in the kingdom. In order to sidestep the visa policy, he's been forced to live in Bahrain for a year and commute to Saudi Arabia." I

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THE EQUITABLE OUTCOME The global financial downturn has fundamentally changed the world of private equity in the region, hopefully for the better. By Ehtesham Shahid Dubai

hen the marketplace goes awry, turn to academics. Yet private equity (PE) players seem to have ignored their advice, or at least the wisdom Stewart Hamilton, professor of finance and accounting at Swiss business school IMD, has been offering on the subject. For years, Hamilton has been talking about the “substantial nervousness surrounding the performance of private equity funds,” lecturing for his university’s MBA and open-enrollment programs. He also forewarned of today’s scenario in his 2006 book “Greed and Corporate Failure.” The downturn happened nevertheless. Asked how his understanding of the subject applies to the Middle East and

what are the lessons to be learned, Hamilton offers more than just one hypothesis. He says many of the private equity players are recognizing too late that they significantly overpaid for some of the deals. “The smarter ones got out and sat on the sidelines because they were unwilling to pay some of the crazy prices. Some of them are having the learning forced on them,” he says. On what the future holds for them, he is even more severe. “The funds will disappear and the monies will be returned to the original investors. They will have difficulty re-entering the market in the foreseeable future,” he says. That may be PE’s worst kept secret out in the open, but not everyone is call-

ing it doom and gloom despite the change that the financial meltdown has brought about. From more money chasing fewer deals a few quarters ago, to fundraising difficulties and underachieving investments, the landscape has certainly changed for PE in the region. With the days of quick-flipping over, there is a need to exercise greater prudence in acquisitions and create value post acquisition, things that were not always on the priority list. While year 2008 saw a significant accumulation of “dry powder,” industry insiders now admit no fantastic deals have happened in recent months. According to the “Gulf Venture Capital Association (GVCA) Annual Report 2008,” private equity companies have June-August 2009 / TRENDS 67

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Private Equity

The number of deals executed by GCC PE firms has reportedly plunged 60 percent in recent months $11 billion ready for investment. But deals are hard to come by, exit routes are scarce and smaller players are finding it difficult to raise funds. In contrast, fund managers last year collected $6.4 billion, 10 percent more than the previous year. The situation is forcing companies to wait for recovery. Whenever that happens, it’s unclear whether investors will continue to channel their money to the same players or wait for consolidation.

According to one estimate, the number of reported deals executed by PE funds in the GCC plunged over 60 percent in recent months. The plunge in GCC stock markets has dried up exit opportunities and damaged the attractiveness of IPOs as well. This situation is drastically different from the one not too long ago when liquidity was abundant and there was pressure to do transactions irrespective of valuations. This, according to

48 DEALS

64 DEALS

50 DEALS

The number of private equity transactions recorded by GVCA during 2006.

The number of private equity transactions recorded by GVCA during 2007.

The number of private equity transactions recorded by GVCA during 2008.

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some, led to questionable deals that took place in areas where PE players had little expertise. “They invested in high valuations and bad assets, and, more importantly, had little or no post-acquisition experience to make such investments work,” says one insider, on condition of anonymity. “In my view the number of private equity players in the region is likely to shrink even if assets under management or aggregate stay as is.” As per GVCA figures, the number of PE investments dropped by 22 percent between 2007 and 2008, while the volume of investments declined 31 percent. Most still assert that all is not lost and, according to a KPMG report, large players with established track records are set to bounce back. “Since historically the best PE returns have been from investments made during an economic downturn, strong funds will survive, while those without track records will disappear,” says its report, “Key Trends in MENA Private Equity in 2008.” “After a period of little activity and after the

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Private Equity

PE firms used to make a lot of money from the increase in general market valuations. Not any more. market settles, there will be decreasing emphasis on minority stakes and more focus on majority control transactions.” Seifallah Zoghbi, vice president at the Investor Coverage Team of Abraaj Capital (a shareholder in the parent company of TRENDS), says the nature of the private equity and its strength in the Middle East largely remains uncompromised despite the crisis. “Private equity is all about creating value in partner companies and there isn’t going to be any fundamental difference in that approach,” he says. “However, the playing field has changed over the last nine months and managers need to have an increased focus on portfolio management during these turbulent times.” Fundamental change. Tamer Bazzari, the deputy CEO of Rasmala Investments, says recent market conditions have made investing in PE more chal70 TRENDS / June-August 2009

lenging and have brought about a change in habits. According to him, before you could put a bit of money into PE and do extremely well in a short period of time from the increase in general market valuations. The nature of PE in the region, he says, was also more of financial engineering. “So you buy a good company with good cash flows, add a bit of leverage, and as it goes up in value with increased market valuations you make a lot of money. That’s not going to be the case going forward,” says Bazzari, whose company announced the first closing of Rasmala MENA Private Equity Fund 2 in January, with $120 million in commitments received. With the rules of the engagement altered, operational improvements are the need of the hour. This means understanding the business you are investing in,

improving operations, enhancing corporate governance, expanding geographically and getting involved more actively. “It has to be more than just attending board meetings four times a year. A lot more integration, strategy and hand-holding is now going to be required to add value,” Bazzari says. The same trends are surfacing abroad, particularly due to the lack of leverage and scarce liquidity available from banks. Industry players are in agreement over the new reality. They say there has been a lot of uncertainty since the last quarter of 2008, which trickled into the first quarter of this year. “There has been unwillingness to make new investments and a lot of focus on restructuring and cutting costs,” says the leading executive of a major PE firm in the region. “We are looking at transactions and we are reactivating the dossier put on hold in the last few quarters. So there are more announcements globally and more transactions are starting to happen

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again.” Focus has shifted to reestablishing platforms of existing businesses instead of going out and seizing new opportunities. That means time to think, reanalyze and discuss the setup of businesses will be crucial to the next phase growth for PE portfolios. Ground beneath. Irrespective of whether lessons have been learned or not, there has been no lack of activity on the ground – albeit of a different kind. The entry of Kohlberg Kravis Roberts (KKR), a global alternative asset manager, is a case in point. On May 11, KKR MENA obtained a license to operate from the Dubai International Financial Centre (DIFC). Abdulla al-Awar, the managing director of the DIFC Authority, had an interesting welcome note. “Our region is witnessing a deepening of the financial markets,” he said, “and private equity is not only abundant here, but is fairly active.” KKR says it sees a wide variety of attractive opportunities in these markets and “looks forward to capitalizing

on its global resources to build an exceptional franchise.” Within days of this announcement, KKR appointed Ford M. Fraker, the former US ambassador to Saudi Arabia and former chairman of private investment banking firm Trinity Group, as a senior adviser to the firm. There have been several other significant developments. Kuwait’s KIPCO said that if market conditions are suitable, it may launch a PE fund targeting the MENA in 2009. Istithmar World Investment Management (Dubai) has also been granted a license to

provide investment management services focusing on private equity and alternative investments from the DIFC. At the same time, stakeholders are brainstorming to revive the fortunes of their industry . The Dubai Financial Services Authority (DFSA) said in March that it wants the DIFC to consider establishing the Gulf’s first PE secondary market where holders of non-listed equity can sell or transfer their investments. DFSA chief executive Paul Koster said there is an opportunity to create a “trading facility,” by which PE fund managers

H EALTH CAR E

TRANSPORT

P O W E R S U P P LY

This sector received 16 percent of regional private equity investments in 2008, says GVCA.

This industry received 15 percent of regional private equity investments in 2008.

This industry received 15 percent of regional private equity investments in 2008. June-August 2009 / TRENDS 71

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‘Private equity thrives when economies are thriving, when people are looking to expand, to invest more’ “can partially sell an investment” from their portfolios. This would provide the fund manager fresh capital and the new investor an alternative exit strategy to join an investment run by a professional fund manager. “The objective of this proposal is to explore how the DIFC could facilitate non-listed entities in raising capital in a manner where those parties who subscribe into such a capital raising are then subsequently able to reduce and/or exit their investment by way of such a trading facility,” Koster said. Such a move will be significant, considering the UAE accounts for 26 percent of the MENA region’s PE transactions. Double-edged sword. Bold moves apart, insiders say the biggest challenge for PE firms going forward will be raising debt. It works both ways though, because companies that need to grow and cannot borrow from the banks might seriously look at PE. What’s missing from the equation, however, is an escape route. Even weaker 72 TRENDS / June-August 2009

players – who may want to exit deals to grab more liquidity – will find few buyers. Whether they like it or not, they are left with no option but to do value additions so as to make their companies saleable. Some say that reinforces the theory that the markets in the region are maturing and investors are realizing that PE is not a financial gimmick, it is also about growth and expansion. The message has begun to sink in on that front. Salman Malik, a senior investment manager at Swicorp, says over the last few quarters private equity players in the Middle East have already shifted their focus from “deal origination and execution to post-acquisition management.” He adds that “companies with access to capital today are well positioned to pick up assets at very attractive valuations.” Riyadh-headquartered Swicorp is a corporate finance advisory, private equity and principal investment firm, with $1.5 billion funds under management.

The trouble is, a lot of funds may still be standing on a weak footing in terms of shareholding, debt, understanding of businesses and their managers’ ability to execute these deals. This isn't necessarily bad news. “It will help in a way because it might remove the weaker elements [players] and reinforce the stronger ones,” says one insider. “However, if the market conditions worsen, the weak ones might not survive but the next phase will probably be better for the industry.” The global financial crisis has indeed educated investors. Now they’re bound to do more due diligence before committing money. Easy money can no longer be made quickly, as it could in the past. Yet for those still left with stacks of cash, Stewart Hamilton of IMD University isn’t necessarily a scarecrow. He sees the bigger picture. “Private equity thrives when the economies are thriving – when people are looking to expand, invest more and when they can see opportunity,” he says. “As long as opportunities exist in the Middle East, there will be people who want to be part of it.” I

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Education

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HELLENIZING LIBYA In one of the Arab world’s most isolated countries, a Greek community school has been transformed into a social experiment in educating global citizens. By Iason Athanasiadis Benghazi

cross the Middle East, from Cairo and Istanbul to Damascus and Tehran, abandoned churches, schools and social clubs, wrought in the neoclassical style that was in vogue during the 19th century, lie abandoned. Few efforts are made to revive them by the surviving octogenarian patriarchies. Instead, fossilized boards of directors meet once or twice a year inside these crumbling buildings, for extended procrastination sessions. They are surrounded by thick walls, their plaster peeling off. The dim roar of 21st century traffic peters through as a reminder of besieging modernity. For Benghazi, a dusty Mediterranean city just 200 kilometers south of the

Greek island of Crete, its Greek community reached the point of extinction in the 1980s, as an international embargo was slapped on Gadhafi’s Libya for its alleged role in the bombing of a Pan Am flight over Scotland. Flocks of Greek businessmen departed as opportunities dried up. After a century of commercial back and forth that mirrored millennia of trade in this corner of the Mediterranean, socialist policies and a crippling bar on trade with the outside world dwindled a once-thriving community to a few families. 2004 was the last year the Greek community school functioned. That year, six teachers taught the two remaining students.

“In the name of maintaining Greekness we led ourselves into seclusion, even though Greece is in the European Union and most Greeks no longer live in homogenous ethnic states,” said Kanakis Mandolios, who is the president of Benghazi’s Greek community. “So we decided to create here in Libya a multicultural community of the type the EU is striving to replicate.” Frustrated at the network of empty Greek schools no longer serving the Middle East’s depleted Greek communities, Mandolios offered Benghazi’s school building to Benghazi European School (BES). In one stroke, the Greek school was converted into an international educational establishment. June-August 2009 / TRENDS 75

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With 40 nationalities represented, the school represents Libya’s emergence from global isolation Today, it boasts first-world facilities and equipment, tennis, basketball courts and spacious classrooms. “When you walk into here, you forget you’re in Libya,” said Gisela Vejmelek, an Austrian expat engineer who sent her children to BES. For BES, its present surroundings mark a long journey from a humble start in 1999, when a $70,000 grant by a Cretan trustee and six pupils taught inside two prefabricated living containers set out on an ambitious experiment. The timing was propitious. Less than four years after the school opened, Libyan President Muammar Gadhafi 76 TRENDS / June-August 2009

announced in an address to the world that his country would accept the terms for lifting the international embargo that had kept it isolated for nine years and arrested its growth. At the moment, 65 students from 40 nationalities (speaking 12 languages) attend the school. By 2011, the school will have 100 pupils, taught by a mixture of Libyan university professors, foreign full-time staff, and expat wives moonlighting as occasional teachers. Staff members admit the result has been as positive as it could be “in a loose environment regarding discipline and homework.” Many of the students

go on to study in British or Canadian universities, or Tripoli’s elite but ramshackle Fatih University. Libya is no longer the cosmopolitan entrepot of the 1940s. Its Jewish community emigrated to Israel, the Christians left, and public entertainment in this observant Muslim society is limited to the odd restaurant and a thriving Sufi music scene. With mixed-sex interaction occurring mostly inside houses, lovers meet in dusky parks or frantic hospitals. Alcohol is banned even in international hotels, but Benghazi’s Western and Westernized youth can still dance, drink and have their first romantic encounters in furtive social gatherings at home, or – once the weather warms – on isolated beaches far from peering locals along Libya’s sprawling coastline.

Trends 22x27cm E Raja-Empost.indd 2

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BES is a a petri dish for building the next generation of multicultural, multilingual Libyans But more important than academic achievement, Mandolios says the school is a petri dish for building the next generation of multicultural, multilingual Libyans, as comfortable in English and French and mingling with Christians, Jews and agnostics as they might be around fellow Muslims or talking in their native Arabic. “What they gain is a multicultural community which is a necessary weapon

in the international society we live in,” said Mandolios. “They get in a conservative Arab environment the gift of a foreign culture.” To this end, an ethnic quota system was instituted, which strikes a very conscious balance between international students, full Libyans, and half Libyans from mixed marriages. In this game of balances, the idea of a dominant culture emerging is avoided in

S C O T L A N D

SAUDI ARABIA

USA

In 2003 Libya accepted culpability for the deaths of 270 people killed in the Lockerbie bombing.

Gadhafi attempted to reconcile with King Abdullah at the March Arab League summit.

In 2008 Gadhafi met US Secretary of State Condoleezza Rice, in a bid to ease relations.

78 TRENDS / June-August 2009

favor of pluralism – a symphony of languages and colors. Still, cultural harmony is not always possible, whether in the school or the wider community. At the height of worldwide rioting over the Danish newspaper cartoons in 2006, 10 people perished when a mob rampaged through Benghazi, burning down the Italian consulate. The school remained open and untargeted in what, Mandolios says, is testament to its strong Greek community roots. “This is a community school, it’s not an embassy construct,” said the member of the Board of Trustees whose construction company gave a Greek templelike facade to the school’s new premises. “It’s about harmonious coexistence.” Aside from imparting knowledge, teachers must mix the children and encourage them to see their commonalities rather than fixating on cultural differences. In what is a deeply conservative and almost exclusively Sunni Muslim country, the school is a rare multicultural lake.

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Education

‘We no longer live in homogenous ethnic states, we’re entering again the era of empires’ “Religious education is not offered in the school, except that religious matters will come up in the normal course of the History curriculum,” said Anthony McQuiggan, the headmaster. What cannot be achieved in the classroom is often resolved with extra-curricular activities that reinforce in the pupils’ minds the shared Mediterranean culture of the country they inhabit. There are school trips to Libya’s splendid Roman sites of Leptis Magna and Ptolemais, and an excursion to the Greek island of Crete. On a recent trip to the desert, the sole European pupil among 11 students on the trip (aged between 14 and 18) worried he would be shunned by his Arabicspeaking classmates. When the Englishspeaking child was assigned the same tent as another pupil with whom he fought in school, teachers feared the 80 TRENDS / June-August 2009

worst. But the desert transformed their relationship positively. “Each nationality is different from others and sometimes it’s hard,” said Walid Kombari, a Beirut-educated Palestinian teacher at the school. “But he got on with the kids better than we had expected – the desert achieved what the city could not.” For Mandolios, the Greek community president, building this school with his own hands is payoff for not having abandoned Libya through the hard years of the embargo, unlike the majority of Greeks who jumped ship. “We created a microcosm in the school in which people could live well,” he says. “The outside circumstances were not good, which is why no-one remained or bothered to invest in their surroundings.”

A fluent Arabic speaker originally born in Egypt, Mandolios represents a generation of the Middle East’s cosmopolitan multilingual Greeks now rapidly rushing towards extinction. These Greeks were romantically captured in works of literature such as Olivia Manning’s “The Cairo Trilogy” and Lawrence Durrell’s “The Alexandria Quartet.” But their multicultural breeding grounds were drained by the storms of pan-Arabism and Islamist exclusionism that swept the Middle East in the post-colonial period. Mandolios inserts a lit cigarette in the mouth of his long, cultured face, and parks the packet on the table against a no-frills Nokia turned to silent. In forging this school, he seeks to leapfrog the damage inflicted on his heritage by a century of nationalism. “We no longer live in homogenous ethnic states, we’re entering again the era of empires,” he says. “The trick now is to learn to get along.” I

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Cover Story: Tourism

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THE OFF-PEAK YEAR Caught in the midst of infrastructure overdrive and global slowdown, the region’s tourism sector will be forced to find new revenue streams to survive the lean times. By Ehtesham Shahid Dubai

ourists are no strangers to the shores of Arabia, but never in history have they been so critical to the future of the region. Alongside the second oil windfall, the region identified the sector and worked upon it as a key component of economic diversification. Since then the Middle East has already spent millions on building infrastructure and grooming destinations to keep the numbers flowing in. But with the financial downturn throwing a spanner in the works and projections going haywire, the ensuing months are certain to be a test of the region’s ability to stay the course and meet its long-term tourism objectives. With a high dependency on intra-regional travel of over 40 percent

and growing, the region cannot afford to roll up its welcome carpet. Fortunately, with a lot of momentum gathered in recent years, the tourism sector enters this phase of uncertainty from a position of strength. An Alpen Capital report, citing the International Monetary Fund (IMF), says international tourist arrivals in the Middle East more than doubled from 24.4 million in 2000 to 52.9 million in 2008. With a compound annual growth rate of 11.7 percent, that is more than double the world international tourist arrivals (4.4 percent) over the same period. The WTO data says international tourism receipts in the region grew by 25.5 percent, from $27.3 billion in 2005 to $34.2 billion in 2007,

and are expected to reach $38 billion in 2008. According to a Euromonitor International report – “Future Trends for Travel in the Middle East” – a total of 67 million arrivals to MENA brought $50 billion worth of incoming receipts during 2008. Clearly there is a lot at stake, and the region can ill-afford to lose ground at a time of crisis. Refreshingly, sector stakeholders are displaying more realism than they have been known for. They are willing to make short-term adjustments to achieve broader objectives. Hoteliers are openly admitting a drop in occupancy, authorities are cutting tourist projections, and airlines are launching budget brands. Hotel owners and management companies are being June-August 2009 / TRENDS 83

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Tourism dollars are being missed in markets with long-term potential like China and Latin America advised to assist each other in promoting destination tourism and not just rely on government marketing. The focus is therefore shifting towards maximizing revenue streams and greater efficiency at lower costs, even though key drivers are very much part of the equation. The reason is simple. Around 68 percent of the population of the GCC are aged under 35, and there is still a positive regional GDP growth compared to other parts of the world. The liquid assets in the form of oil reserves that provide a cash buffer during boom times are now proving a valuable resource for the region in the current crisis. More importantly, government investment in infrastructure is set to keep the momentum going. Correction time. The sector is still nervous, though – awaiting good news with bated breath even as short-term 84 TRENDS / June-August 2009

projections spread further gloom. Independent observers are revising tourist target numbers in places such as Dubai. “The 10 million visitors by 2010 [in Dubai] is not achievable in the current climate. However, it will be by 2013 once the global economy recovers and developed countries’ growth stabilizes, leading to improved consumer confidence,” says Caroline Bremner, the global travel and tourism manager at Euromonitor International. The source of tourism dollars is still not being properly tapped. The United Kingdom will continue to be the region’s leading source market, whereas key alternative source markets with emerging middle classes remain negligible, even as China, Brazil, Eastern Europe and Latin America offer long-term potential, according to Euromonitor.

Government support notwithstanding, hotel occupancy rates have been falling significantly in Dubai – to 73 percent in the first quarter of 2009 from almost 90 percent last year (according to one estimate). To tide over this situation, different players are trying different prescriptions. “First we launched a 20 million savings campaign in our net profit line,” says Marko Hytonen, the area vice president for the Middle East and Egypt at Rezidor, the multi-brand hotel management company. His company then followed up with another initiative to save 10 million more so as to stay in line with the drop in revenues. “It has been a bit of a corporate diet. We still keep the muscle but we trim the extra fats,” Hytonen says candidly. Rezidor ’s biggest drop has come about in Dubai. “During the first quarter we have lost 36 percent in revenue per available room in Dubai,” he says, and the average house rates have also definitely decreased in the city. “It definitely

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‘I think it is going to get worse before it gets better. We have to fight harder to get our piece of the cake.’ is correction time, there is no question about it.” Rezidor currently operates in 20 countries, has 5,000 hotel rooms in operation and is in the process of adding another 5,000 rooms and 18 hotels over the next five years. The Dubai Department of Tourism and Commerce Marketing (DTCM) has a different story to tell, however. According to the department, hotels in Dubai saw a five percent increase in the number of guests in the first quarter of this

year. “A total of 1.99 million guests stayed in Dubai hotels in the first quarter of 2009, five percent more than the corresponding period in 2008,” a DTCM statement said. According to them, the number of operating hotels and hotel apartments rose to 519 in the first quarter of 2009, up from 475 during the corresponding period in 2008, while the revenue of hotel establishments during the January-March 2009 period was 4.26 billion dirhams ($1.2 billion).

11.6 million

8.8 million

2.3 million

Number of visitors arriving in Saudi Arabia in 2008 according to Euromonitor.

Number of visitors arriving in the UAE in 2008 according to Euromonitor.

Number of visitors arriving in Oman in 2008 according to Euromonitor.

86 TRENDS / June-August 2009

Like many others in his sector, Hytonen of Rezidor is unsure about how long this situation is likely to continue. “There has been discussion that 2010 would be a more destabilizing year and [the economy] will pick up 2011 first half. I think it is going to get worse before it gets better, this is at least the feeling. I think the market is not going to get bigger, so we have to fight harder to get our piece of the cake,” says Hytonen. There is also a disconnect with regard to the supply-demand equation in the hospitality sector. Hytonen notes there are around 45,000 hotel rooms in Dubai today, another 13,000 are estimated to come online next year, and 10,000 more by 2011. He says a lot of these estimates are based on what was in the books last year. “I do not believe operators have adjusted and consolidated the situation yet. We will get a better and more accurate picture by the end of the year,” he adds. The numbers aren’t dipping everywhere, though, because there are segments within the sector making hay

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despite the gloom. The food and beverage segment remains largely intact, while online travel booking is actually looking up. Tom Rowntree, the vice president commercial at InterContinental Hotels Group, argues drops in numbers can be offset by other more vibrant segments. “The MICE (Meetings, Incentives, Conventions and Exhibitions) sector continues to be strong, and if you look across the region there will continue to be a market despite global economic downturn. Moreover, we are in the market on a long term,” he says. During an economic downturn, he suggests, there is a short term or a tactical approach and a more long-term strategy positioning. “The more tactical focus necessitates looking at promotions and campaigns to stimulate the market and activate the opportunities that exist,” says Rowntree. The growth in online demand is a far more interesting story. Diego Lo Fuedo, the director of Hotels.com, says there has definitely been a slowdown in general, but it is different for the online segment. “In times of crisis, people tend to go digital, which is not just a faster way to communicate but

also gets you a variety of offers,” he says. So if tourism is expected to grow by 4 percent to 7 percent, the online shift is growing at around 15 percent to 20 percent, depending on the geography. Lo Fuedo also rules out lack of Internet penetration as a problem. “There is always a learning curve,” he says. “The Internet levels increased in the West only in the last 10 years. The shift in information channel to transactional channel is only recent,” he says. Beyond Dubai. On the ground there are different sets of realities confronting different countries. Some are far too out of the loop to really get hit by the downturn. Qatar, for instance, currently receives only 0.9 million international visitors, out of which 90 percent are for business purposes. From these figures, there is clearly a large amount of work to do to build Qatar, and Doha, as a leisure destination. Caroline Bremner, of Euromonitor International, says investing in Doha’s tourism offers is a good start. “These steps are critical to building its credentials as a leisure destination and will help underpin 10 percent arrivals growth per year, so that

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Cover Story: Tourism

Gulf countries have more than $140 billion worth of hotel projects under construction the country welcomes 1.7 million visitors by 2013,” she says. Tourist arrivals are indeed important, not only for the hotel sector, but also the broader service and retail sector. Besides those blips on the tourist radar, Doha seems to have chosen to take the retail route to attracting tourists. A Jones Lang LaSalle report says about 500,000 square meters of retail space is expected to come online by 2011, which

will double the retail stock within the city. That is not necessarily good news under the circumstances confirmed by the report itself. “Faced with this increased supply and declining global tourism, rentals in the Doha retail market are expected to decline in the short term,” the report reads. Although the level of leisure travel for sporting and other events is likely to increase in Doha, the business and convention sec-

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The number of new hotels currently under construction in the Gulf region.

The number of new hotel rooms currently under construction in the Gulf region.

Value of the new hotel facilities currently under construction in the Gulf region.

88 TRENDS / June-August 2009

tor will remain the major driving force of Qatar’s tourism mix. Abu Dhabi has chosen to focus on family and cultural tourism, which observers say should hold the emirate in good stead. But, since it doesn’t overly rely on tourism, little sleep is lost. Places like Oman are happy holding on to their ground as regional leisure destinations, and wouldn’t want to experiment at this time. However, construction activity isn’t drastically slowing down across the region. According to Proleads research, Gulf countries have more than $140 billion worth of hotel projects under construction and 19 percent of the projects are being suspended or canceled as the sector faces a global slowdown. Of 893 hotel projects surveyed in the Gulf, 5 percent had been canceled, 14 percent put on hold, and 42 percent were underway. Road to recovery. The same yardstick cannot apply to the entire region, but Dubai and its exploits in recent years have certainly raised the bar on tourism

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potential. As one would expect, Dubai has suffered the most in the face of the downturn. Euromonitor considers Dubai’s population decline of 17 percent a major concern. Then there is the real-estate bust, over half of the city’s development projects are on hold or delayed, and there are cases of expatriate migration and rising job losses. According to an Economic Intelligence Unit report, the rapid population growth witnessed in 2006-08 in the UAE has now gone into reverse as expatriate jobs are cut in the construction, real estate, tourism and financial services sectors. “This will affect private consumption in both the short and medium term,” it says. But Graham Cooke, the founder and managing director of the World Travel Awards, says it is all part of a growth curve and the region is no different. “Whenever a new destination is discovered, tourist numbers rise drastically and then level off. What Dubai did for the Middle East's tourism sector was fantastic – it put them on the map and brought everyone's focus to this region. Now the region’s tourism destinations should think how they

can build from that,” he says. The trouble is, three of Dubai’s key tourist markets – the UK, the euro zone and Russia – are in recession, with depressed consumer confidence and rising unemployment. Cooke admits the number of tourists and business travelers will decline given the global financial situation, but that’s not the end of the road. “As long as these destinations continue to remain competitive, their airlines continue to offer world-class service, and their tourism experience continues to diversify, tourists will keep coming,” he says. “I don’t think it will be as catastrophic as people make it to be. If the projected number of tourists don’t show up in the Gulf countries there will still be a tourism sector.” Nevertheless, despite those encouraging words, the sector is not investor grade in the near future. The Jones Lang LaSalle “Hotel Investment Outlook 2009” report bluntly sums up the future with a simple chronology: “2009 will be the year of correction, 2010 will bring market stability ahead of general recovery in 2011.” I

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Interview: Selim el-Zyr

BACK TO BASICS Selim el-Zyr, the president and chief executive officer of Rotana Hotels, tells Ehtesham Shahid about the hospitality sector and how it can duck the downturn.

ou recently bagged several awards at the World Travel Awards event. How does it feel to receive an award in these difficult times? Every company, every individual, needs recognition for whatever he does. An award is one way the market, customers, or specialized institutions recognize your efforts in reaching a certain level of professionalism. How do you view the difficulties facing your business in 2009? 90 TRENDS / June-August 2009

It has been challenging, but in every depressed market there is an opportunity. It is an opportunity for us now to go back to the basics, to go back to normality. Everything went berserk at once – prices, rates, salaries, costs. Everything was hitting the roof and for no reason. But even before that set in you had started moving into Abu Dhabi, which is comparatively better off. Was that anticipation or calculation on your part?

We actually didn’t move, we started in Abu Dhabi. But obviously the demand three to four years ago was mainly in Dubai; Abu Dhabi was somehow stagnant. Around four to five years ago, Abu Dhabi started picking up. So we didn’t shift gear and go to Abu Dhabi, we were in Abu Dhabi, but we opened our eyes to the opportunities that existed – the low-hanging fruit was in Abu Dhabi. Where has the focus been in the region outside of the UAE?

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We are all over the Middle East and are now moving into the Saudi market and North Africa. The Saudi market has got tremendous potential; we had many, many opportunities before, but we did not want to go with one property or two or three. We want to go to Saudi Arabia and within a period of time to cover the whole kingdom, which is a massive country. Saudi Arabia is two million square kilometers in size. The travel time between Jeddah and Riyadh is around one and a half hours by plane, so to go and open a 250 to 300room hotel wasn’t going to be viable [as people won’t stay overnight].

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will tend to go to Oman and other neighboring cities, and also to Southeast Asia. Dubai is not more expensive than any other city in the region, but it has got superior hotels. The Burj Al Arab is, of course, very expensive, but where is there another Burj Al Arab in the Middle East, or a Madinat Jumeirah? The standard of services and luxury that exists in Dubai does not exist elsewhere. But if you take the same product in Cairo, in Beirut, in Muscat, or in Abu Dhabi, Dubai is at the same level. Now with regards to rates, obviously when there is less demand, rates are going to come down.

But there is also a categorization of How much are your hotels happening, and lots of movement in the ‘A budget hotel plans dependent on the projected tourist numbudget sector of the isn’t cheap – it bers? Are you considermarket. How are you means better ing a backup plan for a placed to tackle that? value for money, situation in which those Rotana started talking that it caters to numbers don’t turn up? about budget hotels in the middle of the expanessential needs’ We are adjusting our plans. When we did the sion period. Three years ago, when we talked about budget projections for 2009, we did them in hotels, everybody thought we were July and August 2008. At that time crazy. Budget hotels are needed at all there was no crisis. So we based our times, and particularly in difficult projections on numbers that we had times. A budget hotel doesn’t mean it from 2007 and 2008. But once the criis cheap – it means better value for sis started we adjusted our numbers, money, that it caters to essential needs. and now every month we are adjusting You’re not going to book into a our projections. hotel that has got a 40 to 45 squaremeter room when you’re only going Do those adjustments happen quarto spend seven or eight hours sleep- ter to quarter or is there a more ing. If you come to an exhibition, long-term view? many people would look for accom- We are doing it monthly now, because modation where there’s just a com- the changes are unexpected. This is a fortable bed, it’s clean, safe and crisis [the like of which] we have trendy, and that’s it. But this doesn’t never seen before. Nobody has got mean that people won’t go to five- experience in crisis management of this magnitude and nature. We all star hotels anymore. In every market there’s got to be went through periods of slowdown, enough diversification of the product to boom, slowdown and so on, but it was satisfy everyone; there’s the chairman never so bad. of a company who wants to pay $3,000 a room, and also the guy who fixes the But is the message sinking in? Is the industry prepared to face the crisis? stands and wants to pay $100. The industry is not prepared today, but It’s being said that places like Dubai it will be prepared within the next few will have to cut down on hotel rates months. And whoever is not prepared to stay in business, because people is going to go out of business. So we

SELIM EL-ZYR is president and CEO of Rotana, which he co-founded in 1992 as the first Middle Eastern hotel management company. Rotana currently manages 67 locations across the region.

June-August 2009 / TRENDS 91

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‘Every year we are opening hotels; so almost every month we need 300 to 400 people’ are all on a learning curve. The faster you react and find solutions, the better placed you will be. It is a race and we are all going to reach the end, but who is going to be first? A lot of players in the industry have shed excess fat to stay in business. You have chosen to keep your workforce. What makes you think you can sustain them? We haven’t shed jobs due to our expansion plans. We have 12 hotels that are

opening between now and the end of the year and we need 3,000 people – so we didn’t have to [make people redundant]. But I understand and sympathize with organizations that had to tell people “sorry, you do not have a job.” Many companies are cutting employee numbers quite drastically as a way of reducing costs. But how can Rotana cut costs if you keep your people? What happens if hotel occcupancy drops?

1992

2000

2009

Nasser al-Nowais and Selim el-Zyr co-found Rotana hotel corporation.

The rapidly expanding chain offers 15 locations throughout the region.

Rotana currently operates 67 properties across the Middle East.

92 TRENDS / June-August 2009

If we have a hotel in Dubai and the occupancy dropped 10 percent, we may need to cut around 50 people, but we have jobs for them due to our expansion plans. Every year we are opening hotels; this year 12, next year 13 or 14 hotels, so almost every month we need 300 to 400 people. So the excess from one area is being absorbed. We do not have enough excess so we are hiring new people. But, of course, companies that have no growth have to tell people they no longer have jobs. As someone who has spent decades in the industry, what is your view of the road to recovery? Do you expect to get better news in the next six months? I hope so, we are very optimistic. By nature, I am optimistic. I look forward to the growth – I do not know if we are at the bottom or not yet, but there will definitely be a boom and I hope to be alive to see that boom. Whether it’s going to be six months or six years, who knows? I

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Interview: Eric von Hippel

RETHINKING IP Eric von Hippel, an innovation expert at MIT’s Sloan School of Management, tells Ian Munroe why intellectual property laws are out of sync with the digital age.

ow have the sources of innovation changed at a global level over the past 20 years? The world is in a big shift now from manufacturer-centered innovation, which has been the paradigm since the industrial revolution, to user-centered innovation. Business models have to adapt to this, and the policies of governments have to adapt to it, too. You have these manufacturers following the traditional ‘find a need and fill it’ model, the idea that the manufacturer’s job is to go out and look for 94 TRENDS / June-August 2009

user needs, come back and develop the products for the users. Market researchers go out to find needs, and then the internal R&D department develops the solution. They spend money doing that, and out of it comes the need for intellectual property. This is because the only way a company can benefit from spending R&D and market research money is by selling whatever they develop at a profit. User innovators are different. When innovation switches to users, users actually benefit from an innovation by using it.

Can you give an example of user innovation to illustrate this? Take the heart-lung machine that was developed by a surgeon. He benefited because he used it. He built it for his practice. The inventors of the mountain bike were also users, and so were windsurfers. The guy who builds an innovative mountain bike gets to ride it. On the other hand, a manufacturer doesn’t get any profit from innovation unless he sells it. So if a medical equipment company built the heart-lung

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machine, they wouldn’t benefit until they sold it. The user has in-house use, and the user can be an organization like a hospital, a company making equipment for itself to use, or it can be an individual, somebody who’s building a bit of sports or cooking equipment for their own needs. They build it to solve their own problem.

… this policy of supporting the IP regime impedes the common interest. Each institutional regime tends to build around itself the infrastructure it needs to thrive. Manufacturers are not direct users because they don’t directly profit, so they need strong IP. Governments have come along and progressively made it stronger, and built up other policies like R&D subsidies and so on. With this user-centered innovation coming along, where users collaborate openly, we need a change in policy.

What’s driving this change in the way designs develop? Is it that people have access to more technology? Users are more connected on the Internet. They have design tools that are digitally-based, so what’s happening is What role does education play in that the cost of user innovation is this process? going down. Also, the cost of collabo- Education is built around the way things traditionally work ration among groups of users is going down. ‘Business schools – so business schools are designed around the tradiWhen that happens, users are designed manufacture-censtart to collaborate, they around the manu- tional tered model, and that has start to innovate together, facture-centered to change, too. to share without IP – like model, and that open-source software. The Gulf states tend to And the result is that in has to change’ score high in terms of many areas, they’re showing they can actually drive manu- adopting new communication techfacturers out of design – they can do nologies, but they fall short in other so much better than manufacturers at areas like education. What are the designing. The user is the center of implications of this? the story here; he innovates in collab- If you don’t have a population of innovators, then there’s no one particioration with others. pating in this collaborative net. It’s Does this happen in developing mar- wonderful that you built the collaborakets like Dubai, as well as in devel- tive net, but you certainly need the technology-enabled users who can oped ones? The key point for Dubai is that there exploit it. The Internet is like the are policies involved that can make roads of the modern age. So if you this possible, such as making Internet think about in the old days, i.e. why access really cheap and creating easy people built roads to markets, initially collaboration tools, making it easy to roads were private. One town would build roads for work together. It’s important to make collaboration among users in the itself, and nobody would support the inter-town connections. Then governdesign area cheap. ment came along and said this is What does that mean for intellectual important to make markets work. Farmers had to get their crops to marproperty policies? A lot of things governments do when ket – so there had to be farmers in they support the manufacture-centered order for there to be roads. The same innovation model – which is now is the case here: you’re building the dying – are against the user-centered roads but you have to have people model. When you have things like able to do the technology designing – really strong intellectual property the information freight that goes on I rights, when you really push patenting those roads.

ERIC VON HIPPEL is a professor and head of the Innovation and Entrepreneurship Group at the MIT Sloan School of Management. He is also the author of the book "Democratizing Innovation."

June-August 2009 / TRENDS 95

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BIGGER IS BETTER Saudi Arabia isn’t immune from the global downturn, and is making changes to manage its future growth. By Sarah Abdullah Riyadh

he official line in the kingdom is that everything is going well. As early as last October, two months before the release of the government’s 2009 budget, the Saudi Arabian Monetary Agency (SAMA) and other governmental entities were busy doing press conferences and interviews in the hope of getting the word out that Saudi Arabia’s economy hadn’t slipped into recession, despite the onset of the global financial crisis. But those statements also acknowledged that the country isn’t immune from the crisis, either. “Saudi Arabia’s economy and financial institutions will not be greatly affected by the global financial crisis as they have not been exposed to

the international financial institutions that faced problems in recent times,” Mohammed al-Jasser, then deputy governor and current governor of SAMA told the Saudi Press Agency (SPA). Al-Jasser added that the Saudi economy has never witnessed liquidity problems, and refuted international reports that SAMA had pumped $2 billion to $3 billion in deposits into the kingdom’s banking system in order to ease liquidity pressures. In January at the World Economic Forum, Saudi Arabia’s banking chief Hamad Saud al-Sayyari reiterated that the country is not in recession, and said the 2009 budget had been drawn up to counteract the decrease in oil prices.

A month later, King Abdullah bin Abdulaziz, Saudi Arabia’s monarch, reshuffled his cabinet and made al-Jasser SAMA’s governor, removing his longstanding predecessor, which caused speculation about whether or not the Saudi economy would take a new tack or remain on its present course. “I can affirm to you that the wise policy followed by SAMA in the past will continue, including its strong and direct supervision of the banking sector,” Ibrahim al-Assaf, the minister of finance, said on the occasion of the cabinet reshuffle. “Therefore, we expect more stability in monetary policy.” Despite all the publicity and efforts to reassure the public, however, the June-August 2009 / TRENDS 97

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Economy

A survey of 765 Saudi firms shows that business confidence has been dropping since early 2008 numbers show that the economic crisis is taking a toll on Saudi Arabia. According to a 2009 Q1 survey carried out by Saudi British Bank, the country’s economy has been affected by the global economic downturn. John Sfakianakis, chief economist at SABB, believes that Saudi businesses will feel the pinch because people there

are unsure of what to expect. “I think it is a combination of uncertainty, coupled with a slowdown in the kingdom, region, and international community,” he says. The survey of 765 Saudi companies shows that business confidence has weakened from 96.4 index points to 89.2 points, in keeping with a steady decline since the start of 2008. Only 42 percent

11.1 PERCENT

7. 9 P E R C E N T

6.9 PERCENT

The annual rate of inflation in Saudi Arabia as of July 2008.

The annual rate of inflation in Saudi Arabia as of January 2009.

The annual rate of inflation in Saudi Arabia as of February 2009.

98 TRENDS / June-August 2009

of respondents expected to see an increase in business growth, down from 54 percent the previous year. Saudi businesses are also wary of the near future, with two-thirds of companies surveyed admitting that they expect to institute hiring freezes in the second and third quarters of 2009. Saudi consumers have also experienced a loss in confidence when it comes to the strength of the kingdom’s economy, according to findings from a recent monthly report by YouGovSiraj. Of those surveyed, 30 percent reported that their close friends or family members had lost jobs recently, and 47 percent said they were nervous about the security of their own jobs. The report also said 63 percent of Saudi consumers are choosing to stay away from easy credit solutions to avoid taking on future debt, and are instead opting to spend more cautiously. “The kingdom has felt the chilly winds of the global credit crunch and

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The kingdom has had to reappraise projects that have been delayed as credit flows have tightened the deepening recessionary forces at work around the world,” says Howard Handy, chief economist at SAMBA. “The former are weighing heavily on financing conditions for Saudi projects, while rapidly declining oil prices have further undermined domestic sentiment. He says the key is to reinflate the price of oil to maintain Saudi Arabia’s economic performance: “in its efforts to

support oil prices I expect the kingdom to cut crude production sharply this year, and this will naturally have a significant impact on overall economic growth.” Over the past few months, the price of oil has been hovering between $41 and $57 a barrel. However, King Abdallah has reportedly said he feels that the current price is undervalued – his view being that a fair amount to aim for is $75 a barrel.

2008

2009

2010

Saudi Arabia’s economy grew by 4.2 percent last year, according to the EIU.

That growth rate will drop to 0.4 percent this year, says the EIU.

The Saudi economy is expected to rebound in 2010, expanding by 3.3 percent.

100 TRENDS / June-August 2009

Handy adds that as confidence has weakened and financing has become scarce, the pace of investment and consumption in the non-oil sector has slowed sharply – a trend that’s likely to continue in the coming months. “The government has adopted an appropriate expansionary fiscal stance, and this will keep investment trickling over,” he continues. “However, this is unlikely to fully offset the impact of softening private activity and with the oil sector’s contraction weighing heavily, we are expecting a 1.5 percent reduction in real GDP this year.” Handy also confirms that Saudi Arabia has had to reappraise projects that he says have been delayed as credit flows in the kingdom have tightened. Some developers have decided to hold out for better financing terms next year. “The economic cities are not immune from this, and the pace of construction has certainly slowed,” he says. “Nonetheless, those projects that are bet-

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GROSS DOMESTIC PRODUCT, CURRENT PRICES 2006 2007 2008 2009 2010 2011 2012 2013 100

200

300

Source: International Monetary Fund

400 Scale: US dollars, billions

500

600

700

800

900

Note: Figures for 2009-2013 are forecasts

PERFORMANCE OF SABB BUSINESS CONFIDENCE INDEX 110 106 102 98 94 90 86

106.2

105.4 100.2

100.0

96.4 89.2

Q4 ‘07

Q1 ‘08

Source: Saudi British Bank (SABB)

102 TRENDS / June-August 2009

Q2 ‘08 Index taken from Q4 ‘07

Q3 ‘08

Q4 ‘08

Q1 ‘09

ter advanced – such as the King Abdullah Economic City [KAEC], should continue to make progress, particularly as the private sector regains confidence and momentum next year.” “One of the most important factors for any economy is the ability of businesses to access credit,” says Shady Shaher, an economist at Standard Chartered Middle East and North Africa. “Thus, as credit conditions tighten, both businesses and consumers will undoubtedly be affected, which in turn will result in slower economic activity. In this case, government spending plays a greater role, with getting liquidity and credit flowing being the first step in building confidence for both businesses and consumers.” The main challenge for the Saudi economy is to navigate through the worst of the crisis, he adds. “We also agree that the government has adopted the necessary fiscal and monetary policies, and has announced a massive budget for 2009, which is expected to fall into deficit. Even if we see a larger deficit on the back of more government spending, we think it should actually pose no problems for Saudi Arabia, as the country has the resources to cover any shortfalls.” Shaher suggests that the worsening climate provides the kingdom with an opportunity to move ahead with its plans for economic diversification. “We expect 2009 to be a year of global recession. In 2010 we will see stagnation in the west and recovery in the east,” he says. He notes infrastructure spending will increase in 2009, citing the critical importance of this sector to Saudi competitiveness and its key role in attracting foreign investment. Huge financial reserves and conservative economic policies have, he argues, led to the expectation that the kingdom will weather the global downturn. But Saudi citizens and businesses are clearly feeling the pinch of the recession. A large injection of government spending will certainly provide a fillip, but business and consumer confidence will be noticeably absent for the long term. I

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Retail Interview: Paul Krugman

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CAUSE AND EFFECT Nobel laureate Paul Krugman tells Ian Munroe about the origins of the financial crisis, and how its fallout will change the global economy.

aul Krugman, recipient of the 2008 Nobel Prize for Economics, is a professor at Princeton University. He writes opinion pieces for New York Times twice weekly and has authored several books including, most recently, “The Great Unraveling.” There were a lot of indications that a crisis was coming, but decision-makers seemed to ignore them until things got really bad. Why was that? The first thing is that when people are making money, telling them that it’s not based on well-grounded fundamentals is not a popular position. Nobody wants to hear it. This is always true when you have a bubble and too many people are profiting from the bubble to want to listen. I think there was also a deeper prob-

lem among policymakers and many economists, which was an excessive belief that markets are efficient. We saw this proliferation of financial markets, of various kinds of financial derivatives – a rapid increase in the sheer scale of the finance sector. And the assumption was that this all had to make sense, despite substantial evidence that it did not. So most people just didn’t look, even though there were quite obvious clues in the data that something was very wrong. Most people simply chose to ignore that. What caused the financial crisis? One reason was simply a prolonged period without a major crisis. The roughly 25 years between the second oil shock and the coming of this crisis bred a lot of complacency. Nothing really bad hap-

pened to the global economy and so people took more risks. They forgot that bad things can in fact happen. There were too many risks, too much leverage and too much debt. The second thing that happened was the change in the nature of the financial system. Twenty-five years ago we had a system that was centered on conventional banks, which were quite tightly regulated; there was limited ability to take risks. Since then we had the growth of a much more complex, much harder to pin down financial sector, with conventional banks making up less than half the total sources of credit. This new system was unregulated, it lacked a safety net and there was no explicit insurance. So we found ourselves exposed to a banking crisis in a way that hadn’t happened since the 1930s. June-August 2009 / TRENDS 105

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Interview: Paul Krugman

‘People had large sums in their accounts, but it was a mirage, only there until someone tried to spend it’ So it was a willingness to take risks on the one hand, and a failure of regulation on the other? Yes – people were taking too many risks and regulators hadn’t kept up with the changing financial system, so we had a financial system that was largely without any form of support. There were no airbags on it, you might say. We’ve witnessed some astonishing financial losses. In everyday terms, where did the money go?

Mostly, the money was never there. People had large sums in their accounts, but it was a mirage. It was only there until someone tried to spend it, and then it was no longer there. But on top of that, there is a lot of real destruction going on. The world economy is probably now operating 4 or 5 percent below its capacity, which means we’re losing several trillion dollars each year of output that we could have produced but haven’t. That’s a real impoverishment of the

3.8 PERCENT

1.3 PERCENT

The predicted GDP drop in advanced economies in 2009, according to the IMF.

The predicted drop in the global economy’s GDP in 2009, says the IMF.

The predicted GDP rise in Middle East and Central Asian economies in 2009.

106 TRENDS / June-August 2009

world. If it goes on for any length of time it will end up eliminating a substantial fraction of the world’s wealth. Have we seen the bottom yet, or do we have further to fall? We certainly still have further to fall. Everybody talks about green shoots, favorable signs. But the only thing we have is some evidence that the pace of the decline is slowing, that things are getting worse more slowly. When we actually reach the point where things level off, nobody knows. I wouldn’t be surprised if measures like industrial production do in fact level off later this year. But that’s not enough, that’s still leaving output failing to grow – it’s almost certainly going to mean unemployment in the major economies continuing to rise. So we may hit a kind of plateau beyond which we don’t fall very much. But actual recovery, actual return to anything like full employment, full capacity utilization, I think is years away – two, three years if we’re lucky, quite possibly much longer than that.

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‘A lot of people will starve as a result of this crisis. Not many of those people will be in the West.’ Is everyone hurting equally? Who’s feeling the brunt of the slowdown? There are two kinds of losses here. There are the financial losses, which fall more heavily on the wealthy than they do on the rest because they have more financial assets. But even there, substantial losses are also occurring in pension funds, things that affect people around the world. Then there’s the economic disruption, which I’m sorry to say, as always, falls most heavily on the weakest and the poorest. If we’re looking at Western countries, unemployment is rising most sharply among the least-skilled, the lowest-paid. And if we’re looking worldwide, although the GDP numbers may be falling most in particularly troubled, advanced countries, the sheer human misery is concentrated in the poorest countries. A lot of people will starve as a result of this crisis. Not many of those people 108 TRENDS / June-August 2009

will be in the West. They will be in lessdeveloped parts of the world. Will the developing world feel those effects later on? It’s already happening now. If you look at the sharp fall in world trade and the disruption in world trade credit, you can see there are already extremely negative effects happening in parts of Africa. World trade has declined faster than it did during the Great Depression. For many poor countries, trade is literally what they need to survive. Hit with a decline in their ability to export – which is necessary to buy the essentials of life – they’re in terrible trouble. How well has Barack Obama dealt with the crisis so far? I’m giving him a ‘B.’ The fiscal policy has been fast. It looks like it’s going to be reasonably effective, but it’s not big enough. And the bank policy has been

cautious – I think the word might be ‘diffident.’ They’ve shied away from taking any really strong measures to clean up the system. So I support the general direction of the policies, but I’m disappointed in the lack of boldness. And how well has the international community responded? Some things have been good. The expansion of IMF funding is a good sign. In general, I think the IMF has done a good job compared with during the Asian crisis, for example. There have been some major disappointments, though. The inability of the European Union countries to settle on any cooperative economic policy, and in particular the failure to aid emerging Europe on a sufficient scale in this crisis has been a real disappointment. There’s not a lot of international cooperation going on aside from the I M F f u n d i n g , a n d t h a t ’s a s h a m e because this really is a global crisis and there’s a lot to be said for cooperating in the response.

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‘We’re probably going to be in a world in which China is pushed to rely on domestic demand’ What should the Gulf states do to cope with the financial crisis? They don’t have a lot of freedom of action. They need to engage in some a u s t e r i t y. T h e y n e e d t o r i d e t h i s through. Although oil prices have fallen a lot from those very high peaks in early 2008, they’re actually holding up surprisingly well in real terms. The price of oil is substantially higher than it was early in this decade, despite the fact that the world economy is so deeply depressed right now. …

This is not 1986; this is still a world of surprisingly robust demand for oil. Credit rating agencies have taken a credibility hit. How do we make them better at what they do, especially when it comes to assessing financial institutions in the future? Who knows, is the short answer. This is very difficult. We have a problem that doesn’t seem to have an easy solution. The rating agencies are paid essentially by the people they rate. And while crude cor-

19 PERCENT

77 PERCENT

3.8 PERCENT

Amount that the CaseShiller Index, which measures US housing prices, fell by in March.

Amount that the Baltic Dry Index, a key trade indicator, has risen by since February.

Amount that Germany’s GDP declined by in Q1 of 2009, its steepest drop on record.

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ruption may be reduced, may be avoided, there’s clearly a built-in tendency not to recognize the realities. Try and think of an alternative model and it’s not so easily done. Have them taxpayer financed? How do we avoid politicization? Try to get some other model for their payment? It’s not clear exactly how you do this. It does require some thought, and it is a real problem because, like it or not, the rating agencies have an enormous impact. Institutional investors almost have to base their decisions on those ratings. But I don’t know what the answer is. Beyond that, the major changes are going to be a return to a world of more balance, you might say. It’s unlikely that we can have a full world recovery while these very large surpluses for some reason persist [in some countries], and there are large deficits in others. So we’re probably going to be in a world in which China is one way or another pushed more to rely on domestic demand, and in which the United States is pushed to rely more on its domestic saving capacity. It’s a little bit hard to figure out how the Gulf region fits into this, because it will have

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‘I think it’s probably just going to be a calmer sort of world – less wheeling and dealing, less adventurous’ a high income – I think oil prices will at least partially recover – but limited absorptive capacity [to increase further]. So you don’t think they’ll become any less influential? Well the trouble is, no matter how much people say “I don’t really trust the rating agencies,” it is nonetheless very difficult for institutional investors to ignore what they say. If the rating agencies put a downgrade on your country’s debt, then your sovereign debt spreads will rise because there are so many players who are more or less mechanically forced to divest themselves of holdings of your debt because of that action. How do you see the crisis changing the global economy? I think we’re going to see substantially bigger financial regulations, and with that, substantially reduced financial globalization. A lot of the international pene112 TRENDS / June-August 2009

tration of markets was part and parcel of the growth of this unregulated banking sector, and I think that’s going to be reigned in. A lot of things we’re seeing countries do as part of their rescue are also pushing finance towards a home focus. So in a way, the world is going to get bigger again. International finance will be less of a factor than it was. Will developed and developing countries be pushed further apart? We may actually have some of the decoupling that people thought would happen in this crisis and didn’t. Now for what it’s worth, we had a perverse situation in these past 10 years where many of these developing countries were actually exporting to a lot of the advanced countries. I don’t think anyone foresees that coming to an end. I don’t think we’re going to have a lot of global protectionism or that trade is going to be cut back very much. There is obviously some

pressure there, but I don’t think it’s going to be at the center of the story. It’s going to be a little hard to see how this plays out, but I think it’s probably just going to be a calmer sort of world – less wheeling and dealing, less adventurous finance. How will people and companies behave differently? Eventually we hope that there will be a revival in business investment. One of my big concerns is what it will take to get that going. But in the end I think it will happen. In terms of the debt position, non-financial corporations haven’t behaved in a particularly over-the-top way. They’ve actually behaved relatively responsibly, so I don’t think there will be major changes there. Households in the United States, and to some extent in several European countries, are probably going to have much higher savings rates for a sustained period. They were leveraging themselves off, taking on a lot of debt, and relying on capital gains to provide for retirement. That’s not going to happen, so there’s going to be a serious change in consumer behavior.

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‘I worry about Ukraine – that it might seek to join with Russia and reconstitute the Soviet Union’ Will the global services sector grow larger than it was before the crisis, or will it shrink? Ultimately the reason we shifted to a service-based economy is a combination of saturation in the demand for goods … and higher productivity growth of the goods-producing sector, that pushes us towards services. One of the reasons we have so few farmers is that the farmers we do have are so productive. I don’t think that’s going to change. The only big thing is, I don’t think that financial services is going to come back. We went from financial services bringing in 4 percent of GDP to 8 percent of GDP and it’s not clear there was any social gain from that extra 4 percent of GDP, so that sector’s going to shrink. But in terms of other sectors, healthcare shows no signs of ceasing to grow. I don’t think we’re going to go back to becoming a manufacturing-centered economy, basically because the manufacturing 114 TRENDS / June-August 2009

sector we now have worldwide is big enough to supply the goods people want. A lot of historians blame the stock market crash in 1929 for the rise of radical movements. Could something similar emerge now? It’s hard to come up with anything on that scale. Fascism as a movement existed before the crash, so there was a kind of ready-made template for the anger to fasten onto. There’s nothing comparable to that in today’s world. None of the great powers, economically or militarily, is unstable in that way. So I don’t think you can envisage something like the rise of Nazism coming back. But we could have a lot of nasty stuff. I worry, for example, about Ukraine – that it might seek to join with Russia and reconstitute the Soviet Union. This is still not a likely event, but the scale of the economic crisis there makes it more likely. I’m doing my best not to think about Pak-

istan, but when I do I get very scared, and the economic crisis doesn’t help. How are human rights and fredom of speech being affected? So far, we’re not seeing states engage in crackdowns or reductions of civil liberties in response – aside from a couple of places where governments have attempted to prosecute bloggers who said negative things. But they tend to encounter a lot of anger and ridicule when they do. So if there’s something out there, I don’t see it. Is there anything we can do to minimize these cyclical economic swings? Remember, this isn’t a run-away, out-ofcontrol financial system. If we regulate it we won’t have this kind of crisis again. My read of this is that there have been three major global economic crises since the Great Depression. The first two were about oil. This is the third, and it’s about finance. If we can get finance under control, then we can probably go another generation before we have anything comparable to this. I

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BOOKMARKING BEIRUT Beirut is UNESCO’s 2009 World Book Capital, a prestigious title that the city intends to live up to. By Nathalie Bontems Beirut

hen talking about Beirut, images of violence, riots and bombings are usually what comes to mind. Or, at the other extreme, one may think of a nightlife that’s unparalleled in the region – of dazzlingly beautiful young women dancing on tables while drinks are flowing and speakers are pumping loud music. The Lebanese capital is described as the beating heart of culture in the region to rarely. But it’s a place that hosts more than 600 publishing houses, myriad libraries, bookshops and cultural centers. It’s also a haven of freedom for the media and for Arab intellectuals. So it somehow makes sense that in 2007, Beirut was designated World Book

Capital for 2009 by UNESCO, the International Publishers Association (IPA), the International Booksellers Federation (IBF) and the International Federation of Library Associations and Institutions (IFLA). Since 2001, the festival has been organized annually in one major city. Beirut is the ninth to be crowned as such, in the footsteps of Madrid (2001), Alexandria (2002), New Delhi (2003), Antwerp (2004), Montreal (2005), Turin (2006), Bogotá (2007) and Amsterdam (2008). Strings attached. Beirut now sits at the heart of an impressive number of events promoting books and reading to the widest possible audience – all in a country where, unfortunately, reading is becoming less and less of a habit.

Ambitious plans are underway: 250 projects have already been approved, and this number is expected to reach a staggering 300 in the coming days – or almost one event a day throughout a whole year. “We’ve kept the project submission form open on our Web site in order to keep the dynamic alive,” says general coordinator Leila Barakat. “Anyone can submit a proposal, from individuals to publishing houses, embassies, writers and so on.” “Since the official launch of the festival on April 23, and due to its increasing visibility in the media, we are receiving more and more proposals,” adds cultural adviser Abdallah Machnouk. Out of the 250 confirmed events, 150 are cofinanced by the Lebanese Ministry of June-August 2009 / TRENDS 117

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‘It’s a big responsibility without any compensation, since UNESCO doesn’t pay for anything’ Culture and the Beirut Municipality, which together came up with a $4.3 million budget, in partnership with other sponsors such as cultural centers, individuals, publishing houses and NGOs. “Our strategy is to involve the private sector as much as we can through partnerships and co-financings,” says Machnouk, “because after Apr. 22, 2010, we [the event organizing team under the Ministry of Cul-

ture] won’t be there anymore. But we want the dynamic we have initiated to keep going. If we manage to show that books can be profitable, that culture is something worth investing in, the private sector will keep supporting it.” Indeed, the festival’s purpose isn’t limited to short-term celebrations. On the contrary, such a nomination comes with strings attached. “Usually, a city is

AMSTERDAM

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LJUBLJANA

The capital of the Netherlands was UNESCO’s 2008 Book Capital.

The capital of Lebanon is UNESCO’s 2009 Book Capital.

The capital of Slovenia will be UNESCO’s 2010 Book Capital.

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declared World Book Capital because of its previous achievements, its support to a thriving book industry and against a promise to do more in that regard,” says Machnouk. “It’s a big responsibility without any financial compensation, since UNESCO doesn’t pay for anything.” In order to honor its engagement, the team in charge of the festival delineated a program according to three main, longterm objectives: to bolster Lebanon’s book industry (with a special focus on youth literature), to promote reading and a love of reading – mostly by focusing on schools, and to adopt a diverse approach to reading through cooperation with embassies. Borderless books. The wide array of events is a testimony to the enthusiasm the festival has generated. Public readings, writing workshops in a number of schools, book fairs, sponsorship of young authors, writing contests, round-table debates, meetings with authors flown in from all around the world, exhibitions of

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More than half the events promote works exclusively in Arabic, yet Western states are still heavily involved medieval documents, presentation of plays, films and music pieces revolving around books … all these are just a sample of a program that not only runs for an entire year, but also across the whole of the country. “We approached regional institutions because we want to create a national dynamic,” says Barakat. “Our objective is to have people outside of Beirut reading

too: to make sure they can go to libraries and to keep bookshops from being turned into mere stationers.” On top of the 150 state-sponsored events, Lebanon’s private sector has organized and financed an additional 100 events. Sponsors include banks, schools, cultural centers, publishing houses and NGOs. All in all, according to Barakat, the whole festival has an estimated total

218

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36,907

The number of days Beirut’s libraries were open during 2007.

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budget of $8 million. More importantly, this mix of state-initiated and privately designed efforts gives the festival an unusual and interesting feel, with public and private players, for once, working hand in hand towards a common goal. The international dimension of the festival is another critical aspect of Beirut World Book Capital. According to Barakat, more than half the events promote works exclusively in Arabic, with strong participation from booksellers and authors traveling from Egypt, Algeria, Morocco, Tunisia, Syria and the UAE (among other countries). However, many Western countries have also been heavily involved in events, focused either on their own languages or in association with Arabic, giving meaning to the global aspect of the festival. France, obviously a traditional player in the Lebanese cultural field, has been keen to participate, but so have Italy, Spain, Germany, Mexico, Switzerland, and others. “International involvement

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‘Beirut is recognized for its commitment to dialogue, which is necessary more than ever in the region’ has been strong, mainly at the creation and instigation level,” says Barakat. “And the Lebanese community abroad has been participating, too, such as the Lebanese businessman who is financing a $50,000 prize.” Culture vultures. Ten leading projects (either local or international) are under the spotlight, including a month-long exhibition of 450 books with creative design published in Spain. There is also

the “Writing Letters to Beirut” project run by the French embassy, where anyone (living in Beirut or not) can express their feelings about the city in the language of their choice, with sentiments published on a special blog. The “Beirut 39” contest, in cooperation with Scotland’s famous Hay Festival – and launched in March at the International Book Fair of Abu Dhabi – will select and celebrate 39 of the best Arab writers

161

968

1,74 9

The total number of subscribers to libraries in Beirut in 2002.

The total number of subscribers to libraries in Beirut in 2005.

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under 40 years of age. Another project involves the reprinting of 130 books from the Bibliotheca Islamica, which were destroyed during the fighting that broke out in Lebanon in 2006. Of course, in light of what has been happening for the past four years in Lebanon, it may seem a bit surprising that Beirut was selected for “its focus on cultural diversity, dialogue and tolerance,” but then again, as the international committee’s statement says, “The city of Beirut, which is facing great challenges in terms of peace and peaceful coexistence, is recognized for its commitment to dialogue, which is necessary more than ever in the region, and … the book is able to contribute actively towards this goal.” In fact, showing the world another image of Lebanon in general, and Beirut in particular, is crucial for the event’s organizers. “This is one of the reasons why we are so motivated,” says Barakat. “We always hear about Beirut when there’s a political crisis, but we want the cultural image of Beirut to prevail.” I

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Save the Last Dance Traditional nightlife in Cairo is under threat from new Western entertainment and increasingly conservative attitudes. By Rebecca Collard Cairo

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carabee Alley, just off 26 of July Street in bustling downtown Cairo, opens onto a small courtyard surrounded by bars. Up the stairs at the end of the courtyard a belly dancer shakes her hips and smiles at the mostly empty tables in Club Miami. She turns and sways in her bright yellow costume in front of a five-piece band belting out Arabic songs. At 11 pm on Thursday night the place is quiet, with the exception of a few middle-aged men sipping beer at a table near the bar.While belly dancing has become popular abroad, and for foreign visitors to Egypt, many here

have feared its demise as a result of the increasing observance of conservative Islam. Over the last several decades, traditionalist ideals have been gaining ground in the country once known for its cosmopolitan ways. In the 1990s, when violent Islamist groups weresmost active in Egypt, the haram (forbidden) combination of alcohol and shaking, skimpily dressed women made belly-dancing cabarets a target. Nabil Abdel Fattah, head of the sociological research unit at Al-Ahram Center for Political and Strategic Studies and editor-in-chief of the centerâ&#x20AC;&#x2122;s â&#x20AC;&#x153;State of Religion

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The clientele remains mostly middle-aged Egyptian men. New bars now offer serious competition. Report,” says businesses like bars and belly-dancing clubs have suffered because of the Islamization of both the public and private spheres in Egypt. “Belly dancing is outside of Islamic values,” says Fattah, adding that increasing conservatism in Egypt has led to reforms in the role and dress of women and fewer customers for establishments that serve alcohol. However, in the last few years the country has undergone a soft revolution, where a surge in conservatism for many has coincided with an increasing movement toward Western lifestyles and liberal practices for others. “There is a new soft revolution in Egyptian society. You can see this trend of new magazines and shops and people returning to belly dancing. There is also a Westernization of the way of life, of the new upper-middle 126

TRENDS / June-August 2009

class and businessmen,” says Fattah, who maintains this has happened in tandem with increasing observance of conservative Islam. Looking back. Belly dancing is the English name given to the art of raqs sharqi (oriental dance) or raqs baladi (country dance). The practice spread throughout the Middle East but took a greater hold in Egypt than the rest of the Arab world, finding its place in wedding celebrations, private and public performances and, most recently, in tourist establishments. Around midnight, customers begin to take seats near the stage at Club Miami. The clientele remains the same, mostly middle-aged Egyptian men. The band continues to play as the second dancer, Suhayla, takes the stage under a small disco ball. Tamer, Club Miami’s manager, who asked that his

real name not be used, says in the winter the club attracts foreigners and in the summer it fills with Gulf Arabs. But most of their clientele is Egyptian. “We get the rich and the less fortunate,” says Tamer. “Thursday is the busiest day of the week. We start the night at 11pm, but it doesn’t get full before 12 or 1am.” He’s been working in the industry for 10 years and says he’s seen a decline in the number of visitors in the last decade. Despite the influx from Gulf tourists, places like Club Miami are not seeing an increase in customers. “There are new bars for the middle class everywhere, in Mohandeseen, in the city center and also in hotels,” says Fattah. “This is a new variable and I think it’s related to the economic policy of the state. There is a tolerance now ... because [these are] private companies and this is very important economically.” The next evening, a few kilometers south on 26 of July Street, Ahmed

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The Cairo Jazz Club could be in any major US city, with little room to move after midnight Dessouki leans against a polished wood bar sipping whisky over ice at the Cairo Jazz Club. The 28-year-old architect says he goes out four nights per week, but doesn’t venture to bellydancing joints or baladi-style bars. “I mostly go to Zamalek bars,” says Dessouki referring to Cairo’s expensive, more Western neighborhood. “I’m not interested in this kind of art.” The Cairo Jazz Club could easily be in any major American city, with a DJ spinning records in the corner, high-back booth seating and multi-colored track lighting. By midnight there 128

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is little room to move as young Egyptian men hold the waists of their girlfriends and mix with foreigners on the tiny dance floor. “It’s the mentality of the people. We don’t have a big gap between the mentality of Europe and the [United] States,” says Dessouki. “Almost everybody has a girlfriend. We like to come to this kind of club to spend a nice night with our girlfriends – nothing more.” Dessouki says some nights he and his friends rack up bills of several thousand Egyptian pounds (or several hundred US dollars).

In the 1990s, Western-style bars became popular among some Egyptians and today, in Cairo, Alexandria and in tourist towns like Sharm ElSheikh, there is no shortage of European – or American-style establishments. The influx of Western-style nightclubs is drawing customers away from the baladi nightspots. A soft revolution here won’t necessarily restore belly-dancing cabarets to their former glory if young, affluent Egyptians prefer to drop a 200 Egyptian pound minimum charge ($35) to dance to house beats, R ‘n’ B and top-40 music, rather than watch jeweled women shake their hips in an age-old tradition. “ We ’ v e b e e n a ff e c t e d b y l a s t year’s economic slump. Some of our best customers come once a week now instead of every day,” Tamer says. While he notes most of his customers are Egyptian, Suhayla, who has been performing as a belly dancer for years, argues this isn’t the case in other establishments. “It depends. You get Egyptians, foreigners and Arabs,” Suhayla says. “You can find more foreigners in El-Haram.” Tourists have long filled the seats of higher-end belly-dancing establishments. In tourist cities like Sharm ElSheikh, dancers perform to almost entirely foreign crowds. The Egyptian Ministry of Tourism said last month that hotel occupancy rates had dropped to between 66 and 70 percent and some analysts have predicted that the global financial crisis, combined with the recent bombing in Cairo’s Khan El-Khalili market, could result in occupancy rates falling further, even to 50 percent. The opening of Egyptian society may not be enough to salvage an art form that has had a place in Egyptian society for centuries. “Most of the people I know who are interested in belly dancing are foreigners and they just go once,” says Dessouki over thumping electronic beats. “Most of my friends are interested in this kind of music – house and trance.” I

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On the Road

THE ART OF SPEED True to their heritage, the Vantage and DB9 display the famous Aston Martin verve when they hit top gear.

n setting out to drive the DB9 for the first time, a businessman called me about an article I wrote recently. He asked where I was and, rather than reveal my location, I said that I was in an Aston Martin. “I don’t believe you,” he responded. I replied with a stab on the accelerator. Two seconds later, “I believe you,” was the audibly envious retort. When it comes to sights and sounds, Aston Martin is producing some of the most beautiful cars on the road. They have character and a sense of heritage, which stands out against some of the other high-performance roadsters on the market today, barring possibly those from the Italian racing stables. The V8 Vantage and the DB9 are a case in point. The former is for the devil-may-care lover of life, the latter for the more urbane dilettante who is ready to experience the road and all that it can offer. Both these cars are very similar to the Lockheed Martin Blackbird, the 132 TRENDS / June-August 2009

supersonic plane that had an eye-catching shape in the sky. It looked as if it was born for high speed and high altitude – but if you ever saw one on the ground it was rather ungainly. The Aston Martin Vantage and DB9 are definitely in their element at triple-digit speeds (in kilometers per hour). Even the speedometer seems to treat anything in the double-digit range as paltry. This does leave a little to be desired, especially with the Vantage, when it comes to taxiing before getting ready for a metaphorical takeoff. The clutchbased gearbox is a little clunkier at low speeds and provides a noticeable jarring in acceleration that gives you the impression the gearbox is really working for you. The slightly shorter Vantage makes up for this by giving a drive that would thrill a contender at Le Mans. With the noticeable gear change, an acceleration that can be heard in the next city and the acceleration lag expected of a turbocharged engine, you do arrive with a

sense of exhilaration and exhaustion. The fact that “Comfort” is an alternate option on the dashboard says it all. By contrast, the DB9’s “Sports” option shows the more sophisticated drive to hand. The absence of the clutch means a smooth acceleration, while the handling would help any secret agent work their way out of a tight situation. Perhaps, however, its good looks would make anyone in that line of work stand out a little too much. That being said, the cars don’t receive the same treatment from valets in Dubai’s hotels that, say, Bentleys or Audi R8s do. So perhaps there is something in it after all. Both cars have the button system for gear changes. With many cars going for unique methods of changing gears (for example, BMW’s X6 has a jetfighter joystick), you have a choice of buttons for your drive. Dashboard-mounted, you could almost imagine that when you press “Drive” you might also be firing a guided missile at the baddies. The handbrake takes some getting used to, but once you’ve mastered the fine art, it shouldn’t be a problem anymore. A tip of the hat goes to Aston Martin for its nod to the iPod. Both models feature a dedicated docking station from which sweet music can be played. The menu for music displays nicely in both cars, but is noticeably more user-friendly in the DB9 than the Vantage. Given the performance and handling, there’s no denying these are great cars to drive. It should also be noted that they would not be comfortable for people of a larger than average build, but over long distances the miles fly by and I found myself enjoying the drive, even without cruise control. Just one note of caution: concentration is a necessity to avoid speeding fines with these cars – otherwise driving will bring out hidden costs you haven’t dreamed of. I

POWER

PERKS

The Vantage has a top speed of 290 km/h and a 4.7-litre engine

Both cars have iPod docking systems and fingertip controls

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Yves Saint Laurent

La Nuit de L'Homme

story of seduction, intensity and bold sensuality. A darkly handsome man – with irresistible charm and seduction – sweeps away everything in his path on a night full of promise. La Nuit de L'Homme, the new fragrance for men by Yves Saint Laurent, is a structure of contrasting forces, a seductive aroma that lies halfway between restraint and abandon. Bright, masculine freshness combines with sophistication and nonchalance for a deep, mysterious and sensual fragrance. It combines a fresh oriental scent with notes of cardamom, cedar and coumarin. The aftershave brings comfort, invigoration and tone to the skin after shaving, and subtly scents it with sensual notes. A lively, oriental fragrance, full of tensions.

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1815

he Défi (Challenge) pen tests the laws of gravity and tradition, and declares war on the blank page. This new writing weapon challenges excess and features streamlined and virile lines. It has become a weapon for everyday writing. Like a fighter jet, the S.T. Dupont Défi is responsive, precise and offers high performance. Its fuselage is constructed according to a unique and original design, with a composite carbon-fiber body. This highprecision metal injection technique used to create the pen was previously reserved for manufacturing advancedtechnology components in the aeronautics industry – testament to the Défi’s high-tech status.

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or the charming gentleman, the latest 1815 by A. Lange & Söhne embodies simple, classic mechanical timepieces, in a large case and with a new manually wound movement. With its graceful sleekness, it reflects the principles of company founder Ferdinand Adolph Lange, saluting his proud legacy by taking his birth year as its name. The new 1815 is a classic three-hand watch with a manually wound movement, that unites the finest virtues of Lange watchmaking artistry. A. Lange & Söhne watches have been at the forefront of exclusive watch production since the 1800s, and are available only at exclusive Lange points of sale.

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LETTER OF THE MONTH WHAT HAPPENS NEXT? t was nice to see a story about what the Gulf’s post-oil economy may look like (“Spark Plugged,” May 2009), but is it really fair to compare the GCC states with developing Asian giants like China and India? It seems to me like apples and oranges. With such small populations, the Gulf can only hope to find niche markets to serve if it does eventually become a high-tech producer. It may be a wealthy part of the world, but even then, it will be impossible to produce anywhere near the same numbers of technology workers as any of the larger countries. So the question I’m left wondering is whether decision-makers in this part of the world are working with a focused niche strategy as they spend billions on high-tech investment, or are they putting up the money now and figuring out where they’re headed later?

Fakhri Nahas Damascus, Syria

TRAIN TO NOWHERE rail network for the Middle East? (“On Track,” May 2009). It’s funny to see such an ambitious idea being floated in seemingly desperate times. If rich Gulf states want such a thing, I’ve no doubt they can build it. But would people use it enough to keep the trains running? As far as I know, most travelers in the region come from elsewhere, such as countries in Europe or Asia. Would there be enough passengers that travel from country to country in this part of the world to warrant a multibillion dollar rail system? And why wouldn’t travelers fly rather than staying on the ground, especially when local budget carriers are taking to the air? It’s a wellmeaning idea that looks great on paper, but in practice may be another pipe dream.

Abdul-Rahman Kouri Amman, Jordan

SEEKING PERSPECTIVE can’t help thinking that there Iyour was something missing from super-sized cover story last time around (“Choosing the Right Path,” May 2009). You

told us a lot about how the Gulf states have responded to the financial crisis, but not much otherwise. How have less fortunate Middle East countries fared in 2009? On that question I’m still at a loss. And how does the Gulf’s reaction compare to what other regions of the world have been doing? This part of the world is under-reported, so it’s great to see in-depth stories about how things are changing here – from a local perspective. Too often, Middle East media treat their stomping ground as if it exists in a vacuum. Just a thought to bear in mind for future issues. Tawfiq Sleiman Basra, Iraq

THE BACK PAGE ’ve noticed a spike in the numIzine ber of spokespeople your magahas been interviewing for its back page (“Last Word,” April and May 2009). I don’t want to put down the important work that groups like Oxfam and the UN Food Programme do, but perhaps it would be good to mix things up a little bit. If you want to cover charities, I’d like to know more about what local non-profit

Letters to the editor must include the writer’s name and address, and should be sent to: The Editor, TRENDS, S.C.C Arabies 18 rue de Varize, 75016 Paris, France or faxed to: +(33) 1 4380 7362, or e-mailed to: editor@trendsmagazine.net

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groups are doing to better the world. That’s something that we seem to hear very little about. How are they funded, and where does that money flow to? Are they worth donating to? I don’t know, but it seems like a sector this part of the world is just now becoming acquainted with. Charlie Bridgestone Tunis, Tunisia

REALITY DOSE cannot understand why so many are saying that the market will recover here in the region and we can look forward to better times by the end of this year. Dubai is the regional hub for business, fueled by the support and investment from multinational players, who are all affected on the world stage. In the last few years it has been behaving irresponsibly, assuming that there will always be a boom and that markets never falter. There has been a property bubble bursting here and, quite frankly, most businesses are still losing money and failing to trim their operational performance, in the vain hope that business will come along again. And so we cannot honestly say that things are going well. I’d like to feel much more optimistic. But I can’t.

David Blair Dubai, UAE

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 MANAGING DIRECTOR: Julien Hawari MANAGING EDITOR: Jonathan Howell-Jones jonathan@mediaquestcorp.com BUSINESS EDITOR: Ehtesham Shahid ehtesham@mediaquestcorp.com COPY EDITOR: Richard Greig richard@mediaquestcorp.com FEATURES EDITOR: Ian Munroe ian@mediaquestcorp.com CREATIVE DIRECTOR: Aziz Kamel ONLINE DIRECTOR: François Louis ART DIRECTORS: Sheela Jeevan & Jean-Christophe Nys ART CONTRIBUTOR: Alvin Cha CONTRIBUTORS: Ahmed Al Attar, Nada El Sawy, Ben Lynfield, Thomas Lippman, Christian Malar, Iason Athanasiadis, Tanya Goudsouzian, Dominic Ellis, F. Brinley Bruton, Zeinab Charafeddine CORRESPONDENTS: Abu Dhabi:: Ahmed Salam – Beirut:: Ed Blanche & Nathalie Bontems – Istanbul:: Bill Sellars – Jeddah:: Alex Malouf – Jerusalem:: Ben Lynfield – Kuwait:: Jamie Etheridge – London:: Clare Dunkley – Tehran:: Guy Smith – Washington: Afshin Molavi ADVERTISING: neena@mediaquestcorp.com Europe: S.C.C Arabies, 18 rue de Varize – 75016 Paris – France Tel: +(33) 1 4766 4600 – Fax: +(33) 1 4380 7362 GCC: Dubai Media City – Al Thuraya Tower 2, Office 1901, UAE Tel: +(971) 4 391 0760 – Fax: +(971) 4 390 8737 Lebanon: Beirut – Lebanon Tel: +(961) 1 202 369 – Fax: +(961) 1 202 369 PRINTERS: France: CORLET S.A. UAE: EMIRATES PRINTING PRESS (Dubai) N˚ Commission Paritaire 1201 K80 202 – N˚ ISSN 0983-1509 PUBLISHED BY:

Europe: 18 rue de Varize 75016 – Paris, France TEL: +(33) 1 4766 4600 – FAX: +(33) 1 4380 7362 GCC: Dubai Media City, Al Thuraya Tower 2, Office 1901, Dubai, UAE – Tel: +(971) 4 391 0760 – Fax: +(971) 4 390 8737 CO-CEO: Alexandre Hawari CO-CEO: Julien Hawari DEPUTY GENERAL MANAGER: Ayman Haydar FINANCE DIRECTOR: Dinesh Kumar CREATIVE DIRECTORS: Aziz Kamel & François Louis MARKETING MANAGER: Amanda Danielle Bloud amanda@mediaquestcorp.com, Tel: +(971) 4 391 0896 DISTRIBUTION & SUBSCRIPTION MANAGER: JP Nair jp@mediaquestcorp.com, Tel: +(971) 4 391 0765 MEDIAQUEST COUNTRY MANAGERS: Saudi Arabia: Tarek Abu Hamzy tarekah@mediaquestcorp.com, Tel: + 966 50 814 50 90 North Africa: Adil Abdel Wahab adel@medialeader.biz, Tel: + 213 661 562 660 www.mediaqestcorp.com

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THE LAST WORD JOAQUIN F. BLAYA

overnor Joaquin F. Blaya is a member of the Broadcasting Board of Governors (BBG), a US Federal Agency charged with all non-military international broadcasting services to promote democracy worldwide. He talked to Jonathan Howell-Jones about the new direction BBG’s Arabic-language television station Alhurra is taking.

What sort of new channels are you moving into, especially here in the Middle East? Well, to be honest, the one that has seen an explosion here is television. The whole region has basically moved from, in a decade, from one, maybe two channels, state-owned and operated, to this diversity of 300 channels today. And in that respect, it’s a pretty free region. … There are many societies on earth where you cannot own a satellite dish. Iran comes to mind, certainly China. So who do you see as your competition? We have two operations for the region. One is radio Sawa, and the other one is the Alhurra TV channel. Who do you compete with when you are in the mass media business? Everybody. Who is 138

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specifically in your category? It’s obviously Al Jazeera, Al Arabiya, and now there are many others joining the parade. You know, BBC has an Arabic service, France has announced its own, Russia has announced its own. So you see these other national broadcasters as your direct competition? No, I don’t see the other broadcasters as our competition. No. I was just describing the landscape of the people that are in the business of news and information, and that includes Al Jazeera and Al Arabia. And in that respect, you could say that the main competitors, if you were to define it in commercial terms, which you can’t, would be Al Jazeera and Al Arabia. But we think we have a niche and we have a role to play that is different to what they do. How are you reestablishing your credibility in the wake of the Bush administration’s ‘Hearts and Minds’ policies? Where we’re going as a channel – and that’s through making news and information in a balanced way for the region through creating a platform where citizens can participate in a dialogue. …

Basically, citizens from the region in particular [can engage] about commonality of ideas and concepts and issues, whether from women’s rights to human rights to … food and passion, to all that. We are establishing a unique proposition that was not available in the region, and that might leave you with people with better information and more education. What is the budget, roughly, that you currently enjoy for your operations? The budget of all international broadcasting is about $769 million. Would you say then that public sector spending on news organizations is really one of the few ways that international journalism can survive? Right now, yes. Absolutely. … Thank God for it. I’m a product of commercial broadcasting ... I’m the son of a radio operator and a TV operator and it was my livelihood. I was always driven by ratings and selling spots, but it’s obvious – it doesn’t take a very brilliant person to figure out that a government subsidy today has become essential for supporting free expression and journalism. I