TO OUR MONTHLY ELECTRONIC ECONOMIC BULLETIN
|G R E E C E||ON FOCUS||GOVERNMENT||MACROECONO||BANKS, MONEY||INDUSTRY|
|L E B A N O N||ON FOCUS||GOVERNMENT||MACROECONO||BANKS, MONEY||INDUSTRY|
|L I N K S||OUR OWN||GREEK||LEBANESE||CYPRIOT||INTERNATIONAL|
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--Christodoulakis visits Turkey--------------
Greek Economy and Finance Minister Nikos Christodoulakis (R) is welcomed by Turkish Economy Minister Kemal Dervis in Ankara on May the 9th.
Economy and Finance Minister Nikos Christodoulakis was on a two-day visit to Turkey on May 9-10 with the aim to expand economic relations between the two countries. Christodoulakis discussed with Turkish bankers in Ankara and Istanbul about ways to promote joint Greek-Turkish businesses and bilateral cooperation in the framework of European Union rules. The minister led a delegation of Greek bankers and businessmen and spoke at the Bilkent University of Ankara on "Greece's European convergence". He furthermore met with Turkish Foreign Minister Ismail Cem.
The two countries, together with Italy, can work together to build regional transport and energy infrastructure, Christodoulakis and his Turkish counterpart Kemal Dervis told a joint press conference on May 9. Earlier this year, Greece and Turkey signed a $ 300 million deal to extend an Iranian natural gas pipeline from Turkey into Greece - an agreement that could eventually take Iranian gas to other European countries. the pipeline, due to be completed by 2005, could be extended to Italy, with financial assistance from the European Union. The European Investment Bank, the EU's financial agency, could also provide funds to develop joint energy and transport between Greece and Turkey, Christodoulakis said.
In view of Christodoulakis' visit, Dervis said on May 7 he firmly believed in good economic relations between neighbouring countries. ''When your neighbours are doing well then you are doing well. I believe there is much we can do together, I believe in cooperation in tourism, in cooperation in joint investments. The more we do together the better it will be, '' Dervis said, speaking to Greek television channel NET.
''We have big problems to solve but as long as this message of step by step progress exists, I believe this will be very positive for the Turkish economy," Dervis said, commenting on Greece's experience in the European Union as well as on Turkey's relations with the EU.
subsidy law in the works..................
Economy and Finance Minster Nikos Christodoulakis said on March 14 the government will implement a new development
law in 2003 providing incentives for businesses to invest in the country's less developed regions, some of which rank amongst
the eurozone's poorest. Finance Minister Nikos Christodoulakis told reporters the incentives will include tax cuts, with exact
details of the plan to be finalised after talks with employer and employee groups. "This (the development law) will help us reach
real convergence with eurozone peers," Christodoulakis said. Greece's per capita income currently stands at around 71 percent
of the eurozone average, according to Christodoulakis, but some of the country's agricultural districts are among the poorest
regions in the eurozone.
Businesses to be targeted include the tourism and manufacturing sectors while incentives will be directly linked to the creation of
jobs. Greece's previous four-year development law saw 1,642 investment plans put into effect at a cost of 2.18 billion euros
and resulted in 14,680 new jobs, the finance ministry said. The finance ministry will work on composing the new law over
summer and expects to submit the bill to parliament in autumn.
budget rules against overspending ....----------------
ECONOMY and Finance Deputy Minister George Floridis on May 9 announced tougher budget rules to curb public expenditures. In line with the same policy, a new budget-drafting procedure will be introduced in 2004. Under its provisions, ministry spending plans, their implementation as well as actual results, will be strictly supervised.
The new measures regarding the government's preparation in drafting the 2003 budget include a two percent cap on ministries' operative outlays, such as energy consumption. Operative outlays had also topped the government's cost-cutting list when it had to revise the 2002 budget in the aftermath of the September 11 terrorist attacks in the US.
Ministries also have to report their officials' travel expenses as well as compensation paid out to them for overtime work. They will have to fill in new forms allowing the economy and finance ministry to closely monitor these line items. Such expenses fluctuate more widely and overshoot spending targets more flagrantly than any other, the ministry's general accounting office said in its guidelines for the 2003 budget.
As a further measure, each ministry will have to present a three-year timetable lining out its hiring needs. Contrary to past practice, no modifications of these plans will be allowed, Floridis said. But, answering reporters' questions, he also revealed that the government was no longer bound by earlier legislation that limited the number of public sector employees entering service in relation to outgoing ones to the ratio of 1:5. "Such measures formed part of Greece's stabilisation programme in order to achieve eurozone admission," he said. Now, budgetary prudence must fulfil that role, he implied.
As of 2004, a new budget-drafting procedure will be set up, ensuring increased efficiency and control over government spending, Floridis said. Its main plank will put expenses into three-year projection groups, allowing for stricter supervision over spending, implementation and overall performance. A special commission within the ministry will work out the details, in cooperation with British government officials. The UK Treasury has already implemented a system assessing public spending performance. The commission will be chaired by Greece's former ambassador to the Organisation for Economic Cooperation and Development (OECD), George Venieris.
Regarding this year's budget, Floridis upheld the target to achieve a general government budget surplus equalling one percent of GDP, up from 0.1 percent this year. Government revenue results for the first quarter, however, indicate that ordinary budget receipts were up by a mere 2.2 percent year-on-year against an annual target of 6.1 percent. The central government's borrowing requirement fell by 1.3 percent over the same period, against the target of a 11.6 percent decrease set out in the budget. The most important shortfall was recorded in the ordinary budget's "various revenues", which were down by 2.9 percent against a projected annual increase of 5.1 percent. This item covers direct personal and corporate taxes as well as receipts from stock market transactions.
grows by 3.7%
Greece's gross domestic product (GDP) grew by 3.7 percent year-on-year in the last quarter of 2001, the National Statistical
Service (NSS) said on March 13. In the fourth quarter of 2001, the eurozone's GDP rose 0.6 percent year-on-year.
trade deficit up
GREECE'S trade deficit widened by 1.0 billion euros to 17.6 billion euros in the year to October 2001 compared with the
same period in 2000, according to European statistical agency Eurostat. The shortfall was the third-largest in the European
Union in absolute numbers, following UK's 53 billion euros and Spain's 37 billion euros. Greek exports fell by 14% in the
January-October 2001 period to 8.4 billion euros, down from 9.7 billion in 2000. Imports also fell by 2.0% to 25.9 billio
inflation drops to 3.4%
Headline inflation in Greece dropped to 3.4 percent on an annual basis in February, down from 4.4 percent in January, official
data showed on March 8. Analysts attributed the February easing, which was sharper than analysts had expected, to a retreat
in food prices and positive year-on-year base effects kicking in. In March inflation is expected to pick up again as price
stabilisation agreements concluded due to the introduction of the euro end. The long-term inflationary outlook, however, is
downwards, they said.
Foreign Exchange Rates
......13/05/2002 Indicative tourist buying rates per euro
Bank fund invests 25 million euros -------------
The investment portfolio of National Venture Capital, a subsidiary of National Bank Group, has invested more than 25 million euros and numbers 12 companies in Greece and in the Balkans, the fund said on May 9. The company also announced the liquidation of 2 out of its overall 12 equity holdings, securing significant added values in its investments. Kyriakos Mitsotakis, National Venture Capital managing director and son of former Prime Minister Constantine Mitsotakis, said the company was seeking businesses with rapid growth rates and with activities in dynamic sector and markets. The financing of these companies is made usually through an increase of a company's equity capital ahead of its listing on the stock market. "Unfortunately, a negative trend in the Greek bourse does not facilitate new listings in the market and has made it more difficult for a venture capital company to exit from its investments," Mitsotakis said. National Venture Capital manages three venture capital funds: the first, NBG Greek Fund, with a capital of 44 million euros, invests in developing businesses in the services, food and retail sectors in Greece. The fund has already invested 19 million euros in eight companies and expects to have completed its investment programme in the next 18 months. The second, NBG Balkan Fund, to be renamed NBG Emerging Europe, has a capital of 30 million euros and has already invested more than 5.0 million euros in three companies. The third, NBG Technology, was founded a few months ago with a capital of 60 million euros. It invests exclusively in companies in the technology, media and telecommunications sectors in Greece, the Balkans and the rest of Europe. The European Investment Fund and General Bank also participate in the fund's capital. National Venture Capital has also signed an agreement with National Bank to invest 15 million US dollars to Turkish Private Fund, seeking to expand its Turkish activities.
into energy -----------
METAL industry Spider set up a subsidiary operating in the energy sector. The firm called Spider Energy already applied to state authorities for a licence to undertake three small-scale hydroelectric projects with an installed power capacity of 13 MW, the parent company said in a statement.
---PC Systems supplies parliament -------------
IT FIRM PC Systems signed a contract worth 1.5 million euros with the Greek Parliament to supply computer equipment to Greek deputies' political offices around the country. The company will supply computers, printers and internet software applications along with the technical support and maintenance of all systems.
--Construction of 2004 Olympics press centre awarded--------------
Lamda Development, a subsidiary of Athens-quoted EFG Eurobank Ergasias, is to undertake construction of a press village for the Athens 2004 Olympics that is to be located near the main stadium for the event.
The developer said in a statement on Thursday that it will use designs produced by the public works ministry and local authorities in the northern suburb of Marousi, the venue for the press centre.
The press village, one of the Athens Olympics' few self-financing projects, will house 1,600 journalists during the games.
food safety network to be created within six months
Development Minister Akis Tsohatzopoulos said on Friday that a regional infrastructure for food safety controls would be put
in place over the next six months.
The agriculture ministry is to issue formal decisions in coming days that will supplement the institutional framework for controls,
Offices are to be opened in the western city of Patras and in Iraklio, on the tourist island of Crete, in line with an existing
bureau in the northern port city of Thessaloniki. Others are due to open in the next phase of the project.
The network will belong to the state's Unified Food Controls Authority.
The minister was addressing a European conference arranged by the INKA consumer group.
industry lashes out at minister -------------
THE ASSOCIATION of Greek Food Industries (SEVT) threatened to challenge a Greek law stipulating that businesses must
preannounce price changes to the Development Ministry 20 days before taking effect. "Some businesses (among them all the
state-owned ones) are excluded from this regulation," Dimitris Daskalopoulos, SEVT president and chairman of dairy products
company Delta told daily Naftemporiki. SEVT's threat is seen as a riposte to the punitive measures the Development Ministry
has taken against some of its members over what is said was euro-related profiteering. "In a free market there can be no
agreements about price increases," Daskalopoulos noted.
Export's rising profits ---------------
BALKAN EXPORT announced a 61.3 percent increase in first quarter pre-tax profits to 664,710 euros, up from 411,941 euros in the same period last year, reflecting an increased market share following a successful implementation of a restructuring programme. The firm's turnover rose by 36.6 percent to 5.72 million euros in the January-March period compared with 4.19 million euros in 2001.
prices up ------------
THE MARCH wholesale price index rose by 1.2 percent compared with the previous month and by 3.7 percent year-on-year, the national Statistical Service (NSS) said. NSS attributed the monthly increase to an 1.2 percent rise in domestic product prices and to a 1.3 percent rise in exporting manufacturing product prices.
China discuss tourism ---------------
DEVELOPMENT Ministry officials met with a Chinese government delegation in Athens to discuss ways to expand tourist relations between the two countries. Officials stressed there was interest in exchanging know-how on hotel management and conference tourism. The Chinese government is expected to officially announce Greece as a tourist destination country. The Chinese delegation also repeated a proposal for establishing direct flights between Beijing and Athens. China begun developing external tourism in 1997. 12 million Chinese visited foreign countries in 2001, around one million of which went to Europe.
: Greece offers good value for money, UK tour operators ------------
Travel reservations for Greece are up 2.0% in the UK so far this year based on figures by the country's largest tour operators,
Greek Tourism Organisation said on Tuesday.
British tour operators think that Greece offer good value for money as a travel destination, GTO said.
At the same time, A.C. Nielsen's figures showed that UK reservations were sharply off for most other travel destinations this
year, compared with 2001. Reservations for Spain are down 27%, Portugal -33%, Cyprus -35%, Turkey -7.0%, Malta
-36%, Morocco -18%, Tunisia -42%, Florida -35% and Carribean -11%.
Greek tourism is seeking an aggressive advertising campaign in the UK market with special surveys in newspapers such as
Sunday Times and Sunday Telegraph.
GTO is also organising a more aggressive campain in the US by participating in an annual Travel Show organised by the Los
Angeles Times, in LA, February 16-17.
expands retail network --------------
CELLULAR operator CosmOTE announced the opening of a new retail outlet in Heraclion, Crete, its eighth in Greece. The company's strategy envisages expanding a retail network offering all Cosmote's product and services.
and the seven dwarfs-----------
WHAT'S good for competition is good for consumers' pockets. In Greece, there is no better example for this simple truth than the telephony market. That is, the cellular part of it. The country's three mobile operators, CosmOTE, Vodafone and Telestet, regularly lavish price cuts, rebates and special offers on their pampered customers. This is seen as the direct result of the thorough liberalisation of the market in the early 1990s: OTE Telecoms, the state-owned outfit running Greece's telecommunications network, was not allowed to enter the fray until after its competitors were up and running.
In fixed public telephony, by contrast, successive Greek governments defended OTE Telecom's monopoly. They spared no effort in securing OTE an exemption from EU regulations on telecom liberalisation. The market was eventually liberalised on January 1, 2001 - on paper. In practice, it took one year more, forceful arm-twisting from the National Telecommunications and Post Commission (EETT), the telecoms regulator, as well as threats by the European Commission to clamp down on OTE before the incumbent signed agreements to connect its network to those of alternative carriers. The latter need such "interconnection agreements" to enable their customers to make calls to subscribers of other networks,
One question, however, remained open: At what price would OTE allow the newcomers to interconnect? The startups complained about OTE wanting to offer them retail instead of wholesale connection prices, thus squeezing their profit margins to extinction. Last March the EETT cut through the Gordian knot by single-handedly setting interconnection rates enabling startups to make a decent return. OTE says the EETT's pricing model is unfair and is pushing for a revision.
New kids on the block
But despite the debate about interconnection rates, it was also lack of preparation that held the new entrants back. This year, however, they are ploughing ahead. In the last few weeks, Forthnet, Intraconnect, Teledome and Lannet offered households across the country fixed telephony services. Three more are set to follow in the next months. Most of them operate (or plan to operate) as so-called selection carriers. Under this system, callers register with one or more alternative carriers, the services of which they activate by dialling a four-digit prefix before entering the number of the person they call.
Consumers choosing the new services realise the following savings: with the new entrants (rates are practically identical, except for certain international destinations) local calls cost 2.4 cents; national, long-distance calls 5 cents; international calls (Europe and US) 19 cents and calls to mobiles 23 cents (all prices per minute, excluding VAT). With OTE, by contrast, they cost 2.6, 6.3, 24.6 and 32.3 cents, respectively (OTE calls to CosmOTE mobiles are charged 28.8 cents per minute). Selection carriers demand no fixed monthly fee and usually offer detailed bills for free, as well as per-second charges on long-distance calls.
There's a hitch with carrier selection
However, there are several problems with carrier selection. The biggest is that OTE still owns the line leading to the customer. Consequently, clients using, say, Forthnet still have to stump up a monthly rental to the incumbent.
Furthermore, selection carriers usually do not vouch for their service's quality. "Both the incumbent's local switch centre as well as the interconnect to the new operator remain weak points in the communication chain," consultancy firm Dataxtele points out.
Probably the greatest shortcoming is the lack of control over the client base. "Customers with four-digit [selection carrier] numbers do not tend to be loyal. They hop from carrier to carrier on a call-by-call basis depending on the charge rate they are offered," says Ioannis Karantonis, marketing director of Intraconnect, one of the new entrants that does not work through carrier selection.
Looking at the big picture, voice telephony is considered a mature, low-growth market. Including internet dialups, it is set to expand by just 2.7 percent a year in the EU, a European Commission study says. Local analysts have similar projections for Greece. Selection carrier spokesmen told the Athens News this growth is sufficient to generate profits. First, it is about in line with projected GDP growth; and second, this figure also hides faster-growing market segments, such as business with corporate clients, they argue.
Gateway to broadband?
However, no alternative carrier says it will grab more than a five percent share of the voice market in the next five years - hardly a breathtaking ambition. "Telecom operators do not make money out of voice services," Karantonis explains. The jackpot, instead, is value-added, high-end communication services, such as fast internet and interactive applications. "Narrowband" access is to be used as a gateway to "broadband" solutions like digital subsriber lines (DSL). Operators, however, cannot provide these services unless they own the access lines to their customers. The new entrants' strategem seems to lie in hooking clients with carrier selection first, then luring them to more lucrative hi-tech services.
In fact, almost all of the new entrants already cradle wholly-owned networks able to carry such services. They are already well established in the exurbs of Athens and Thessaloniki which are home to more than 80 percent of Greece's business activity. They provide, with hitherto moderate success, advanced telecommunication services to corporate clients. Gradually, they are fanning out to the provinces.
The only snag is that the network of companies like Forthnet and Quest Wireless will rely on fixed-wireless relay stations, complemented by the necessary LMDS technology, to reach clients directly. Because of the cost to set it up, however, this system seems to be more suited to serving business customers. "Private clients will be included only if they create substantial communication volume," a source within one of these companies told the Athens News. According to Karantonis, fixed wireless solutions to reach clients' homes and offices are also impractical. They would require all the residents of an entire apartment building to install one company's infrastructure, costing up to 12,000 euros. "In Greece, flat owners usually argue even about the heating bill," he says.
From Scylla OTE to Charybdis DEH
In Greece, however, telcos do not seem to have another option for striding "the last mile" from their networks to individual homes. Cable infrastructure does not exist yet (this, alongside the small size of the Greek market is to blame for the relatively high prices for fast internet in Greece, market players say). There are also no rules yet about sharing access to the non-voice band frequency spectrum of OTE's copper wires.
Intraconnect says it is the only firm to offer DSL-powered voice services to individual households, provided the customer also buys the firm's wider communication package. Intraconnect taps homes directly by installing modems upgrading copper wires (xDSL).
Unless they go for Intraconnect, private customers who want non-OTE voice services without resorting to four-digit carrier selection may have to wait until optical fibre networks (like those used for cable TV) are set up. Forthnet plans to build such a grid by 2004 - despite the bureaucratic nightmare currently existing in Greece to secure rights for setting up telco infrastructure (so-called rights of way).
Evergy, a joint venture by Greece's Public Power Corporation (DEH) and Italy's telecoms operator Wind, has similar plans. Evergy is expected by other market players to be a formidable competitor once it takes off. Not only will it have access to DEH's customer base; it will own the state-controlled utility's grid as well as the rights of way that go along with it; and last but not least, it will import Wind's tested and effective backoffice infrastructure.
No portable numbers yet
But before this happens, the seven telcos dipping their toes into the fixed voice market must overcome one key obstacle: establishing "number portability". This term stands for customers' ability to carry the same phone number from one carrier to another. Despite its technical simplicity, number portability is regarded as one of the most important aspects for new entrants to get off the ground. At the moment, some alternative carriers' customers continue to use their old OTE numbers for incoming calls, while employing new numbers for outgoing ones. The Greek government does not need to introduce number portability until January 1, 2003. It demanded, and got, an extension of its deadline to do so from the EU.
The key challenge the new entrants are facing is to lure technology-shy Greeks (internet penetration is still at a paltry 13 percent of households) to their new services. One new entrant is currently holding trials to send one of Greece's two digital TV channels through its wires. The company thinks that such services are more in tune with locals' taste than more interactive ones. Evidence suggests that time is running out for some of these startups. Big bad wolves OTE and DEH lurk, threatening the seven dwarfs. But that, of course, is a different story.
the flag --------------
FOUR freighters hoisted the Greek flag, eliciting appreciation by Merchant Marine Minister George Anomeritis. The four ships are the "Kaiti L", 31,600 DWT, "Iro", also 31,600 DWT, "Anatoli", 27,566 DWT and "Chios", 27,835 DWT. The first three vessels belong to Liberian shipping companies and the fourth to a Panamanian one.
of Lavrio investment ------------
AKIS Tsochadzopoulos, Development Minister, pledged public investment of 150 million euros for the port town of Lavrio in southeastern Attica by 2010, including the creation of 1,000 jobs. A new electricity plant wi th 400 megawatt output will be built in Lavrio by the Athens-quoted Public Power Corporation (DEH); the port will be upgraded; and the road network improved, Tsochadzopoulos said.
HDW ownership not to affect Skaramangas -----------
THE ACQUISITION of a 75 percent stake in German shipyard HDW by an American investor will in no way affect the
privatisation of Hellenic Shipyards (also known as Skaramangas), an HDW spokesman told the Athens News on March 12.
Last October, HDW agreed with the Greek government to take over the heavily indebted Skaramangas shipyards.
"The new owner has pledged he will not interfere in the operating business. The Skaramangas takeover remains on track," the
German company's spokesman, Juergen Rohweder told the Athens News. On March 12, Babcock Borsig, the indebted
engineering group controlling the profitable HDW yard, sold a 25 percent stake to US private equity house One Equity
Partners, a unit of Chicago-based Bank One Corporation. One Equity also bought out time-tourism group Preussag as well as
another financial investor, thus increasing its stake to 75 percent minus share.
Rohweder's statement that One Equity will not be involved in running HDW is substantiated by two facts. Klaus Lederer, who
heads the management boards of both HDW and Babcock Borsig, said he would drop the latter post in order to safeguard
HDW's independence. Lederer is also the mastermind behind the HDW bid for Skaramangas. Furthermore, One Equity
immediately offered two other German HDW partners ThyssenKrupp and MAN AG, 15 percent each, the right to buy its
remaining shares in two years' time and a subsequent three-year veto over control of the yard.
conference sees hope amid gloom ---------------
.........Organizers predict success despite Mideast tension
Organizers of the 8th Arab Capital Market Conference in Beirut on May 23-25 hope to attract a big number of participants despite the tension in the region.
The general manager of Al-Iktissad Wal Aamal magazine, Raouf Abu Zaki, which organizes this annual event, said that more than 700 bankers, businessmen and investors from 30 countries are expected to take part in the conference.
The delegates will represent more than 250 banks and financial firms from all over the world.
Among the participants will be Arab ministers, central bank governors, and chairmen of big companies as well as financial experts.
Many important deals were done during the previous conferences in Beirut, and some major firms were also said to have been founded during this event.
Speakers at the conference will discuss the economic and financial reforms in the Arab world, the impact in the Middle East of the Sept. 11 attack on the United States, foreign direct investment in the Arab states, investment opportunities and the Euro-Med partnership agreement.
Central Bank Governor Riad Salameh said that this event will allow the participants to examine real investment opportunities in Lebanon and the region.
He added that many investors look forward to taking part in the conference to make new contacts.
The president of the Association of Banks in Lebanon, Joseph Torbey, said Lebanon has one of the best banking systems in the Arab world, adding that investment opportunities in Lebanon have grown since Sept. 11.
investment fails to lift economic outlook --------------
A leading Lebanese banker declined Friday to make any projections on economic growth in the country this year, as most economic indicators remained mixed with tourism and real estate services booming, versus decline in some financial activities.
“We cannot issue any forecast for economic growth. Things are almost the same as last year, with a bit of a wait-and-see attitude on the part of the Lebanese,” Banque Audi’s chief strategist Freddie Baz said in a news conference.
But Baz did talk about the positive indicators of Gulf nationals and capital flooding Lebanon versus a swift exit of Lebanese money that left the country $697 million short in the first quarter of 2002.
“There is a state of stagnation, although there was a considerable outside demand for real estate and tourism services,” Baz said.
Unofficial estimates put the post-Sept. 11 inflow of Gulf money to Lebanon in the vicinity of $1 billion, mostly going into lavish apartments in downtown Beirut, courtesy of Solidere.
“We have heard tidings of a Dubai-based group mulling over the option of building a $60 million mall in the downtown area with a help of a European group,” Baz said. “Also, another Kuwaiti firm has bought a car park in Riad Solh to use in building a $60 million to $70 million trade center nearby.”
Although investors are buying real estate, mostly in central Beirut, Baz said the rush had not translated into a rush on construction projects.
Cement deliveries and the number of construction permits have dropped in the first quarter of the year, said Baz, quoting Central Bank statistics.
Baz also pointed out some worrying statistics about the banking sector’s performance in 2002.
“For the first time in a number of years, the growth rate of consolidated customer deposits fell to 0.9 percent in the first quarter of 2002, compared with the same period of last year,” Baz said.
“This rate is lower than the average of 2.4 percent growth for the first quarter in the past five years.”
Baz also lamented the discrepancy between Arab and Lebanese faith in the economy, saying: “It is pitiful to see Arab capital flowing in while Lebanese deposits retreat.”
He warned that any financial crisis would have to be coupled with painful measures that would have a great impact on the socio-economic situation.
“Despite ongoing economic deterioration, there are still technical means to control the situation,” Baz said.
Baz said the local currency is still in good shape, despite the vast macroeconomic problems.
“Around 30 percent of customer deposits are in Lebanese pounds, which means people still have faith in the local currency,” Baz said.
logs on but lags behind in e-government --------------
..........Internet services in need of more work
The e-government initiative propagated by the Lebanese government has placed the country 70th out of 196 states in terms of internet-based government services and data, according to a recent study conducted by Brown University.
Yet Lebanon lags behind Arab countries such as Mauritania, Djibouti and Libya, according to the findings of the study conduced by the Providence, Rhode Island-based university in summer, 2001, and presented Tuesday at an e-government conference held at the Sheraton Coral Beach Hotel.
The two-day conference, organized by the Office of the Minister of State for Administrative Development (OMSAD), attempted to shed light on Lebanon’s effort to become a wired government capable of delivering services and data to the public via the internet.
Darrell West, author of the Brown University study and a keynote speaker at Tuesday’s conference, said the Middle East had not fared too badly in terms of e-governance.
As a region, the Middle East ranked fourth in its level of e-governance, preceded by North America, Europe and Asia. E-governance in North America stood at 50 percent, while the Middle East’s performance hovered around 31 percent, close to Europe’s score of 34 percent.
West said that the extent of e-governance among countries more or less depended on the country’s political will to become transparent and the ability to provide economic resources to do so. The survey covered 2,888 government websites and ranked them in terms of data and services provided.
“We didn’t care if they were democracies, dictatorships or military regimes,” West said.
“The good news is that 45 percent of government websites were multilingual and 71 percent provided access to publications. The bad news is only 8 percent offered services.”
While countries have made headway in providing extensive information on government websites, the issue of services is less forthcoming, primarily since wiring government institutions is a long and costly affair. These immediate costs, however, should not dissuade governments, according to West.
“For the short term, the process may be regarded as costly, but in the long term it should help provide better government services at a cheaper cost,” West argued.
In the United States, according to West, 70 percent of households have access to the internet, yet only 10 percent of the population are classified as browsers of government websites.
“Only a third of the population log on to government websites regularly, one-third are sporadic users and the remaining third haven’t visited government services and never will,” West said.
Despite the slow progress of government-website usage, West said that countries were tuning in more and more to the uses of e-governance.
“In the Dominican Republic, the National Drug Control Council website allows users to report illegal drug deals anonymously,” West said.
“A favorite is the Lithuanian site that allows users to search for stolen vehicles through the Ministry of the Interior.”
In Lebanon, the government has begun to offer certain services online, such as customs procedures through the Noor system, real estate registry and medical expenses for public employees.
Minister of State for Administrative Development Fouad Saad announced at Tuesday’s conference that the government was working on issuing ID cards readable on line, taking further its nascent effort of e-governance through the one-stop shop website for services www.informs.gov.lb.
OMSAD’s e-government site links the services of 11 ministries and 11 state-run institutions as a means of smoothing bureaucratic procedures.
OMSAD’s mission has been facilitated by a number of donations, the biggest being 38 million euros extended by the European Union to sponsor administrative reform .
On a regional level, Lebanon ranked seventh out of 21 Arab countries surveyed in the Brown study.
The top Arab government websites were located in Saudi Arabia, followed by Morocco and Egypt. Over all, Saudi Arabia ranked 27th among the 196 countries.
West urged Arab states to cooperate regionally to produce a better e-government.
“Cost of technology is a barrier and getting government agencies to work together is another problem,” West said.
“The virtue of regional alliance is the ability to share technology and information so that governments learn from one another. Smaller and medium countries will never have economies of scale without such cooperation.”
But the main issue at stake is the political will needed to make e-government an effective tool for the citizen.
“IBM estimates that government agencies can save up to 70 percent by providing their services on the net,” said Saad Barak, head of Kuwait-based International Turnkey Systems.
“But a number of projects such as the Taurus project for the London Stock Exchange failed not due to technology but political will,” he added. “Making the public the king is the gist of e-government projects.”
----Government is jubilant over VAT success ------------
The government’s VAT gamble appears to be paying off, as recently released figures from the Finance Ministry indicate that at least LL168 billion ($112 million) was generated by the state since the implementation of the controversial tariff.
According to the ministry on Tuesday, more than LL111 billion of the LL168 billion came from customs, while the rest was procured from a number of outlets such as supermarkets, factories, merchants and suppliers.
The Finance Ministry is currently analyzing VAT income from more than 7,800 registered firms and companies. The figures were collected by the newly created value-added tax department in February and March.
Chaouki Hamad, the government’s VAT project coordinator, said that 97 percent of companies registered with the department have already filed their taxes. He added that there are currently returns from some 220 firms which are still in the mail.
Hamad predicted that customs revenues generated from the tariff would increase in the coming months, as traders are expected to make more business transactions.
“We are auditing the amounts already paid to the VAT department to ensure that the calculations are accurate,” Hamad said.
The 10 percent VAT, which was introduced by the government in February 2002 to help alleviate the budget deficit, is projected to generate about $500 million by the end of
“After its debut, revenue from the VAT wavered between LL80 to LL82 billion in February and March,” said the advisor to the Finance Ministry, Jihad Azour.
He added that the ministry was able to maintain such a high number despite the fact that imports in those two months were low.
In preparation for the VAT, many merchants and importers stockpiled goods to avoid paying the 10 percent extra duty. This led to a drop in the value of imports early in the year.
But Azour told The Daily Star that revenue from customs was expected to pick up pace again once merchants and suppliers resume ordering goods from abroad.
“Revenue from the VAT in the first two months proved that negative estimates from the new tax proved to be incorrect,” Azour said. The Finance Ministry estimates that the VAT will increase the government’s revenue by 3.5 percent of GDP (gross domestic product). The ministry also hopes to clamp down on tax-dodgers.
He added that the second positive element regarding the VAT was that the impact on prices was lower than expected or even projected.
“Independent agencies estimated that the increase in prices on commodities after the introduction of the VAT was less than 4 percent,” Azour said. He added that the price increase in basic products, according to the Economy and Trade Ministry, was between 1.5 and 1.8 percent. “Given the increased competition between supermarkets and small businesses, the 4.5 percent rise on products may soon fall,” according to Azour.
Still, skeptical economists claimed that the VAT may increase the price of goods by at least 10 percent.
The other impressive achievement claimed by the ministry’s VAT department was its ability to process the new tax’s revenue in record time.
“In less than two hours, the VAT staff managed to process all the applications and tax declarations from thousands of companies in Lebanon,” Azour said. More than 150 staff underwent 120 hours of intensive training on the VAT.
“The management of the VAT processed 7,800 declarations in a short period,” said Azour. He added that in other countries it took more than 10 months to prepare for the effects of the VAT. “But we did it in less than two months,” Azour proudly proclaimed.
Officials from the VAT Office visited 6,700 companies out of the 7,000 registered ones in less than two months in an attempt to ensure that the zero hour would go according to plan. “In all aspects, the assessment of the VAT was positive,” Azour said, adding that people and merchants have adapted themselves to the new tax.
The VAT is one of the measures adopted by the government of Prime Minister Rafik Hariri to tackle the $27.6 billion public debt. Other measures include privatization, reducing expenditure and expanding the collection of taxes.
considerations put EU agreements in doubt ------------
...........Foreign ministry undecided despite European lobbying
The Foreign Ministry is still debating whether to sign three agreements with the European Union at next week’s Euro-Mediterranean ministerial meeting in Spain, which will be attended by Israel.
Spain, the current holder of the EU’s rotating presidency, and the EU are lobbying hard for Lebanon and Syria to attend the meeting, which is seen by the EU as crucial to pushing Middle East dialogue further.
The EU is eager to conclude the agreements with Lebanon, which are an offshoot of 1995’s Barcelona process of peace and economic prosperity in the Mediterranean region, but regional politics is plaguing the signing ceremony.
Lebanese and Syrian hesitance to attend this year’s meeting follows Spanish and EU refusal to take up their request to ban Israel from the meeting due to its continued offensive in the occupied Palestinian territories.
Both Israel and the Palestinian Authority, who
are signatories to the Euro-Med partnership of 15 European and 12 Mediterranean
states, are due to attend the meeting in Valencia.
Foreign Minister Mahmoud Hammoud received the EU’s refusal on Thursday, but did not indicate whether Lebanon would boycott the meeting.
In 2000, Lebanon and Syria boycotted a Euro-Med foreign ministerial meeting in Marseilles due to Israel’s attendance at the onset of the intifada.
If Lebanon boycotts the Valencia meet, it will not benefit from early tariff cuts on agro-industrial and industrial goods under an interim agreement, which was to come into force after the ceremony.
The “to sign or not to sign” dilemma was also at issue Friday at a Euro-Med conference held at UN House in Beirut.
The conference, organized by Data Invest Consult and the Friedrich Ebert Foundation, debated the feasibility of entering into a partnership with the EU without first possessing an equal footing with Europe.
Former Finance Minister George Corm, a member of the previous government of Prime Minister Salim Hoss, issued a tirade against the negotiation tactics for the association agreement with the EU on the part of the government of Prime Minister Rafik Hariri, saying: “I have a feeling the association agreement with the EU will place us in a cage.”
Corm and other participants argued the agreement is accompanied by baggage that is not beneficial for Lebanon, such as a possible linkage with the International Monetary Fund.
“The chief EU negotiator with Lebanon, Catherine Day, told an EU publication that aid to Lebanon is linked to an IMF program,” said Corm, quoting a Euro-Med publication of January this year, after the initialing ceremony of the agreement.
Catherine Day, who initialed the agreement with Economy and Trade Minister Basil Fuleihan, said that “an early IMF agreement will be a very important precondition for any wider international assistance to Lebanon.”
But joining such an IMF program has been met with staunch opposition by successive governments in Lebanon.
Corm further argued that Lebanon’s association agreement was negotiated without making an effort to increase European aid to acclimatize Lebanon’s war-damaged economy to the European market.
“Between 1995 and 2000, the EU disbursed to Lebanon only 17 percent of its commitments under the Meda I financial program,” said Corm, quoting a Meda I report.
The Meda program, the EU’s main financial instrument for the Euro-Med area, has been taken to task by many countries. But the EU has pledged to speed up the process of handing out funds in the Meda II program, covering 2002-2006.
The EU usually distributes aid under Meda proportionate to each country’s gross domestic product and population.
“Lebanese negotiators should have told the EU that these guidelines cannot be applied in the same way to Tunisia as to a country like Lebanon, bearing a war-gutted economy.”
Corm conceded that Lebanon was more or less forced to join the Euro-Med agreement, but most probably should have limited itself to joining the World Trade Organization only.
“A country as small and vulnerable as Lebanon should have protected itself just like Switzerland did, by opting to stay out of the EU,” said Corm.
The former finance minister doubted that an EU agreement would have a revolutionary affect, since Lebanon’s has been an economy that has set precedents in liberalization since the 1950s.
“The way the agreement is being trumpeted as a process of liberalization, you would think we have a cloistered, socialist economy,” said Corm.
Instead, he concluded, “a number of free trade agreements forged with Arab countries in recent years such as the one with Egypt have mostly hurt the economy.”
----Hariri agrees deal with Microsoft for use of latest software ------------
Prime Minister Rafik Hariri yesterday announced an agreement worth $3.5 million over three years with the Microsoft Corporation, which will see the latest software technologies deployed across most public institutions.
The Enterprise Licensing and Premier Services Agreement will provide the government with immediate access to modern software, operating systems, office business applications and client-access licenses.
It will also provide tools to increase the productivity of public sector employees by cutting costs and time-wasting procedures. Full training and back-up will also be available from Microsoft as part of the deal.
Following a conference at the Sheraton Coral Beach Hotel on Tuesday to promote e-government in Lebanon, and the success of ministerial websites like that of the Ministry of Finance, the agreement with Microsoft illustrates the current administration’s commitment to moving local and national government into the new millennium.
“We are proud to be part of this strategic alliance with the Lebanese government. We believe the government’s commitment to implement the latest technology, backed up by its drive to develop technology skills amongst its people, will play an increasingly important role in the future of the country,” said Ali Faramawy, regional manager for Microsoft Eastern Mediterranean.
Minister for Administrative Development Fouad Saad, who signed the agreement on behalf of the government, said: “The agreement is beneficial because it reduces the cost associated with operating systems on both the PC and server sides as well as the cost of productivity tools in use by civil servants.
“It also allows us to upgrade all our existing Microsoft applications, while providing us with a decreased total cost of ownership by simplifying the administration, usage and management of software licenses throughout the government.”
The three-year term is such that the government can plan and implement technology needs without managing new agreements every year. It takes significant business and legal resources to complete annual agreement reviews.
Commenting on the agreement, Charbel Fakhoury, general manager for Microsoft Levant said: “Technology has become an integral part of governments around the world and so all governments are constantly on the lookout for ways to be more efficient and more cost-effective through the better use of technology.
“Standardizing on the Microsoft platform will provide the Lebanese government with a solid base as well as exceptional salability and reliability.”
Midware, a Microsoft solution provider and reseller, has been awarded the contract to administer the agreement, and will provide further technical services to the government.
for Syrian gas in pipeline ---------------
Syria will soon notify Lebanon of the discount it will be offered for the purchase of gas needed to run two power plants, Energy Minister Mohammed Abdel-Hamid Beydoun said Friday.
Beydoun and his Syrian counterpart, Ibrahim Haddad, made the announcement after a meeting in Beirut to discuss the rate.
Last month saw the signing of an agreement to sell Syrian gas to Lebanon at a discounted rate, but that rate has yet to be set due to the fluctuation in oil prices, which determine the price of gas.
The two ministers also agreed to outline joint plans for renovating the Tripoli refinery and undertake studies to explore gas and oil fields along Lebanon’s coast. Haddad underscored the importance of exploring fields along the coast with the help of foreign firms.
“There is indication that gas and oil fields could be found along the Lebanese-Syrian coastline, as is the case along the Egyptian coastline,” he said.
Lebanon is also trying to secure Iraqi crude oil at a 50 percent discount to lower its energy bill.
Lebanon’s two defunct refineries used to run on Iraqi oil, pumped through a pipeline linking Lebanon to Iraq via Syria.
The connecting line between Lebanon and Syria is one of the stumbling blocks for repumping Iraqi oil.
----LIA boss sees way for industry to reach its potential ------------
Trust and a good reputation can vanish overnight. A factory cannot.
These words, uttered by US Federal Reserve Chairman Alan Greenspan a few weeks ago, are close to the heart of the newly elected president of the Lebanese Industrialists Association, Fadi Abboud. He has jotted them down on a paper lodged in his jacket pocket.
Nearly 12 years after the civil war, industrialists like Abboud are trying to convince the government and investors that Lebanon’s industrial sector can deliver more profit and economic growth than any other.
“For every $13,000 invested in the industrial sector, a job is created,” said Abboud. “I personally think we can create 50,000 jobs in the next two years, more than half of them by replacing foreign workers in Lebanon. We can also triple exports in the next five years, if our life is made easy.”
Abboud’s recipe for churning out jobs is simple. Eliminate the graft that is hiking up export costs for industrialists, offer trouble-free and tangible tax breaks for industrial projects and break the so-called lifelong “Maronite marriage” banning employers from “divorcing” employees.
“I personally think that we cannot, in the year 2002, argue against the fact that complete freedom to fire and hire creates jobs,” said Abboud.
“The ‘Maronite marriage’ between the employer and employee is the reason employers are shying away from hiring Lebanese workers.”
Abboud said that nearly 78 percent of foreign workers do not possess the necessary permits; moreover, he said, Syrians working here do not need one.
“It is a question of supply and demand,” said Abboud. “At the end of the day employers cannot enter into a contract with a Lebanese worker if they are forced to pay him considerable compensation.”
According to Samir Aoun, advisor to Labor Minister Ali Qanso, the government is currently working on a new law to improve conditions for the hiring and firing of employees.
Poor legislation is not the only thing stunting the growth of the industrial sector. Abboud said high production costs, loose borders and high taxes have also boosted smuggling and crippled local industries that cannot compete with cheap, duty- and tax-free Syrian goods.
“I estimate that $10 million worth of smuggled goods enter Lebanon each month,” Abboud said. “It is an organized smuggling ring which reveals only half of the weight of their load and takes off 20 percent of the real value.”
If this estimate is true, then smuggling is nearly a third the value of annual Syrian exports to Lebanon, which was around $328 million last year.
“We have also discovered that major supermarkets in Lebanon are selling Syrian-made products that bear the supermarket’s label,” said Abboud. “Five trailers entering Lebanon per day from Syria is a considerable amount for an economy as small as Lebanon’s.”
Abboud said the problem of smuggling is fueled by the inequality of the Lebanese and Syrian tax systems.
Lebanon slapped a 10 percent value-added tax on goods in February, while Syria is expected to introduce their VAT in 2004. The issue has prodded traders and industrialists to ask the government to delay the tax until 2004 to combat smuggling.
Abboud said another illegal practice, graft, is hiking up costs for industrialists, who also have to shoulder the burden of a strong pound backed by the government’s continued protection of the fixed-exchange rate.
“Can you ask a resistance fighter for a gun license?” he asked. “Exporters should not be tangled in bureaucratic procedures and taxes. Dues for customs statements and the cost to the so-called forwarder and his friends are more than $150 per container.”
Although the government has excluded exports from the 10 percent VAT, Abboud said extrabureaucratic procedures have raised export costs, despite last year’s introduction of a modern customs law.
“It is frustrating that even though the new customs law is quite modern and in principle should have cut all these costs, the cost to place a container aboard a vessel is still in the region of $400,” he said.
Elie Zakhour, who heads the International Chamber of Shipping, said average total costs for transporting a container from the warehouse to the vessel could reach $300, once all fees are counted.
High export costs, Abboud said, also apply to land transport.
“To clear a truck at the border costs LL300,000,” he said. “In our opinion it should not exceed LL50,000.”
Abboud said there is no shortage of investors willing to partake in industrial projects, although at least 70 percent of investments have gone to real estate and tourism projects, for obvious reasons.
“Incentives for industrial investors are still a myth,” he continued. “If all these problems vanish, Lebanon would be first in jewelry, agro-industry, printing, molding-making, film, printing, fashion and software. No one in the Arab world stands a chance of competing with us in these fields.”
To fulfill this export potential, Abboud suggested a three-month emergency plan to be implemented with the help of the government. “We need direct access to the prime minister’s ear,” he said. “As we all know, we are still in Lebanon and we can only abolish all problems the Hariri way by making sure that anyone who tries to make the exporter’s life difficult will be dealt with.”
exhibition draws businesses from near and far -------------
..........Local and foreign companies seek distribution deals
It seemed like a strange scene for Beirut. Martin Dikjman, a young man from Holland, carving stake in hand, fashioning his home country’s famous wooden clogs at the 2002 Horeca hospitality exhibition Wednesday.
Two middle-aged Lebanese women approached the Dutchman, who sported a mustache and John Lennon glasses. He shaved off a sliver of wood, asked the ladies their names, and carved them into the shavings along with a tulip “the national flower of Holland.”
“You know,” one woman cooed, “you look just like the movie star Russell Crowe. I mean, he’s bigger, you’re much thinner than him … but he’s a handsome man.”
The clog display is just one sign that foreign industries are looking to gain a foothold in the Lebanese market. Next to Dikjman’s stand were other displays from the land of windmills and tulips, showcasing Dutch cheeses among other things.
On the other side of the exhibition hall at the Beirut International Exhibition and Leisure Center, Benoit de Roubaix, a Belgian, was pitching his country’s most notable gastronomic contribution beer. Standing in front of 50 bottles of Belgian ale, Roubaix said he hopes to find distributors here to import his products.
“I’m here during the day, and tonight I’m going out to Monot Street and talking to people at a few bars,” he said.
Dutch clogs, Belgian beer, Armenian wine there is a small, but recognizable, foreign contingent at this year’s convention, which ends Friday. But its purpose is no different than that of the local tradesmen: Everyone wants to land contracts with distributors, catering services, supermarkets and anyone else who will buy their products.
Among the Lebanese participants who have the most to profit from the exposure that comes with the exhibition are relatively new operations.
This is why wineries such as St. Clos and Cave Kouroum de Kefraya joined this year. But many long-established companies also come, hoping to increase their market share. Such is the case with Shuman Farms, a family-owned business begun in 1955. While a chef prepared chicken curry at the company’s display, Shuman Farms owner Nabil Shuman explained what brought him to the exhibition.
“We were the first company in Lebanon to package and sell chicken,” said Shuman, whose rivals now include Tanmia Chicken (which is also at Horeca 2002) and Hawa Chicken. “We’ve been participating in this exhibition since it began about eight years ago.”
“We’re trying to attract new clients from the catering industry and also chefs and food and beverage managers. The exhibition is very well attended, mostly by professionals who are potential clients,” he said.
While the exhibition is ultimately about business, there was plenty of entertainment on Wednesday, including various cooking contests. No doubt the most impressive was a pastry/dessert competition, which was dominated by intricate chocolate sculptures, statues worthy of Rodin as well as more modern chocolate renderings, such as that of a full-court basketball game.
A younger crowd was drawn to a bartender competition, sucking down cans of Red Bull given away at a nearby booth. One of the contest promoters seemed to capture the general mood: “It’s really a good mix. Everyone is trying to sell something and do something good for their business, but they’re also having a good time doing it.”
agrees six-plane deal to update fleet -----------
...........Three further leases to complete overhaul
Middle East Airlines chairman Mohammed Hout confirmed Thursday that the company plans to upgrade its fleet.
Speaking to reporters at the MEA headquarters in Beirut, Hout said the national carrier would buy six Airbus 321 long-haul planes and lease three wide-body A330-200 to replace existing models.
He also said the company’s management was able to persuade Airbus, the European aircraft manufacturer, to reduce the price of the A321 planes but declined to disclose the total value of the deal. According to Airbus, each A321 plane costs nearly $65 million.
The company announced earlier that it intended to lease three new A330-200 planes.
All the new planes, which will come directly from the manufacturer, will become operational in the summer of 2002.
“This is the right time to buy new planes from Airbus because the prices have gone down since Sept. 11,” the chairman said.
At present, MEA has nine Airbus planes on lease and flying to nearly 20 destinations in Europe and the Middle East.
Hout said that he had signed an agreement of understanding with Airbus, but added that the deal won’t be inked until the financing of the purchase has been arranged.
He said that 85 percent of the deal will be financed by foreign banks.
“I don’t think we will have a problem in finding banks to finance the deal after the company managed to implement the restructuring plan last year.”
He added that a number of international banks have already approached MEA to provide financing for the purchase.
In 2001, and with the full backing of the government, MEA sacked 1,200 employees and offered another 250 early retirement packages at a cost of more than $100 million.
“The step we took last year encouraged us to buy and lease new planes,” Hout said, adding that replacing the existing fleet will not create any additional financial burden on the company.
“We are in the right direction because our losses have dropped after the company was restructured,” he said.
Hout projected a loss of less than $20 million by the end of 2002, compared to $30 million in 2001 and $50 million in the year 2000.
The Central Bank, which owns 99 percent of MEA, has spent more than $400 million on the airline since 1996.
Hout added that the chief factor affecting the company remains fierce competition from foreign airlines.
Prime Minister Rafik Hariri initiated an open skies policy in 2000 in order to encourage all airlines to use Beirut International Airport.
Airline experts say that the increased competition is now costing MEA $20 million in annual losses.
There are more than 33 Arab and other foreign airlines using BIA at present, while more are pledging to include the Lebanese capital as a regular stop in the near future.
Christian Scherer, Airbus’ senior vice-president of transactions and control and deputy head of commercial, said that MEA management succeeded in negotiating a good deal.
“They (MEA) drove a hard bargain,” Scherer said, but added that he was not authorized to disclose the value of the deal.
Hout added that there would be no commission payments in the deal because both sides, he claimed, made sure that the contract is “fully transparent.”
He also ruled out the possibility of any privatization of MEA this year given the current depression in worldwide travel and the attendant cool in new investments.
“The company is ready for privatization because the losses have dropped thanks to the measures we took.
“But we are not going to wait forever until privatization takes place,” he added.
trade gap under scrutiny -----------
..............Committee to ‘redress imbalance’
The Syrian-Lebanese Businessmen’s Council met Wednesday in Beirut, with a special committee focusing its efforts on reducing cross-border smuggling and correcting the trade imbalance between the two countries.
After convening at the Beirut Chamber of Commerce, the council, consisting of 130 members, was separated into committees to focus on a particular sector.
“Since not all committees face similar or as crucial issues as others, the council was divided into 10 committees, each focusing on a certain sector,” explained Raphael Debbaneh, the council’s secretary-general.
The council’s trade committee focused on creating a legal framework to facilitate balanced trade, with special attention toward customs, transit facilities and the transportation of money, people and personal goods across the border.
The head of the trade committee, Joseph Jraisaty, said that a common tax formula could help lessen the flow of cheaper Syrian goods into Lebanon.
“We want to find a legal common ground with Syria, so as to stabilize the level of trade leading to a symmetrically priced economy in both countries,” Jraisaty said.
However, with Lebanon enjoying a higher standard of living than its neighbor, Syria will almost always be able to produce lower-priced goods with its surplus of cheaper labor. These economic discrepancies naturally make difficult the establishment of a common market with similar prices and taxes.
“We know that the topic is huge, but we are going to request it,” Jraisaty said. “We might not acquire the exact same (tax) percentage, but we want to bring them as close as possible.”
By asking for this new policy, the committee hopes that both countries will move forward in liberalizing trade in parallel, especially since both are hoping to join the World Trade Organization by 2005.
So far, the trade agreement between the two countries allows products manufactured in each country to be traded between the two with no customs tariffs. However, Syria has set some restrictions on certain products, such as wine and soda exported from Lebanon.
The trade committee also wants to make easier the flow of Lebanese goods through Syria. Transporting goods via Syria to countries such as Jordan and Iraq involves time-consuming paper work.
Meanwhile, “goods imported from Syria’s Tartous Port into Lebanon are entered legally through customs with no hassle,” Jraisaty said.
Another sticking point was the fact that the Lebanese-Syrian trade agreement is biased in favor of Syria in terms of foreign-produced goods.
“Lebanon is not allowed to export foreign goods to Syria, despite the fact that the same products are legally imported from Syria,” Jraisaty said.
This issue alone accounts for much of the trade imbalance between the two countries and was included on the committee’s schedule of “things to do.”
Jraisaty said there is still work to be done but the committee plans to pursue these issues by meeting every two months.
“What we are doing, we are doing for the welfare of both countries,” Jraisaty said. “It is difficult getting an approval to implement a new law or a taxation, but we hope that we will be heard.”
----Tourism industry grows despite regional uncertainty ------------
............Fair showcases all-time high in investment
Despite the explosive situation in occupied Palestine, Lebanon and the region are witnessing massive developments in the tourism industry, a top priority for Middle East governments, according to participants at a tourism conference.
AWTTE 2002, the 7th Arab World Travel and Tourism Exchange, held Thursday through Sunday in Martyr’s Square in central Beirut, served as a platform for potential holiday-makers to get acquainted with the latest destinations, packages and services available.
About 150 leaders in the tourism sector, representing more than 17 countries, came from as far as Romania and Cuba to promote their vacation spots and develop business interests in the Middle East.
Regional representatives said the conference was happening during an all time high in investment in the sector, with multi-billion dollar projects sprouting across the region.
One of the loudest events of Lebanon’s season will be the inauguration of the Movenpick Hotel and Resort in Beirut.
“We have set the opening date for June 6, and we expect full occupancy for the whole summer season,” said Elie Abdel-Massih, sales manager of Movenpick Beirut. “Our marketing campaign is in full swing all over the Gulf, North Africa and the European Union. We are definitely expecting a big boom.”
Jean Claude Ghosn, sales manager of AVIS Rent a Car, was also optimistic, saying: “We have the largest fleet in Lebanon with over 500 cars, and we are expecting a rush for the summer season.”
But he conceded that “nowadays business is good one week and slow the next.”
As for the success of the fair, Osama Bou Ajram, general manager of ArabMotor International, said: “Attendance has been high, and visitors are eager to see what’s available.”
He added: “Being the only English motor magazine directed toward the Arab enthusiast, our business is picking up and we are in the process of establishing regional offices in all the countries of the region.”
All participants that The Daily Star encountered were unanimous in emphasizing that if the summer season turns out to be anything like the Adha holiday, Lebanon will witness a flood of Arab tourists, resulting in a much needed boost for the national economy.
must ‘think local’ to bolster ailing industry -------------
The Arab world, grappling with the stigma of Sept. 11 and the ongoing Israeli onslaught in the Palestinian territories, should think local to keep the area’s faltering tourism industry afloat. Having long craved to lure Western tourists, the Arab world is now pulling all its weight to keep tourism an intra-Arab affair, as is testified by Lebanon’s experience.
In the first two months of 2002, the number of Arab tourists coming to Lebanon increased by 42 percent compared with the same period in 2001, according to the Tourism Ministry. Arab tourists are credited with foregoing more luxurious Western capitals and thereby contributing to Lebanon’s 18.3 percent increase in tourists in January and February this year, a situation that has been emulated in Jordan.
“Despite Sept. 11th and the trouble in Palestine,
we managed in 2001 to maintain the same number of tourists who came to
Jordan in 2000, thanks to a rise in Arab tourists,” Jordanian Tourism Minister
Taleb Rafai said at a press conference in Beirut Thursday. As is the case
in Egypt, the biggest hard currency money earner is tourism, accounting
for around 11 percent of gross domestic product (GDP), according to Rafai.
The press conference was held with Lebanon’s Tourism Minister Karam Karam and his counterparts from Jordan and Romania. All three are trying to forge a more regional approach to tourism, particularly as Lebanon, Syria and Jordan last year signed a cooperation pact.
International chains and hotel owners in Lebanon were also knocked for failing to cater to a greater number of Arab tourists.
Long before Sept. 11 and the intifada, Lebanon saw a number of international management chains leave the market as swiftly as they entered it to raise the Sheraton or Holiday Inn flags over war-dogged hotels.
The latest failed marriage between an international chain and a hotel occurred in March, when the Riviera hotel and Spanish Sol Melia ended a 12-year management deal, nearly a year after hooking up to compensate the country’s dearth of marketing resources.
Nizar Alouf, manager and partner in the Riviera hotel, was cornered by a tourism consultant at a Horeca hospitality conference Thursday held on the sidelines of a hospitality fair to tackle the perennial hospitality question: to brand or not to brand.
“I can only advise those who would like to work with international management companies, to pick one that has a great name in the Arab world,” said Alouf.
Before Riviera, the prestigious Bristol hotel parted ways with the US-based Starwood chain, Palm Beach left France-based Accor and Searock hotel exchanged UAE-based Rotana chain for US-based Best Western, to name a few.
Salim Zyr, the CEO of Rotana, which is currently running five-star Gefinor hotel in Beirut, thought out a solution at the conference. He advised hoteliers in Lebanon to focus on setting up regional or local hotel chains capable of catering to Arab tastes.
“I well understand there are a lot of questions why these companies are pulling out of Lebanon,’ said Zyr. “But Lebanon’s biggest hospitality problem is finding international chains to run hotels that have 70 to 100 rooms.”
Zyr argued international chains coming to Lebanon should view the country as a business destination rather than a summer venue. However, the absence of feasibility studies and reliable data could cloud an investor’s view of the Lebanese hospitality market.
“Many of the investors who came here recently relied on Arthur Andersen’s occupancy figure of 59 percent for the year 2000, and this is not true,” said Pierre Ashkar, head of the Hotel Owners Association.
Arthur Andersen, which presented these figures at last year’s Horeca conference, is now mired in the Enron fiasco, but it is not the only party to have misconceptions about the Lebanese and Middle East market as a whole.
The Arab World’s Travel and Tourism Exhibition, which is set to open Thursday, kicked off last year with a World Tourism Organization report predicting that the Middle East would be one of the world’s fastest growing tourism markets.
Despite the absence of data and stability in the region, the tourism sector is still being hounded by investors, according to figures presented by the investment promotion body, the Investment Development Authority of Lebanon (IDAL).
“Around 70 percent of investments that are in the pipeline are concentrated in the tourism industry, amounting to some $710 million,” said Allan Bijanni, an IDAL vice-president at the Horeca conference.
Ashkar also quoted Central Bank figures that estimated investments in the hospitality sector over the past decade to have neared $3 billion.
Zyr conceded the mismatching between big chains and Lebanese hotels is mainly due to a problem about expectations.
“International chains are excited about coming to Lebanon,” said Zyr. “The first time the Inter-Continental chain went outside of the United States was in 1964, to run the Phoenicia.”
----Restaurants must improve levels of service’ --------------
Lebanese restaurants and bars have a standard of service that is “average” and “well below 100 percent,” according to Wadih al-Batal, manager of La Piazza Restaurant and head of training and recruitment at Premier Leisure.
His comments came at a conference on current trends in the restaurant industry, held last Friday at the Horeca 2002 Hospitality exhibition at the Beirut International Exhibition and Leisure Center in downtown Beirut. The event was attended by all major players in the hospitality industry.
“How many times have we been to restaurants and seen employees slouching against the wall and smoking a cigarette or leaving empty wine glasses at the table when they should be offering new glasses?” Batal asked.
“This is because training of staff is poor, and employee satisfaction is low,” he added.
While this may not necessarily be true for all restaurants and might well cause some upset in some quarters Batal certainly raised an important issue in Lebanon’s hospitality industry today.
As a key factor for any possible economic growth, the hospitality sector must provide high standards of service. And as more restaurants appear by the day, providing hundreds of jobs, professionally trained staff are a must if the new outlets are to survive in a fickle market.
Batal stated that more often than not, the problem was with “employee satisfaction.”
“Restaurant owners must take more care to keep their staff happy, but also must provide new and high levels of professional training,” he said. “But it takes brave decisions to bring meaningful training with positive results.”
Although Batal was unable to give an exact percentage for the level of service, his colleague Mark Dickinson, operations and training manager at Premier Leisure, said the figure was around 75-85 percent.
“Five years ago the market here was very small. There was a limited choice of restaurants,” Dickinson said. “But in the last two years there has been a phenomenal boom in restaurant numbers and therefore customers require an extremely high standard of service.”
This is as much for the restaurants to stay in business as for the customer’s satisfaction, he added: “The two go hand in hand.”
“The problem here in Lebanon is education. We have over 6,000 undergraduate students in the field of hospitality management, but very few get the opportunity to have hands-on work experience in every position of a restaurant,” Dickinson continued.
“Internships and work experience during your course is optional. It is all almost all academic,” Dickinson said.
Sarah Mroueh, a third-year international hospitality student at LAU, told The Daily Star that work placements for hospitality students should be made compulsory during degrees.
“Many students do their work experience after they leave college instead of completing it during their courses. Being optional, it does not encourage students to pursue placements until afterward. This needs to be looked at by the educational establishment,” Mroueh said.
While this is clearly a problem for employers seeking qualified staff, Batal insisted it did not absolve them of the responsibility to train their employees.
He then outlined four solutions to improve the standard of service in restaurants.
“Employers need first to provide training sessions for staff, but we must be prepared to pay our employees to attend these sessions.
“Second, all training sessions should be meticulously planned and detailed.”
He said the third component is to “encourage, implement and support all employees.” Moreover, “any employees who do not carry their weight must be sacked, without fail.”
“These solutions may sound costly, and they are, but they are necessary if we are to provide above-average standards of service in our restaurants,” he added.
----Cell firms reject further negotiation with state ------------
............LibanCell and cellis set on going to arbitration
The short-lived honeymoon between the Telecommunications Ministry and Cellis and LibanCell is expected to end on a sour note with a report by the Dutch consultant company KMPG recommending a settlement of over $321 million for canceling the companies’ contracts prematurely.
According to KMPG’s recommendations submitted Monday, LibanCell should receive $144 million and Cellis $177 million as compensation for abrogating the 10-year Build Operate Transfer contracts three years before their expiry.
KMPG and investment bank HSBC were appointed by the government last year to prepare reports on Cellis and LibanCell and pave the way for a public tender to license two cellular firms.
Sources close to the government said that Cellis and LibanCell rejected a tentative offer by the ministry to deduct the $321 million from $600 million which the ministry is demanding from the companies for an alleged breach of contract.
In 1998, the former government of Salim Hoss asked the mobile operators to pay $600 million for exceeding the number of subscribers from the stipulated 250,000 each to more than 800,000 subscribers in combined total.
The companies denied the allegations and referred the dispute to international arbitrators in Paris and New York.
But the dispute was temporarily suspended at the request of Telecommunications Minister Jean-Louis Qordahi, who called for a three-month truce in an attempt to seek a mutually acceptable solution.
Qordahi is expected to submit a recommendation at Thursday’s Cabinet meeting calling for a compromise to end the long-running dispute with the country’s only two cellular operators.
“The compromise, which calls for deducting the $341 million from the $600 million requested by the government, will probably end in the trash bin,” a telecom expert close to the companies said.
There is no way the companies would accept any solution forcing them to pay a penalty to the government, according to the expert.
He added that Cellis and LibanCell also turned down another proposal by the ministry to extend the truce for another month. Instead, the mobile operators are planning to proceed with arbitration.
Telecom experts fear the stand off between the government and the mobile operators could deal a severe blow to attempts to sell 20-year licenses to two companies.
One skeptical expert even drew a bleak picture of the telecom industry in general, pointing out that the prices of third-generation UMTS (Universal Mobile Telecommunication System) have dropped drastically in the international market.
“The government will be lucky to get $700 million for each license,” he claimed.
Cellis and LibanCell offered $2.7 billion for a 20-year license to the former government in 1999, but their proposal was rejected by the Hoss government, which insisted that the companies pay the $600 million penalty before presenting any bid.
Another skeptical expert also warned that Francetelecom, which owns 69 percent of Cellis, suffered billions of dollars in losses last year meaning “that big companies like Francetelecom will be too reluctant to offer a high price for a license.”
However, some officials seem confident that Lebanon will be able to negotiate a good price for the licenses, despite the drop in prices in the international markets.
Ministry officials have said that prior to offering a price, telecom companies will look at the impressive results of Cellis and LibanCell, each of which brought in a net profit of more than $50 million last year.
And according to a source close to the government, Qatar telecom has already shown keen interest in cellular licensing in Lebanon.
But its not clear if Qatar, which has limited experience in the telecommunications sector, is willing to offer a price above the international markets.
ride for Lebanese transport --------------
The reality of the Lebanese air transport sector is somewhat less bright than such gleaming monuments as the Beirut
International Airport (BIA) would suggest. Though average annual growth in passenger traffic of 5 percent over the past two
years is not bad, the new BIA, built to handle 6 million passengers annually, is operating at 40 percent capacity. As things stand
today, the BIA looks somewhat like one of Lebanon’s problems instead of part of the solution.
The underlying issues are that Lebanese business and tourism has yet to boom in the 21st century, while the depression in air
travel that hit most of the world’s airlines after the Sept. 11 attacks did not spare Lebanon’s carriers. These two, Trans
Mediterranean Airways (TMA) which specializes in freight, and Middle East Airlines (MEA) whose business is mainly
passengers, are looking to modernize their ageing fleets, but that may not be so easy in the present atmosphere.
MEA is particularly problematic. The Lebanese national passenger carrier, practically owned by the country’s public sector, is
in principle a good candidate for privatization and potentially of interest to buyers. However, the current climate in the aviation
industry worldwide is not encouraging, and is even bleaker for carriers in the Middle East. The airline managed to cut its 2001
losses to less than $30 million and has been looking for a buyer, although after Sept. 11 market conditions are currently not
right for a strategic partnership. Much of the cut in losses came from a 40 percent cut in the workforce, undertaken despite the
angry reaction from employees, including strikes by MEA staff.
Nevertheless, MEA is still in a turbulent state and has had to scale back its activities on a number of fronts. Among the
projects frozen is a joint Syria-Lebanon regional airline involving the Lebanese national passenger carrier and its counterpart in
Damascus, Syrian Arab Airways. With a proposed starting capital of $20 million, the project was to have been launched with
three planes that can carry up to 30 passengers each.
The Syrian airline and MEA were to have shared 30 percent of the project, with Syrian and Lebanese investors together taking
up 40 percent and the rest sold publicly. This scheme was being discussed quite seriously a year ago, but during the past few
months the post-Sept. 11 effect, as well as conditions in Lebanon’s aviation sector, have seemingly resulted in a freeze of such
In any case, Lebanon has proceeded to ink an air transport agreement with Syria, another step in the direction of economic
harmonization between the two states. This first Lebanese-Syrian agreement on cooperation in aviation will allow MEA to
operate out of Damascus and will also permit TMA to fly cargo from the Syrian capital to any destination. This could lay the
groundwork for possible future cooperation in the cargo business, yet another Syrian activity that could do with a boost from
However, although this and similar bilateral aviation agreements between Lebanon and other Arab or foreign states may be
desirable, these will not solve the basic problems of MEA and the rest of the Lebanese air transport sector.
Having to cope with corporate and other local issues as well as regional tension in a tough post-Sept. 11 atmosphere will be
difficult, and it looks like MEA and the rest of the country’s aviation industry still have a long bumpy ride ahead.
Lebanese maritime transport’s prospects on the other hand may be better.
Following a couple of years of stagnation and decline, Lebanon’s maritime transport sector improved in the past year. This in
particular is reflected in the rise of import, export, and transit tonnage through the port of Beirut, by far the most important of
the country’s maritime shipping facilities.
Behind the encouraging figures however lurks yet another problematic situation linked to privatization, in this case the measures
proposed for the Beirut Port. The facility, into which major new container facilities costing $200 million were introduced over
two years ago, brings in around $75 million annually to Lebanese state coffers and so should be easier to privatize than MEA
and other loss-making public sector entities. Plain sailing? Not quite: Last year, the government canceled its contract with the
Dubai Ports Authority, which was running the container terminal, and now has to contend with port employees industrial action.
The two issues are not directly linked, except insofar as they are both related to the privatization process that the port is
undergoing. The port employees have already this year staged a one-day strike over the draft Beirut Port privatization law,
which states that the new owners of the facility are not bound to employ all current laborers and employees. In view of this
stipulation, the port’s current employees are seeking job security, even though the draft law adds that such workers will have
priority. The port employees argue that if the government maintains majority control of the facility and continues using existing
human resources that have run the port for a long time, more profit and enhanced productivity would result.
Elsewhere along the coast, the government is seeking private investment of $300 million to expand the port at Sidon and link it
to regional markets by road via Syria. Tripoli in northern Lebanon also has a major port that would benefit from better land
transport links with Syrian cities. In both these cases and elsewhere, there is scope for use of water transport between
Lebanon’s larger coastal cities. However, the tough issue of the ownership and management of Beirut Port, and not questions
of physical infrastructure, will continue to dominate the country’s maritime sector in the near future. Similarly, the need to
privatize MEA will be at the top of the country’s air transport agenda until the issue is resolved.