Book review: Secret Affairs by Mark Curtis

Britain's collusion with radical Islam

By Paul Cochrane for Executive magazine

Britain has played a nefarious role in the Middle East’s history. We all know that London re-drew the region’s borders after World War I as part of a “divide and rule” strategy, but few are aware of Britain’s divisive and often contradictory efforts in the region that have remained a core part of its foreign policy. Instead, the United States and Israel tend to get all the “credit” when it comes to the dark arts of Machiavellian political subterfuge.

In ‘Secret Affairs: Britain’s Collusion with Radical Islam,’ author Mark Curtis uses declassified official documents and leaked reports to lay bare Britain’s policies of destabilization and the political-economic ties Britain developed to ensure energy security and financial co-dependence. What Curtis exposes is as damning to Britain as the WikiLeaks US embassy cables have been to Washington, revealing the decisions made away from public scrutiny and what really makes up official policy. It is not, unfortunately for the establishment and its cheerleaders, conspiracy theory.

“It is clear that Britain has an interest in divide and rule in the Middle East. If it sounds conspiratorial, it is there, spelled out in the planning files,” said Curtis to Executive. “The most obvious is dividing the Middle East after 1918, and throughout the 1950s and 1960s - which I refer to in the book – by keeping oil countries under separate political control so no one can gang up on the West.”

Shady goings-on

‘Secret Affairs’ is an eye opening read that charts the beginnings of British collaboration with radical Islamic forces, a relationship that began during the occupation of India over 150 years ago, was used extensively post-1945 and continues to this day. Britain worked with Islamist groups, particularly the Muslim Brotherhood, and friendly authoritarian Islamic regimes in Egypt, Syria, Saudi Arabia, Iran, Iraq, Bosnia, Indonesia, Pakistan and Afghanistan to ensure that communism, nationalism, pan-Arabism and anti-Western policies didn’t take hold.

Britain would cultivate relationships on both sides of the political fence, showing a willingness to work with essentially anyone, whether the Mahaz-i-Milli Islam (National Islamic Front of Afghanistan), the Libyan Islamic Fighting Group or the ayatollahs in Iran, to achieve short-term goals, irrespective of the longer-term implications, in order to maintain a balance of power.

“In [my] analysis of British foreign policy, it is not all down to economics,” said Curtis. “The collaboration with Islamist groups in the Middle East has been about power status, to not be relegated to a bit player on the fringes. It has seen those groups as essential allies in a region where Britain has often lacked dependable allies. In a lot of the episodes where Britain collaborated with Islamic groups, it was essentially to do the dirty work that the US couldn’t do due to Congressional oversight and the fear of being found out.”

The dirty deeds include assassination attempts – for example on Egypt’s Gamal Abdel Nasser, Libya’s Muammar al-Qadhafi, and Lebanon’s late Ayatollah Mohammad Fadlallah – military assistance and the dissemination of propaganda tools, such as Korans and Islamic literature. British operatives also orchestrated “false flag” operations, such as the one in Iran in 1953 when mosques and public figures were attacked by agents and paid supporters appearing to be members of the communist Tudeh Party. British intelligence also worked in collaboration with Ayatollah Kashani, the mentor of Ayatollah Khomeini, to stir up sentiment against nationalist Prime Minister Muhammad Mossadiq.

Alongside maintaining its power status and ensuring energy security, Britain also worked to make sure oil-producing countries invested their petro-dollars in London to shore up the city’s global financial position. To do so, Britain needed to maintain its status as a power broker and to curry favor with regimes, regardless of the means. One example of this is the “fabricated invasion” of Kuwait by Iraq in 1958, during which Britain intervened to protect its newly-independent former colony against a threat that they had themselves concocted, as British files explicitly show. “Britain wanted to exaggerate the threat to Kuwait so [Britain] would continue its protection and Kuwait would keep investing revenues in the British banking system,” said Curtis.

Blow back

Such covert operations — all documented in ‘Secret Affairs’ — have been just one part of Britain’s foreign policy that has gone against London’s purported democratic ideals. The backing of Islamist forces, and its hidden alliance with two chief state sponsors of radical Islam, Saudi Arabia — which has spent more than $50 billion to spread the Wahhabi brand of Islam around the world and is a major sponsor of Islamist groups — and Pakistan, have also had major negative repercussions.

By preventing independent and secular governments from coming to power in much of the Islamic world, Britain’s policies have nurtured the current socio-political malaise and resulted in what the late Chalmers Johnson famously termed “blow back,” when the very forces the West aided and abetted came back to bite the hand that once fed them. Curtis shows how Britain in the 1990s allowed Islamist groups to operate out of London, which they believed could be used to destabilize governments in, among other places, Syria, Iraq and Libya. This was possible through a ‘covenant of security’ between radical Islamists and the security services.

A former Cabinet Office intelligence analyst explained: “The long-standing British habit of providing refuge and welfare to Islamist extremists is on the unspoken assumption that if we give them a safe haven here they will not attack us on these shores.”

This pact meant Britain could keep tabs on such groups’ memberships and finances, and enabled British intelligence access to groups linked to militancy from Afghanistan to Yemen. Even Al Qaeda had an office, the Advice and Reformation Committee, in London until 1998.

Alongside the US and Saudi Arabia, Britain equipped and bankrolled Islamist groups in Afghanistan, Pakistan and Bosnia that were later involved in the September 11 attacks in the United States, terrorist attacks in Saudi Arabia, and the July 7, 2005 bombings in London. Indeed, as Curtis’s research shows, the history of the ongoing “war on terror” is rooted in covert support for the Afghani Mujahedin in its fight against the Soviets and for the terrorism infrastructure co-established with Pakistan’s notorious Inter Services Intelligence (ISI), which trained fighters for operations in Central Asia, India, Bosnia, the Middle East and elsewhere.

It also goes further back in time, to the British-backed partition of India in 1947, which led to the creation of the Islamic Republic of Pakistan and the current imbroglio in Kashmir. Curtis quotes former Indian Ambassador Narendra Sarila as saying, “Many of the roots of Islamic terrorism sweeping the world today lie buried in the partition of India.”

More than 60 years later, Britain is still using divide and rule as a strategy and is contending with the repercussions of what in many ways its foreign policy has created. “There is still this resort to rely on particular Islamist forces to achieve objectives, whether in Southern Iraq [post-2003], where Britain worked with Islamist forces and now [has] a de-facto working arrangement with the Taliban, in the sense that Britain is reliant on them for an honorable exit from Afghanistan,” said Curtis. In a previous book, Curtis called Britain’s foreign policy a “web of deceit.” In his latest, he has further shown how that web was spun and, crucially, how British foreign policy has nurtured global terrorism and instability.

Unlocking the grid: Alternative fuels for Lebanon's vehicles

By Paul Cochrane for Executive magazine

Alternative fuels could offer a panacea for Beirut’s congestion-caused smog

Congestion in Beirut has reached the point of crisis. Traffic levels have become intolerable, with jams and “road rage” a part of everyday life. There is little public transport and, as a result, no feasible initiatives to encourage people to give up driving. The situation is clearly unsustainable.

Oil prices are hovering around $100 per barrel these days and the cost of fuel has soared in Lebanon over the past year. Consumers are feeling the effects on their wallets, compounding the hurt on their lungs from the amount of pollution generated by the 1.6 million cars in the country, some 76 percent of which are more than 10 years old, and 50 percent more than 20 years old.

In a recent study by the American University of Beirut’s Air Quality Research Unit, “fine” air particles in the capital were found to be three to four times higher than World Health Organization standards, while the unit noted that carbon emissions from vehicles posed a “serious risk to public health” and have “proven to be carcinogenic.” Indeed, environmentalists estimate that 60 to 70 percent of air pollution in the country is generated by vehicles.

So what is to be done? The traffic is detrimental to people’s health, mentally as well as physically, while with roughly 100,000 new and used cars sold every year, more and more carbon emitting vehicles are hitting Lebanese roads. Despite the rising costs of gasoline people have not been discouraged from driving, although there has been a noticeable shift over the past few years in the car market toward more fuel efficient compacts over larger vehicles.

There are options on the table but, in typical Lebanese political fashion, no common policy toward a workable solution. The plan proposed in 2010 by the Ministry of Energy and Water to introduce compressed natural gas (CNG) vehicles has been opposed by the Parliamentary Energy and Public Works Committee, ostensibly over safety concerns.

A draft law to allow four-cylinder hybrid cars to be imported tax free has yet to be passed, the previous parliament having been too occupied with the Special Tribunal for Lebanon to enact it and now, with no cabinet in place, the bill is gathering dust. In any case, the energy ministry is more pro-CNG than hybrid, citing CNG’s questionably better safety record than hybrid technology and dismissing hybrids as not suitable for Lebanon’s topography.

Meanwhile, car dealers are waiting in limbo over whether the draft laws will be passed and what this will mean for their business strategies. Dealerships, such as the industry’s representative body, the Automobile Importers Association (AIA), have serious objections to CNG and query the feasibility of introducing hybrids without financial incentives to encourage consumers away from cheaper traditional models. They also view the law as limited — it does not include, for instance, six cylinder hybrids.
On both sides there is ignorance of the way these alternative fuel technologies work, in some cases confusing CNG with Liquefied Petroleum Gas (LPG) and in others reiterating the myth that all hybrids need to be plugged into electric mains to charge up.

There is also an expectation that the free market will compel consumers to take up either CNG or hybrids despite the global precedent of government-assisted incentives to encourage citizens to switch to more environmentally friendly vehicles.

EXECUTIVE takes a look at the proposed policies, the pros and cons of CNG and hybrids, the investments needed and what is being done elsewhere in the world, and offers some realistic solutions to help clear the air and roads in Lebanon and change this unsustainable status quo.

The ministry’s case

In November 2010, the Ministry of Energy’s proposal for CNG was shot down by three out of four parliamentary experts, with the head of the Parliamentary Energy and Public Works Committee Mohammad Qabbani deeming the fuel un-safe, despite the ministry’s call for a re-evaluation of the criteria used.

“Our proposal was [for] CNG cars, which has not been accepted across the board,” said Cesar Abu Khalil, advisor to Gebran Bassil, caretaker Minister of Energy and Water. “I’m not sure why Qabbani took such a hostile position; the proposal is to allow the use of CNG — it is not obliging people to. We wanted to create an alternative fuel for consumers. Fuel costs have been increasing very fast, by $4 for 20 liters in less than six months, and has become unbearable for those on minimum wage and everyone else. We’ve been urging the Council of Ministers since 2009 to reduce taxes on fuel gasoline but to no avail.”

The ministry’s proposal is based on socio-economic and environmental grounds. CNG is some 40 percent cheaper than gasoline, which would help consumers financially and reduce the amount of gasoline fuel the country would have to import. Environmentally, CNG emits carbon dioxide levels that are 10 to 30 percent lower than gasoline, while emitting 27 times less nitroxide pollutants. CNG has been discussed in Lebanon over other natural gas options such as LPG or newcomer gas-to-liquids (GTL) due to its more extensive adoption worldwide.

In terms of safety, the ministry dismisses concerns that CNG is dangerous and not suitable for Lebanon, citing the fact that there are 12.5 million natural gas vehicles (NGVs) in use today worldwide, with the biggest users in Pakistan, Iran, Argentina, India and, slightly further down the list, Egypt.
“CNG is lighter than air, which means any leakages rise in the air; there are no spillages, and if ever this gas catches fire it burns high in the air, unlike LPG,” said Abu Khalil. He added that CNG cylinders undergo rigorous testing, are capable of withstanding penetration by a 30-caliber bullet without rupturing, are designed for a specific life span and only need to be inspected every three years or 58,000 kilometers.

According to documents given to EXECUTIVE by the ministry, data from the United States showed the vehicle injury rate of the 8,331 natural gas vehicles surveyed was 37 percent lower than gasoline vehicles and that there were no reported fatalities, compared with 1.28 deaths per 100 million miles for gasoline vehicles.

“For over three months we were searching for an accident related to CNG, but all accidents were due to gasoline and hybrids,” said Minister Bassil’s advisor Michel-Ange Medlej. “We are not against hybrids but want all the alternatives available for the consumer. The Lebanese consumer should be able to choose what they want their vehicle to run on.”

Rolling out CNG

The ministry is keen to emphasize CNG as an alternative fuel choice. They feel that market fundamentals will provide the incentives for consumers to convert vehicles to CNG and that fuel distributors will make a return on investment from installing CNG pumps at stations.

“The real subsidy is the fuel, as it is cheap and a retro conversion [of a car’s engine from gasoline to CNG] is around $2,000. The return on investment would be very quick,” said Abu Khalil. The advisors cited service taxi drivers as prime target users of CNG, given an average monthly fuel bill of some $600.
“The encouragement comes when you commercialize CNG. Service taxis, light vehicles and special vehicles are the users we want to attract to CNG,” said Medlej. “Most private owners will not opt for a change to CNG but if the fuel bill increases it will give the [impetus] to switch to CNG,” he added.

In terms of infrastructure, CNG would come from the Arab-Mashreq Gas Pipeline that enters Lebanon from Syria. With the prospect of Lebanon having gas in its territorial waters, this could be a further incentive for adopting CNG. “Why did Pakistan reach 2.5 million CNG cars? [Because] it is a natural gas producer and an oil importer,” said Medlej. “If we become a gas producing country, why not use CNG?”
Lebanese natural gas will not be coming anytime soon, however, and in the meantime gas stations would have to offer imported CNG to consumers if the law is passed. “It is around $300,000 in investment per pump to install CNG at an existing fuel station. That is nothing compared to the amounts of money paid by companies to build new gas stations, and as CNG is cheaper there will be a higher profit margin,” added Medlej. Others in the private sector, however, have cited concerns over the costs, saying that they can reach up to $500,000. While the advisors concede that demand will be related to the availability of CNG, they expect a gradual uptake of the fuel.

“It will take time. You can’t just flip a switch and change to have 500,000 CNG cars,” said Dany Samaha, advisor to minister Bassil. “CNG roll out will need quality control, procedures, employees and mechanics, but the law needs to [be passed] first and then we can address the private sector for investment. It will not take more than a year.”

With no incentives to consumers or financial assistance for fuel companies to install CNG pumps, the adoption of CNG will not impact the government’s financial budget, nor will the treasury lose out on taxes generated from CNG, confirmed Abu Khalil. While no parliament has been formed as of Executive going to print, the expected dominance of the upcoming cabinet by the former opposition March 8 coalition is considered a green light for the ministry’s plan, especially as it is in the hands of the Free Patriotic Movement (FPM). “We are optimistic [that] with the imminent change in government we will have the upper hand and not face all the hurdles faced in the last government, and that should be reflected in many other projects,” said Abu Khalil.

Opposition to CNG

CNG has been opposed not only by the parliamentary committee but also by car dealers. The AIA has opposed the move on safety grounds and dealerships are keener on introducing hybrid technology.

Opposition to the plan is also seen as politically motivated, with opponents even suggesting, off the record, that the energy ministry, which is in the hands of March 8’s FPM and allied to pro-Iranian Hezbollah, is pushing for CNG because of the Islamic Republic’s widespread adoption of the alternative fuel. If Lebanon hitched onto the CNG wagon, so the argument goes, this would result in preferential business deals with Iranian companies for gas conversion, infrastructure installation, rollout expertise and even importation of Iranian-made CNG vehicles. Indeed, Syria recently asked for Iran’s guidance in implementing CNG — Iran has converted 1.9 million vehicles to CNG and in the next four years aims to be a global leader in CNG stations and consumption.

On the other hand, sources close to the energy ministry say that the parliamentary committee’s decision was due in part to “ignorance” about CNG, confusing it with LPG. It is also said that the committee was influenced by car dealers and oil companies, both of which oppose CNG for commercial reasons; leading manufacturers do not produce CNG cars and the conversion would render many marketable attributes essentially obsolete, such as engine size and sound damping technology. It would also affect vehicles’ overall design, with CNG typically increasing a vehicle’s weight due to the tanks fitted in the trunk (although other options are available such as cylinders made of composite materials).

Oil companies would, of course, have less gasoline to market, even though they could sell CNG instead, but margins would be lower due to the limited options of where suppliers may obtain it. Costs are also cited as being prohibitive. On top of the cost of new pumps, CNG would also have to be far better regulated than gasoline, requiring more work by the fuel companies and regular governmental inspections.

The dealerships’ stance

Nabil Bazerji, managing director of GA Bazerji and Sons, the dealer for Suzuki, Lancia and Maserati, said, “CNG is something unrealistic for a country like Lebanon. Automotive sales will not be affected as mass production is not available at the majority of automotive brands, while adaptation of vehicles is done by specialized companies.”

Other dealers oppose CNG on similar grounds, citing market fundamentals. “When we were asked by the AIA whether we were interested in gas cars and [which] manufacturers produced them, we said it was not for us,” said Anthony Boukhater, deputy general manager of ANB Boukhater, dealer for Mazda and Aprilla, Vespa and Piaggio motorbikes.

“Mazda will never produce special cars just for Lebanon as it is such a small market. This needs to be thought about market-wise. For India, Pakistan and Egypt these are large markets [with] over one million vehicles [sold] a year. Not the new and used 100,000 vehicles a year market like in Lebanon,” he added.

But the car dealers’ primary opposition is on safety grounds and the feasibility of investing in the necessary infrastructure.

“Countries that have adapted vehicles to natural gas do so under severe controls. This will never be the case for Lebanon. [That’s] where the danger comes from,” Bazerji said.
On concerns over safe implementation of CNG, dealers do have a point, which has been echoed by environmentalists.

“In principle I am not against CNG but we need the infrastructure and rigorous standards as it is dangerous. In Lebanon, it is a pity to say, we cannot rely on law enforcement to make sure the laws are respected,” said Hassan Jaber, vice president of the Lebanese Association for Energy Saving and for the Environment (ALMEE). “At the méchanique [annual vehicle inspection], they are supposed to have checked 1.1 million vehicles since 2009 but so far only checked 160,000. Some people are even using additives in the fuel to get their car passed. The checks should be continuous, not [every other year].”

Indeed, consistency is a major concern. When the previous government started cracking down on reckless driving and introduced speed cameras last year, road accidents dropped by 10 percent in October and November, with the death-rate down 43 percent and injuries down 12.5 percent. But once the parliament dissolved in January, the police crackdown tailed off, as it has in the past when enforcing seat belt laws, stopping drivers using mobile phones or ensuring that motorbike riders wear helmets and refrain from driving the wrong way up one-way streets. “Motorbikers are like motorized pedestrians — they drive on the sidewalks and go through red lights, right in front of the police and they do nothing,” said Bazerji.

Furthermore, there are an estimated 20,000 cars that have been converted to run on natural gas canisters — the kind found in most kitchens. “Nobody is stopping these vehicles and there are no regulations or controls. If the government cannot stop this illegal usage, who will guarantee that this parallel production will not grow and put the country into real danger?” said Bazerji.

While the ministry claims that they have scoured the world for cases of accidents related to CNG and failed, there have been several cases of CNG-related accidents and even deaths. The potential hazards are illustrated by two examples from India this year, one where 15 passengers on a CNG bus were lucky to escape unscathed when a leakage in a fuel pipe caught fire, the other in February when a New Delhi woman was killed after the CNG vehicle she was in hit a divider and burst into flames.

With that said, properly regulated CNG vehicles are, according to expert analysis cited earlier, less dangerous than combustion engines.

The diesel disaster

A further reason dealerships are wary about the proposed introduction of CNG is over the government’s prior handling of diesel fuel. In the 1990s, the government encouraged the use of diesel over gasoline, with a high percentage of cars switching to diesel due to its lower costs and the efficient mileage attained. But after a few years it became apparent that many cars were running on substandard diesel that was highly pollutive. In 2002, the government banned diesel for private vehicles, limiting usage to buses and vehicles over a certain tonnage. This volte-face by the government caused havoc in the sector as consumers had to change back to vehicles powered by gasoline.

“We had to make the diesel switch possible to drivers as there were protests outside our showroom. That government policy put us in a bad situation,” said Rachid Rasamny, marketing manager of Century Motors, a dealership for Hyundai.

As of January, a parliamentary committee approved the import of new cars and vehicles that run on “green diesel” that complies with Euro 5 standards and banned the import of regular diesel vehicles, although the law still has yet to be passed. It appeared to imply that private diesel vehicles would be allowed but this was in the end not the case, provoking confusion at dealerships.
“I don’t understand this non-diesel policy. A comprehensive car policy has not been thought through. It is more short-term fighting over current high oil prices,” Rasamny said.

Hybrids

While the ministry is not against hybrids per se, it cites the same concerns the parliamentary committee voiced about CNG: safety.

“We don’t understand proposing hybrids and opposing CNG on safety, as hybrids are the real threat,” said the ministry’s Abu Khalil. “Hybrids are an alternative but [are] not as safe — a 400 volt battery alongside a gas tank… any spark would very easily ignite it, making it a car bomb.”

The car dealers dispute this claim, highlighting the awards hybrid cars have received and the billions of dollars spent on research and development that have gone into producing dual gasoline and electric powered vehicles.

“The Toyota Prius has been on sale in Japan since 1997, before even Google and Facebook were around,” said Philip Fred Boustany, managing director at BUMC, exclusive distributor of Toyota and Lexus. “As of September 2010, Toyota has sold 2 million units globally. The fact that hybrids run on electricity as well as gas is completely irrelevant when it comes to their safety. For example, Toyota designs its hybrids to withstand the same crash specifications as normal cars.”

Dealers also dismiss the ministry’s claim that hybrids are not suitable to Lebanon’s mountainous topography. “Hybrids are based on filling up the battery when running, but when climbing uphill the electric battery doesn’t work, so you have to use the regular engine, which doesn’t resolve the problem environmentally or economically,” said Abu Khalil.

Boustany counters that “the biggest misconception about hybrids is that they are not powerful cars.” Equipped with three different modes, Boustany said, the Prius is a very efficient car regardless of topography. “When climbing uphill, the regular engine will be doing its main job of power transfer to the wheels but at the same time recharge the batteries which will be used downhill, or further recharged through regenerative braking. In addition, if you end up stuck in traffic or at a standstill, your Prius will shut off its gas engine, saving you gas and protecting the environment from harmful emissions.”

He added that it was a “myth” that all hybrids need to be plugged into a charger on a daily basis, or that the batteries require replacement every three years.The major obstacle to introducing hybrids in Lebanon is the high costs of the vehicles themselves due to high customs and registration fees.

Boustany says the gas and environmental savings justify the price and he foresees 50 percent of all models offered by BUMC in 2015 will be hybrids or fully electrical vehicles. To Charles Tarazi, assistant general manager of Porsche, the cost of a hybrid — 7 to 8 percent more than a conventional vehicle — is a deterrent to consumers unless there are substantial tax incentives. “Why would you buy a hybrid in Lebanon? There is no point; you are paying more just to make a statement: ‘I’m driving a hybrid.’ It won’t save the world [if] a few guys drive hybrid cars,” he said, adding: “The main issue is tax advantages, yet in Lebanon there is no plan for the six-cylinder hybrid engines.”

Tarazi cited the tax advantages introduced in other countries for the six-cylinder Porsche Panamera, which has helped bolster sales: in the US, tax benefits reach up to $2,200, in Spain a 5 percent registration tax reduction was implemented and in France there is a $2,500 one-off tax reduction on car registration. “I think Syria was clever in changing the laws to promote hybrids, offering 50 percent less tax than on normal cars,” added Tarazi.

In Lebanon, it is the opposite; taxes are actually higher for hybrids than conventional vehicles, with the registration fee of a Toyota Prius 1.8L hybrid around $2,600, whereas a non-hybrid Corolla 1.8L is some $1,800.

A further impediment to hybrid adoption is that there has not been a big uptake throughout the Middle East and North Africa, with Lebanon’s small car market particularly susceptible to regional trends.
“The trend toward hybrids in the region has not really been successful. It is something we’ve discussed with the Hyundai Motor Company in South Korea,” said Rasamny. “I’m not sure we could get hybrids even if the law passes as there is not enough demand for it, especially since the high demand markets of Saudi Arabia, Syria, Egypt and Iraq are not buying hybrids. If there’s no demand in the more populous markets, Hyundai will not send us hybrid vehicles.”

With the law still pending, the nation’s dealers are reluctant to even come up with a marketing strategy.
“When I approached Hyundai about hybrids I had to give demand figures, but due to the draft law being unclear I couldn’t give adequate figures,” said Rasamny. “Once the law passes, we will see how it will alter our sales strategy.”

The road ahead

With the car industry backing hybrids (especially if taxes were lowered), it would seem a sensible option for the government to promote a technology being rapidly adopted around the world. To ensure its uptake, the Lebanese government should follow the lead of other countries by reducing or even scrapping taxation on the vehicles to make the cost difference between hybrids and conventional cars more attractive to consumers.

If the difference were, for instance, $5,000 between the two, hybrid consumers would get a return on investment over a few years given a much lower fuel bill, with hybrids able to cover on average some 450 kilometers per 20 liters of fuel. The proposed law allowing hybrids should also be expanded to include six-cylinder hybrids, made by luxury car manufacturers such as Porsche and Lexus.
As to which is cleaner for the environment — CNG or hybrids — it is a tough call. The technology is continuously being updated, as exemplified in the American Council for an Energy Efficient Economy’s “Greenest Vehicles of 2011” listing, which put the natural gas powered Honda Civic GX in first place, followed by the all-electric Nissan Leaf.

What the ministry did not discuss, nor did car dealers, is that the development of ultra-layered sulfur fuel and associated engine technology has narrowed the gap between CNG and other alternately powered vehicles in terms of meeting many countries’ national motor vehicle standards. The improvements have come so far that the mayor of London recently proposed replacing the city’s “Alternative Fuel Discount” — an exemption from fees that covered fully electric vehicles, hybrids and the cleanest gas powered cars — with a “Greener Vehicle Discount,” as some modern cars with conventional engines emit less carbon dioxide than most hybrids.

Lebanon will have to come up with a solution that is more environmentally friendly on one hand and, on the other, conducive to the particularities of the country. If only a limited number of consumers purchase hybrids, CNG or electric cars, the positive effects on the environment would naturally be minimal.
A high degree of realism is certainly needed to ascertain what is best for Lebanon, given the constraints and issues enumerated above. Hybrids, for instance, would cut down on fuel consumption without requiring installation of CNG infrastructure throughout the country. Furthermore, with the major brands manufacturing hybrids this would keep both dealers and car enthusiasts happy, as they wouldn’t have to retrofit vehicles for CNG.

The wheels on the public bus

The argument for CNG seems strongest when applied to service taxis, commercial vehicles and buses as a more limited roll out would enable better regulation to prevent CNG-related safety accidents and would limit the required number of fueling stations. Such a policy could also help revive public transport, with the number of blue and white public buses on the roads — as opposed to the private clunkers that do cover some parts of the city — dropping from 271 in 2008 to less than 15 today, according to Jaber of ALMEE.

While the cash-strapped government might oppose investing in public transport, the long-term benefits for the populace and the environment would be enormous. Alternatively, the government could enter into public-private partnerships to roll out a reliable bus network.

“We should have buses run on CNG as it would solve two problems in one: a new public transport with very low emissions and low cost of adaptation, as gas would be limited to stations owned by the transport ministry. Interfering with the daily life of the citizen and adding an alternative gas to the system is nonsense,” said Bazerji of GA Bazerji and Sons.

Improving the overall quality of fuel imported into Lebanon is a further solution to the country’s environmental woes, with imports, according to a source familiar with the issue, frequently substandard, highly pollutive and not well regulated by the government. Yet even if the green light is given to both CNG and hybrids it will do little to clean up the country’s air unless a comprehensive transport policy is developed.

“CNG will help reduce pollution and the cost of fuel, but CNG will not be the alternative,” said Yasmine Mahdi, senior transport engineer at SETS, a specialist engineering solutions firm. “Instead of technology, I’d think of alternative modes of transport for people to reduce the number of cars on the roads, the congestion and pollution. A feasible solution is to have a regulated bus transport network and get competitive companies to operate it. Other solutions are a congestion charge and increasing parking fees. There are many ideas that can be implemented by the government with no costs.”

Other alternatives

Further ideas floated by interviewees include car pool lanes to reduce the number of vehicles on the roads and the promotion of motorbikes to curb congestion, with hybrid bikes now available and, in any case, two-wheelers polluting far less than cars. “Putting in motorbike lanes would be very easy to do, and then people would want bikes and not take a car if on their own,” said Boukhater, the dealer for Mazda, Aprilla, Vespa and Piaggio. “It would also make insurance cheaper, while getting rid of all the cars parked on highways and big streets. Also, a motorbike can be bought on credit for $60 a month, whereas a car is $200 plus.”

“When I suggest this to people they say it is not in our mentality. But CNG is? It wouldn’t cost the government anything and they could do a test for a few months that limited the coast road [north from Beirut] to bikers,” he added. The idea could be taken further to restrict certain roads to vehicles with more than one person, buses and motorbikes.

Congestion in itself poses a significant environmental problem. According to the International Organization of Motor Vehicle Manufacturers, test-drives in the Stuttgart area of Germany “showed that a car’s fuel consumption can be 60 percent higher with congestion compared to driving the same route when there is free flow.”

Encouraging consumers to trade in old vehicles for more fuel efficient new models is also one option on the table, although this would require financial incentives from the government to do so, which is unlikely given the country’s poor fiscal health.

Implementing higher taxes on large vehicles such as sports utility vehicles (SUVs) — which emit 30 percent more carbon dioxide and 75 percent more noxious gases than a normal car, depending on the fuel used — is a further option to limit environmental pollution. Such a policy would meet resistance from dealerships, but if higher taxes were levied on SUVs the revenues could be used to finance the trade-ins of old cars for new cleaner vehicles.

Financial assistance from the European Union or the United States Agency for International Development could also be sought as well, as suggested by the AIA.

All options should be reviewed and considered objectively by the government for implementation — perhaps while stuck in traffic on the way to and from their parliamentary offices.

Ultimately, the traffic problem and the associated environmental pollution is not going to abate unless consumers are encouraged to switch to more eco-friendly vehicles and a viable public transport system is made available to lower the number of cars on the roads.

“The media and TV talk of socio-economic problems, but transport is not discussed in its own right. We should keep asking officials about transport solutions,” said Mahdi from SETS. “We are way behind other countries and need to catch up."

Egyptian apparel sector struggles on during the crisis

By Paul Cochrane for just-style.com

Egypt's garment export industry, worth US$2bn a year, has been struggling to cope with the political crisis in its home country, with ports closed and plants working shorter hours, if at all. But factories are still producing clothing and textiles and international clients have yet to cancel orders.

The protests against the regime of President Hosni Mubarak, which started on 25 January and have since escalated, started affecting the textile and garment industry when the government imposed a daily 17-hour curfew: employees were not able to get to work, and the ports were closed.

"Factories are trying to work from 9am-2pm when there is no curfew, since the curfew starts at 3pm. It is not business as usual but it is running," Bassem Sultan, CEO of Alexandria-based Dyetex, and honorary treasurer of the International Textile Manufacturers Federation (ITMF), told just-style. "I think by Saturday, if the curfew is over, we will try and compensate for lost time."

"Factories are producing, but not shipping," he adds. "The last day that shipping happened was last Friday (28 January), but the situation can only last so long because of its effects on the economy, so the sector should be exporting by next week, although it is impossible to know."

Sultan stresses that retailers and clients in Europe and the US have not, so far, cancelled any orders.

Dr Christian Schindler, director general of the ITMF in Zürich, told just-style that the sector has not been as badly affected as would be thought.

"Business has not been dramatically affected, although companies are not working to a large extent and foreign employees might also have left the country in the mean time for security reasons.

"I imagine the impact on the sector would change if developments show a peaceful transformation is not in sight. Everyone is waiting and looking, and taking some precautions, but I think it doesn't really affect the industry to a major extent," he says.

EU and QIZ exports

The current crisis, which could result in a regime change, puts into question trade agreements recently signed by the Egyptian government with the European Union.

Uncertainty also hangs over the operation of Qualifying Industrial Zones (QIZ), which were set up in 2005 to allow textiles and garments made at Egyptian facilities with 11.7% input made in Israel to enter the United States duty-free.

Currently, overall exports are split 60% towards Europe and 40% for the US market.

Even if there is a change in government that may not be overly pro-Western or pro-Israel, Dr Schindler believes the ongoing crisis will not affect exports to the EU or from the QIZs.

"In my opinion there will not be an effect on business relations or political relations with the EU as long as it is a peaceful transformation and doesn't get radical," he said. He also believes the QIZs will not be affected since this would not be in the long term interests of Egyptian manufacturers.

In the first nine months of 2009, the latest statistics available, textile and textile garment exports from the QIZs were US$199m, down from US$205m during the same period in 2008, according to QIZ documentation.

Cotton situation

Interestingly, the ongoing crisis has not had an impact on international cotton prices or the garment industry due to only 130,000 tonnes of Egyptian cotton being produced a year. Global production is around 24m tonnes, according to the ITMF.

"Egyptian cotton is high quality, as everyone knows, but production quantities are very low so [the crisis] is not affecting the international markets or the futures markets," said Dr Schindler.

"Only the small market for extra long staple cotton will be. The crisis might affect the market psychologically but not really the market itself as cotton has not been destroyed or damaged, so the cotton that is there and planted will be there, and will be sold, that is for sure."

Indian struggle

High cotton prices, rupee appreciation and increasing global competition have hit India’s knitting industry hard this year. But can faster turnaround times, increasing synthetic fibre use and installation of more modern technology help drag it out of the doldrums? Paul Cochrane reports from India for Knitting International

Knitwear manufacturers in Tirupur, the southern Tamil Nadu state city that accounts for 60% of India’s knitwear exports, have struggled to retain sales due to high cotton prices, forcing manufacturers to look to synthetics as an alternative.

In 2009, the city’s total exports of garments and knitwear rose to $2.55bn, after dipping 10% in 2007-2008, but the rise in cotton prices has led to a 15-20% drop in production and job losses of 25,000.

As a result, the target set by the Tirupur Exporters’ Association (TEA) to double annual exports from the city’s industry by 2012 to $5.5bn will not be met, Padma Shri A Sakthivel, TEA president and chairman of local company Poppys Knitwear Ltd told Knitting International.

“We set the target for 2012 after achieving Indian rupees 11,000 crores ($2.42bn) in 2006-07, but we have been facing various issues, one by one, like appreciation of the rupee against the US dollar, the global recession and price increases for petrochemical products and other input costs, mainly cotton yarn. We will not reach the target we set.”

In mid-November, Tirupur manufacturers took part in a nationwide strike to petition the Indian government to come to their aid and ban cotton exports because of spiraling cotton prices.

“We have been requesting the government to take measures to get cotton yarn available at the right price for knitwear exporters, a pre- shipment packing credit rate at 7%, an increase in duty drawback rate and a continuance of 2% interest subvention. All this would help to respond to competition from countries like China and Bangladesh,” said Mr Sakthivel. “We have also asked the government to address infrastructure issues and for bank interest rates to be reduced to be on par with competing countries.”

Exporting units

Tirupur has 800 knitwear exporting units, but is dominated by 20 major players, for instance Deecee Export and the Natural Clothing Company, with exports exceeding $22m in each case, catering for, among others, major brands such as Ralph Lauren, Hanes, Wal-Mart, C&A, Reebok and Disney.

About 30% of exports are bound for the US and 60%, the European Union, according to TEA. Many companies are medium-sized: 500 companies have exports of less than $2m a year each.

“No company is free from problems after the increase in cotton prices, but the most affected group are the smaller exporters,” said Mr Sakthivel.

Indeed, several factories contacted by Knitting International said they had ceased operations until cotton prices fell while other companies had seen a major contraction. “We received many inquiries for 2010 compared to last year, but we were unable to book new orders because of the high yarn price,” said G Balaji, manager of Gokul Inc.

Meanwhile, at the Mani and Mani Fabs factory, sales had dropped 15% in 2010, even compared with recessionary 2009, said managing director N Manicka Vasakam.

To tackle the slowdown, TEA has launched the Knitwear Technology Mission (KTM) to help exporters produce synthetic based garments, particularly sportswear and swimwear, instead of cotton.

“Synthetic garments have a global market round the year whereas currently, out of cotton garment exports, we are able to supply only one fourth of the year,” said Mr Sakthivel.

“The KTM will play a major role in introducing the latest technology, such as seamless knitting machinery, as well as design consultancy. We hope that after two years the share of synthetic garment exports from Tirupur will be comparatively higher,” he added. Meanwhile, the TEA has also launched a Knitwear Fashion Institute.

Tirupur exporters have also adopted fast fashion, able to turn around an order within an average of 60 days and no more than 75 days, but a figure still far behind the likes of Turkey as regards the European market. Until the shift to synthetic fibres takes place and with cotton prices high, the immediate outlook for Tirupur’s knitwear exporters is downbeat.

“In the year 2010-11, our exports will come down due to increases in yarn prices. Once the situation improves, we will certainly increase our exports,” said Mr Sakthivel.

The Middle East: On the edge of the abyss?

By Paul Cochrane, in Beirut for International News Services

Countless times I've read analysis and the blurb on the back of books that the Middle East is ‘on the brink’, a ‘tinderbox’ ready to explode due to the nepotistic nature of governments and the dire economic conditions of much of the region. Now more than ever, these predictions look like they may be coming true - a dictatorial regime has fallen in Tunisia and another is tottering in Egypt.

Some of these analyses have predicted the imminent fall of the Middle East's regimes and monarchies for the past four decades. A Middle East ‘spring’ was just around the corner, the people would rise up and the region's overwhelmingly authoritarian regimes would no longer have their days in the sun. Democracy would prevail.

There have certainly been many coups, the overthrow of kings and dictators, and - of course - wars since the region was cookie-cut into separate countries through the fall of the Ottoman Empire, before and after World War One. But that tinder box never exploded. It didn't happen after the 1967 or 1973 wars between Arab states and Israel; it didn't happen after the 1979 Islamic revolution in Iran; it didn't happen following the 1990-91 Second Gulf war or the 2003 US-led invasion of Iraq; and it didn't happen after the July 2006 war between Israel and Lebanon's Hezbollah. The sparks that could have ignited the tinderbox were diffused, snuffed out by the internal security forces and outside meddling, and the malaise continued.

But it would seem that these analyses forecasting the Middle East's imminent explosion were premature. It has taken until now for the people to stand up en masse and say ‘kifaya’, ‘enough’ in Arabic - enough of high unemployment, corruption, cronyism, repression, phony elections, lousy education and low standards of living.

Tunisia provided that spark. Following the successful ouster of Tunisia's dictator Zine al-Abidine Ben Ali on January 17 after a month of nationwide protests, demonstrations have erupted in Algeria, Yemen and on a major level in Egypt. There have even been unprecedented protests in the Saudi coastal city of Jeddah over the government's mishandling of the recent flooding there. Protests have also happen in Jordan, while in Lebanon – although not due to the ‘Tunisia effect’ - the government fell over ongoing political wrangling about the Special Tribunal for Lebanon that is investigating the assassination of former Prime Minister Rafik Hariri in 2005.

These are tense and unpredictable times in the Middle East. The question that is on everyone's lips is whether the protests will escalate throughout the region, and whether the ongoing protests will retain steam. In Egypt it is clear that even if President Hosni Mubarak survives this onslaught against his 30 year rule, it is over for his dynasty. His son has allegedly left Egypt and there is no way Gamal Mubarak will succeed his father. All Middle Eastern governments will have to make concessions to appease their people unless they want to go the way of Ben Ali.

Indeed, oil-rich Kuwait distributed US$4 billion and free food for 14 months to its citizens to mark ‘national occasions’, although the unstated reason was clearly to shore up support for the monarchy.Meanwhile, the regional situation is causing havoc with regional stock markets and economic forecasts. Lebanon is not likely to have as successful a summer as last year, with 2.2 million visiting the country in 2010, due to the current instability. The same can be said of Egypt and Tunisia.

Tourism aside, stocks markets have plummeted in Tunisia and Egypt, as elsewhere in the region, including the Gulf. Sovereign bond risk has also heightened and international investors are understandably hesitant to enter Middle Eastern markets. British investors are holding onto the seat of their pants, with British investment in Egypt the country's largest foreign investor at some US$20 billion.

This year has certainly started out with a bang in the Middle East, and we could all be in for a very interesting 2011. How it will all play out will be up to the people and the reaction of the region's rulers, external forces like the United States included.

The Tunisian Intifada

The poster says "Servant (the Saudi king) of the two thieves (Ben Ali and his wife Leila Trabelsi)"

Commentary for Executive, 13 January (being re-written following Ben Ali's departure from Tunis)

The demonstrations in Tunisia over the past several weeks is the biggest news to have come out of the North African country in a long time. “All is well in Tunisia” is the usual officially parroted mantra. But what is happening there could be the first of many such intifadas (uprisings) in the Middle East and North Africa (MENA) unless political-economic concerns are addressed and high unemployment is tackled in a region where over 50 percent of the population is under 30 years old.

The protests in Tunisia were triggered by unemployed university graduate Mohammed Bouazizi in the central town of Sidi Bouzid on 19 December 2010. Bouazizi had resorted to selling fruit on the street to make ends meet, but after police seized his produce he poured gas over himself in front of the town hall and set himself alight. Bouazizi's actions were literally the spark that prompted nationwide protests over unemployment, rampant corruption and the repressive leadership of President Zine Ben Ali .

Unemployment in Tunisia is officially 13 percent but presumed to be higher than 25 percent. While the country has had economic growth over the past decade, it has not been reflected across society or provided enough jobs for graduates. It is the same story throughout the MENA, which has the one of the highest unemployment rates in the world, according to an International Labor Organization report.

This year protests have taken place in Algeria, again over unemployment and dissatisfaction with government policies. Strikes were scheduled in Lebanon over high fuel prices - seemingly dropped due to the dissolution of parliament – and Egypt is on tender hooks due to the upcoming presidential elections. The region's more authoritarian regimes are no doubt keeping a close eye on Tunis to see the outcome, for if it can happen there it can happen anywhere, despite Tunisia being a police state.

In power since 1987, Ben Ali won the 2009 presidential elections with 89.62 percent of votes cast. In The Economist's 2010 Democracy Index, Tunisia ranked 144 out of 167 countries and was classified “an authoritarian regime.” In press freedoms, Tunisia ranked 164 out of 178 countries in the Reporters Without Borders Press Freedom Index 2010, lower than neighboring Libya.

Interestingly, a Wikileaks cable on Tunisia, written by United States Ambassador Robert Godec in 2009, almost predicts the current uprising: “Corruption in the inner circle is growing. Even average Tunisians are now keenly aware of it, and the chorus of complaints is rising. Tunisians intensely dislike, even hate, first lady Leila Trabelsi and her family...Meanwhile, anger is growing at Tunisia's high unemployment and regional inequities. As a consequence, the risks to the regime's long-term stability are increasing.”

Ben Ali however has gone about appeasing the protests in the typical manner of the archetype dictator. The largely peaceful protests were put down by force, over 50 have been killed as of going to press, and scores of demonstrators were arrested – most later released - on spurious charges. And rather than make the necessary sweeping economic and political changes the country needs and then gracefully stand down from office, like Ben Ali made his predecessor do - declaring President Bourguiba unfit to lead - Ben Ali has opted for the scape goat option: blaming the protests on the always convenient “outside forces” and “radical elements.” Yet considering the nationwide scale of the demonstrations and three public suicides by unemployed men, such excuses are laughable.

Ben Ali did make some concessions by firing four ministers, allocating part of the budget for job creation, and ordering the creation of a special committee to investigate corruption and the actions of some officials. But it is Ben Ali's wife and his immediate family that are, by all accounts, the biggest kleptocrats in Tunisia. It is time they went.

Even if Ben Ali survives this debacle, his support base will only be with the military apparatus and not the populace itself. Some are calling the demonstrations an intifada, and if it keeps on going, it might end up being called the Tunisian Revolution. It may even before the first of many in the MENA region in the years ahead. Indeed, Secretary of State Hillary Clinton, addressing the Forum for the Future conference in Doha in mid January, made an unusually stark warning to Arab leaders that they will face unrest, extremism and even revolt unless economic and political reforms are enacted.

PAUL COCHRANE is the Middle East correspondent for International News Services

Vanquish visas and they will come

European tourists visiting the Umayyad mosque in Damascus

Commentary - Executive magazine

Over the past decade the Middle East has shaken off its 'danger zone' reputation of being a place where only the fool hardiest of holiday makers would plan a holiday. Since 2000, the number of tourists visiting the region (excluding Turkey and Israel) has more than doubled, from 24.9 million to over 53 million. And while 2009 saw a slump in international tourist arrivals, down 5 percent, the region was only behind North-East Asia globally in the rise in tourists in 2010, up 16.1 percent, according to the United Nations World Tourism Organization.

Perceived heightened stability, investment, infrastructure development and marketing campaigns have all contributed to the rise of tourism in places other than long-term favorites Egypt, Turkey and the Holy Land.

The rise has partly been fueled by wary Westerners warming to the Middle East as an attractive vacation destination, after being swayed by the flurry of advertising campaigns and travel articles extolling old Damascus' charms, Dubai's palatial hotels and Beirut's infamous “phoenix rising from the ashes” reputation. However, inter-regional tourism has been a key driver for the sector and has corresponded with the emergence of low cost air carriers and the aggressive expansion of Middle Eastern airlines in general.

The rise in tourism has also dove tailed with a resurgent middle class with the desire and enough money to take a trip within the region, but not quite enough cash to splurge on a family holiday to Europe or America. Syria has become a regional poster child in this regard, with its tourism sector exploding since the economy was opened up at the beginning of this century, with visitor numbers surging from two million in 2004 to a record 8.5 million in 2010. What is notable is that the majority of tourists are from the Gulf, with 2.9 million Arabs visiting in 2010, compared to 1.35 million tourists from other, primarily European, countries.

It has been the increased openness of countries that has really encouraged the inter-regional tourism boom, with Damascus scrapping visas for Iranians and Turks, and Turkey last year (2010) abolishing visas for Syrians and Lebanese. Once the regulations changed, there was a 117 percent rise in Iranian visitors to Syria, while the Turkish-Syrian agreement encouraged 482,000 Syrian holiday makers to stream into Turkey, a 113 percent increase, and a 170 percent rise in Turks heading to its southern neighbor. This sensible bi-lateral move resulted in the highest rise in visitors between two countries in the world in 2010.

Meanwhile, Ankara's decision led to 73 percent more Lebanese visiting Turkey than in 2009, and easier visas and marketing campaigns led to 74 percent more tourists from the UAE, a 60 percent rise from Iran and a 47 percent increase from Saudi Arabia. What is curious is that while Arab and Iranian tourist number surged, Ankara's strained relations with Tel Aviv resulted in a 41 percent drop in Israeli tourists, to 80,000 visitors.

That's not much of a surprise though, as politics and outbreaks of violence frequently cause the region's tourism figures to yo-yo from one year to the next. But with all the development and infrastructure investment underway – from airport expansion in the Levant to the colossal aviation hubs in the UAE and Qatar, to the resorts and hotels being built – the region is on track to being a top global travel and tourism destination. Indeed, according to the World Travel and Tourism Council, the Middle East's tourist and travel economy is forecast to rise 40 percent by 2020 from the current $173 billion to $430 billion.

What should be under debate is the scale and feasibility of tourism projects and development – mass tourism versus more sustainable tourism that is not primarily seasonal, has negative social ramifications or ravages the environment. Now is the time for the public and private sectors to plan ahead.

The easing up of borders and visa formalities should expand further to bolster regional travel for Middle Eastern citizens and foreigners; as Turkey and Syria have demonstrated, scrapping visas makes visitor figures jump. After all, tourists that have to go through the whole rigmarole of applying for a visa and then coughing up $50 may be discouraged from visiting, but if you let them in for free, tourists will spend, spend, spend. In Syria's case, $2 billion more in tourism revenues in 2010 than the year before.

PAUL COCHRANE is the Middle East correspondent for International News Services

Hey, big spenders - The Gulf's personal care market

Paul Cochrane reports from Beirut - Soap, Perfumery and Cosmetics magazine

The multi-billion dollar cosmetics and fragrance industry in the Middle East’s six Gulf Cooperation Council (GCC) countries has had a mixed few years in the wake of the global financial crisis, made more unpredictable by demographic change and purchasing behaviour shifts.

In the years leading up to 2008’s downturn, the personal care industry in the region – Saudi Arabia, Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates (UAE) – had one of the highest growth rates in the world at some 12% per annum over three years. This was driven by strong growth in the Gulf economies, high oil prices and a surge in affluent expatriates living and working in the region, particularly the UAE.

In 2009, regional sales contracted around 4%, according to global cosmetics giant Beiersdorf, as purchasing power and consumer confidence plummeted. The decline was in line with changes at a macro level with the combined nominal GDP of the GCC countries hitting an all time high of US$1.054 trillion in 2008 but dropping to US$841bn in 2009, according to a 2010 report by the Saudi American Bank Group. But following government stimuli, market consolidation and renewed consumer confidence, the sector appears to be re- bounding in 2010, with the International Monetary Fund (IMF) predicting 4.8% economic growth in the GCC this year.

“Fragrance and cosmetics sales have remained stable in the GCC, but we are seeing a recovery and this should be more significant towards the end of the year,” says Salah al Sagha, general manager of beauty retail at the UAE-based Chalhoub Group, which sells commercial, luxury and Arabic- oriented brands. According to Euromonitor, fragrance accounts for a 31% share of the C&T market in Saudi Arabia and 21% in the UAE, while premium cosmetics command shares of 38% and 26% respectively.

“In beauty, we have budgeted our sales to grow by 6% in 2010, which is an improvement from last year,” continues al Sagha. “Sales by market segments in 2010 have remained almost the same compared to 2009, with fragrance leading followed by make-up, skin care and body care. Fragrance sales have increased (up 2%) whereas cosmetics have suffered versus last year.”

The value of the cosmetics and personal care sector in the GCC was estimated at some $2.1bn in 2008 by a paper released by German trade fair organiser Epoc Messe Frankfurt. Meanwhile, while a recent report by the International Journal of Business Strategy (IJBS) estimates fragrance sales in the region at $3bn a year in 2009, approximately 20% of the global market. The luxury cosmetics and fragrance sector is estimated to be worth $1bn, according to al Sagha.

The biggest indicator of change in the market has been in consumer purchasing behaviour for the perfume sector, with consumers buying a product on average once a month before the recession compared to once every two months today. As a result, the average transaction has dropped from $136 to $81, according to the IJBS report. “The spending power decline within our core target segment has undoubtedly affected the movement and volume of sales,” says Abdulla Ajmal, deputy general manager of Ajmal Perfumes in the UAE, one of the region’s leading oriental perfume manufacturers and retailers. “Where before a customer would pick up five or six big ticket items, they now prefer to buy one or two and come back to replenish. I don’t think our core customers have lost their spending power. I think it has more to do with taking a cautious approach and evaluating every purchase decision with much more scrutiny than before.” The Chalhoub Group has noted similar trends. “All customers in the Middle East are now looking for value. It doesn’t mean they are looking for more affordable items, but items that feel durable and feel like they are offered at the right price, whether these are basic or luxury items,” says al Sagha. “People are also looking for choice rather than price so we aim to optimise what we offer in substance.”

RETAIL SCENE

The retail environment in the Gulf, which has matured in recent years, has also been affected by the slow-down, with less successful malls and outlets closing down while segment differentiation has become more apparent due to the recession. “The past few years saw incredible growth in retail outlets, fuelled by incredible demand and also due to the willingness of consumers to try new products,” says Ajmal. “As the demand slowed down, the more established players in the market have managed to hold their positions, resulting in consolidation, while small retailers have suffered the most. But the divide between the different segments is clearer now. Luxury retailers continue to stock luxury products and value- based propositions are now offering added value to entice consumers into making purchases.”

Companies have adapted business strategies as a result by offering a greater array of products to suit certain economic demographics, opting for strategic partnerships instead of tactical agreements and investing in service, marketing and brand promotion.

CLIENT BASE

In such a multi-demographic market as the UAE - catering to locals, GCC citizens, expatriates and tourists - the sector has been affected in different ways from other Gulf countries. This was reflected in the biggest change in Chalhoub’s UAE clientele being a drop in tourists from eastern Europe. “We used to have 20% of our customers coming from Russia and eastern Europe, but since 2009 they represent 3%,” says al Sagha. Emirati and GCC citizen clientele has in contrast increased by a few percentage points, rising above 20% each of overall customers, offsetting the decline in tourists. Benefiting both local and visiting shoppers, the UAE imposes no VAT and has low import tariffs on its cosmetics and fragrances so prices are around 25% cheaper than in western Europe.

A turnaround in sales to UAE bound tourists has occurred this year however in the second biggest cosmetics and fragrance market in the GCC after Saudi Arabia, indicated by duty free sales at Abu Dhabi airports, up 19% in the first half of 2010 on the previous year, and at Dubai Duty Free, up 16%. Perfumes, which account for 14% of total sales at Dubai Duty Free, had sales of $84m in the first half of 2010, representing an 18% increase over the same period last year, while cosmetics sales rose by 26%.

Despite the slow-down since 2008, the Gulf still has one of the highest per capita spending on perfume in the world at $326 annually, according to IJBS. While sales to expatriates and tourists in the UAE have dropped, it is Emirati citizens who are keeping cosmetics and fragrance sales buoyant, with disposable incomes staying high due to secure public sector jobs and government endorsed employment programmes.

It is a similar story in other Gulf countries, which were not as exposed to the international markets and have fewer affluent expatriate workers and less developed tourism sectors.

“Perfume sales in the Gulf continue to grow, albeit at a much slower rate than before,” says Ajmal. “There are a few countries within the Gulf that are primary drivers of this growth – for us it has been Saudi Arabia which was up by 27% for the first quarter compared to last year.”

In cosmetics, Saudi Arabia has also remained strong, with sales reaching $2.4bn in 2009, while analysts predict the cosmetics market will grow by 11% this year, according to figures published by the Financial Times.

FRAGRANCE DOMINATES

A recent survey focused on affluent female customers, carried out by Chalhoub in conjunction with research firm Nielsen in the group’s key three markets of Saudi Arabia, the UAE and Kuwait, highlighted the continued high spending on cosmetics and fragrances in the Gulf.

“For beauty items, the Saudi shopper spends $650 on average every three months, but is far behind the Kuwaiti customer with an average monthly spending of $800. Across all territories, fragrance is the most important item (a minimum of 40% of the beauty budget) followed by make-up (35%) and skin care (20% to 25%, depending on the country). It is interesting to note that skin care is still mainly bought in supermarkets in the Gulf,” says al Sagha.

With fragrance so important to the sector, particularly among Gulf citizens, a wide variety of French, American and oriental perfumes are on sale in the region. This has particular impact on the oriental sector, which brings out new perfumes every year to meet consumer demand.

“We have over 100 perfumes within our stores today,” says Ajmal. “Some of these products are classics, like Dahn Al Oudh Moattaq, which have been on the shelves for more than ten years, and other products which are newer introductions. Typically we create up to ten products within a calendar year. This is a lot if you look at the industry standard, but this is primarily because of the way the local market operates. Our consumers are always in search of something new.”

The region’s burgeoning young population has also helped to retain sales and provides for a positive long-term outlook for the cosmetics and fragrance sector. “The youth market is significant in the Middle East, where over 50% of the population is younger than 30, and we constantly adapt our offer to answer these needs,” says al Sagha. “In beauty, we are very much helped in this regard by the major brands in the industry, with their strategic launches in 2010 targeting the young generation, so that helps us to reach out to these customers. For example, this June we launched exclusively at our Faces stores the latest fragrance by Lancôme, Trésor In Love. This fragrance is a ‘younger’ version of Trésor, aimed at the 15-25 year-old women, so it was very strategic for us but also very successful.”

Copyright SPC

Egypt's clothing industry starting to bloom

By: Paul Cochrane for just-style.com | 17 December 2010

Over the past five years Egypt has cemented its position as a fashion hub for European and American high street brands, with average annual garment exports earning the country US$2bn. Yet domestic labels are generally not exported and high-end clothing manufacturing is still very niche.

"Fashion manufacturing is still rather new to Egypt, as this requires high skills and a fast turnaround time, but the sector has developed a lot in garment manufacturing since 2005," explains Dr Hala Hashem, chief executive officer of Al Arafa for Investment in Garments Manufacturing.

The company, headquartered in Nasr City, Cairo, exports to Zara, JC Penny, Macy's, Banana Republic and Gap, while in men's formal wear sells to Debenhams, House of Fraser, Massimo Dutti, Ben Sherman, Racing Green and the Valentino Fashion Group.

"We are not driven as a society by fashion, unlike say Lebanon, and we don't have a heritage of strong local brands," she adds.

Egypt is the European Union's (EU) sixteenth largest supplier of clothing and is becoming a more important export market for Egyptian manufacturers due to the downturn in orders from the United States, a long-time trade partner due to preferential trade agreements.

Exports are currently split 60% towards Europe and 40% for the US market, down from a 50:50 split before the financial crisis, according to Bassem Sultan, CEO of Alexandria-based Dyetex, and treasurer of the International Textile Manufacturers Federation (ITMF). Exports are predominantly low to medium-priced garments, with few companies manufacturing high-end fashion items.

However, Sultan believes the sector has potential over the next few years to manufacture high-end garments. "Already some manufacturers have started producing high-quality fabric shirts for Italian and Swiss companies, and I think the Egyptian market for export is growing," he says.

Rising orders fuel optimism

Egypt has gained orders recently due to rising domestic demand from the Far East, which has reduced capacities for export to Europe.

Combine this with the benefit of low labour costs and geographic proximity to the European market, and optimism for growth is strong.

Another sign is the launch of a boat carrying product between Egypt and Venice. "We have not yet fully utilised its benefits, but it has reduced the logistics time, especially with Italy, and the sector is now at a similar stage to Romania six years ago," explains Dr Hashem.

Indicative of the sector's potential growth strength is the news that retailers Zara and Tesco will open sourcing offices in the country next year. "It gives Egypt positive vibes that they are coming here," says Dr Hashem.

Egypt's domestic clothing manufacturing sector, estimated to be worth US$1.6bn according to Sultan, is not however involved in the production of clothes sold by foreign retailers in the country.

"We manufacture for Nautica, Dolce & Gabbana, and Calvin Klein, but it is only for export," says Sultan, adding that Egypt does not produce a wide enough selection of items to cover a brand's full range.

Retail market opening up

Since 2005, international retailers such as Zara, Paul & Shark, Lacoste and Benetton have entered the market as malls opened in the capital Cairo, while next year Marks & Spencer will open two stores.

With Egypt having a low GDP (gross domestic product) per capita of US$5,700 a year, only around 5-7% of the population can afford higher cost clothing, explains Sultan.

Retailers are nonetheless faring fairly well though, selling to affluent Egyptians and tourists from the Gulf.

"The retailers are still testing the Egyptian market but they underestimated it," says Dr Hashem. "They are not offering the same amount of items as I see in Europe, which I think is a mistake.

"I think in due time the big retailers will understand how things work in Egypt. It also depends on the model, as the most successful has been Benetton, as the clothes are manufactured and imported from Syria, and they understand the Egyptian market," she notes.

One of the few local brands with export potential is Al Arafa's label 'Concrete', which it bought ten years ago.

In the Egyptian market for 20 years as a mid-to-high end clothing store for men, with Italian style fabrics and designs similar to American label Gant, Concrete has 45 outlets in Egypt.

Dr Hashem says her company plans to export Concrete to the Gulf, Turkey and Europe. "This is not a common practice in Egypt as it is not easy to go with your own brand to where competition is, but Concrete is one of the best known names in the country."

Naoshima Art Island Part 1 - Benesse Art Museum

One of two giant pumpkins by Kusama Yayoi on Naoshima, this one by the ferry port

Part One of a two part series on Naoshima “art island” in Japan's Inland Sea, around one hour from Okayama by train and ferry.

By Paul Cochrane in Naoshima for Aishti magazine

Viewing art is more often than not an urban activity. Galleries and museums don't tend to be tucked away in forests or on small islands only accessible by ferry. But a remote location showcasing artistic masterpieces has the air of a pilgrimage about it as well as providing a more relaxed setting to ponder and appreciate the art you have traveled so far to see.

There was certainly a feeling of anticipation in the air as visitors boarded the ferry for the 15 minute ride from the mainland, around five hours by train from Tokyo, to the island of Naoshima in Japan's Inland Sea.

This is not a place that is on most visitors' to-do list when visiting Japan, like including an afternoon to tour the Louvre when in Paris. Naoshima attracts the artistically inclined, whether architecture students staying at youth hostels near the port or well-heeled art aficionados checked in at one of the four hotels run by the Benesse Corporation.

Naoshima is an island that had a dwindling population as the youth left for the high-tech cities before new life was breathed into it 20 years ago by Benesse, which had a growing collection of modern art in need of show casing.

Established in the early 1990s, the Benesse Art Site Naoshima has evolved from one art museum, the Benesse House Museum, to house a second museum, Chichu (see part two), and the Art House Project, where artists transform spaces into artworks while restoring old buildings.

In fitting with its “art island” moniker, works of outdoor art are dotted around the coast, including the giant pumpkin sculptures by Kusama Yayoi that have become symbols of Naoshima. Yayoi's bright red pumpkin at the fishing port signals the island's artistic bent, while the yellow pumpkin near the Benesse museum stands in colorful contrast to the rugged coastline and maritime backdrop.

Even the island's sento – public bath – is a fully functional, if somewhat surreal, art installation designed by Shinro Ohtake called "I ♥ Yu" – a word play on you and yu, which means hot water in Japanese. On top of the wall separating the men and women's bathing sections is a stuffed Indian elephant.

The Benesse House Museum designed by award-winning architect Ando Tadao merges two different functions – museum and hotel – in one building, with the art collection open to the public during the day and accessible at any time to hotel guests.

As much a piece of art as the works on display, the museum is set over three floors that utilizes natural lighting, minimalism and curves to highlight 38 paintings and art works. Set into the side of a hill with a panoramic view of the sea, art work is visible from inside and outside the museum while Tadao's design fuses nature and architecture to encourage what it means to benesse, Latin for 'live well'.

Displaying some of Japan's best contemporary art, the museums also houses work by Jasper Johns, David Hockney, Jackson Pollock, Andy Warhol, and Yukinori Yanagi.

In an almost cavalier attitude for a museum, the painting on the wall of its restaurant is by Jean Michel Basquiat. Yet when on an art island, if you can visit a museum in the middle of the night and bathe among art, why not eat among art?

Photographs by Paul Cochrane