Tokyo’s Manga Madness

School girls on "Maiden Road" in Ikebukuro

Plastik magazine

By Paul Cochrane in Tokyo

The Japanese are crazy about manga and no where more so than in the manga capital of the world, Tokyo. Comic books come in all sorts and sizes, from samurai and science fiction to haute cuisine and porn. Comics café’s offer all you can devour for an hourly fee, while in “cosplay café’s” waitresses dress up as anime characters to serve drinks and, at times, a “happy ending.” Welcome to the wonderful world of manga, which in Japan alone is worth a staggering $31 billion annually.

To get a sense of how manga mad the Japanese really are you must visit Tokyo's “otaku” (geek) districts of Akihabara (Akiba) and Ikebukuro. Originally known as “Electric City” for its cut price electronics, Akiba in central Tokyo has morphed into a manga and gamers' paradise. Store employees call out deals on megaphones, young women dressed as saucy maids hand out fliers on the streets, music pulses from store fronts, while men and women of all ages browse the store’s shelves for the latest titles to bargain-bin deals at $1 a copy.

Building after building along the district’s main drag is covered in bright colorful strip lighting and advertising while the interiors hold floor after floor of manga: comics, dvds, games, costumes and merchandise of all that can seemingly be commercialized: chocolates, toys, bottled water, clothing, models, playing cards, headphones, plastic dolls.

Akihabara aka Electric City

Browsing for manga on "Maiden road"

One store has five floors of normal manga – Japanese for “whimsical sketches” or cartoons – while the top two-floor “adults only” section is stacked floor to ceiling with manga “dojin” (porn), ranging from feature-length stories and one-off 10-page sexual encounters, usually between a bug-eyed, big breasted, tiny waisted girl and an exceedingly well-hung male, to all-female-action, alien sex and hermaphrodites with colossal boobs and swinging dicks.

Vivid is hardly the word to describe much of the content – nearly all dojin manga involves such a copious amount of splattered cum that you can almost feel it oozing out of the bindings. Meanwhile, outside each floor are machines selling models of nude female manga figures in “interesting” postures dispensed in plastic cylinders for reassembly back home.

If purchasing models or dressing up in the costumes of a favorite character are not enough, then there are the cosplay (“costume play”) cafes, where waitresses are dressed up like anime characters. More personal maid cafes are dotted around Akiba, where massage “happy endings” and fetish inclined wants can be satiated.

Dojin manga on sale in Ikebukuro

Drink dispenser in Akiba

It is over in Ikebukuro in northwest Tokyo that you find “otome” (geek girls) on so-called “Maiden Road.” Otome hang out at manga shops to browse boys' love, or “boizu rabu,” a female-orientated manga that focuses on homo-erotic or homo-romantic male relationships that are usually created by female authors (but distinctly different from “bara,” or gay manga). There are even role-play cafes featuring women in drag waiting tables as butlers.

For the more mainstream reader who is low on funds yet wants to buy all the cartoon candy the eye desires, “manga kissaten” (comics cafes) are found all over Japan, where customers can read manga, watch dvds and surf the internet for an hourly fee or stay all night to plough through a 25-part manga series in-between cat naps.

The amount of manga available in Japan is truly staggering, with the all encompassing manga industry - from comics to anime to toys - worth an eye-popping $31 billion a year. The Kyoto International Manga Museum alone stocks what is considered a conservative number at 50,000 manga volumes. And manga, in all its forms, covers all genres: samurai tales, history, fantasy, science fiction, action, romance, porn and even educational content. Food is also an immensely popular genre, evidenced in the “Oshinbo a La Carte” series by Tetsu Kariya and Akira Hanasaki, which have sold over 100 million copies worldwide.

Japan's visual entertainment has certainly made its mark on global popular culture, despite a lack of translations and promotion over the past 30 years. That Japan has done so in the face of the Hollywood entertainment empire is down to the vivid, artistically rich imaginings of futuristic and fantastical worlds coupled with a willingness to take the material, as well as the viewer, seriously. A realization that comics are not solely a medium for children as escapist entertainment and can verge on the high-brow in the stories and ideas expressed.

Indeed, the international commercial success of post-apocalyptic anime films “Akira” (1988), “Ghost in the Shell” (1995) and “Appleseed” (2004) showed that what some deride as “cartoons” requires not only a “Parental Advisory” warning but also a more than functioning brain.

Ikebukuro

What pushed anime into the realm of adult entertainment was the development of manga from the easily digestible American superhero comic of the 1940s and '50s into a more realistic, violent and sexually explicit style. Spearheading the rise of manga was legendary artist Osamu Tezuka – aka the “God of Manga” - who revolutionized the medium by adopting film-frame visualization in his drawings and taking manga from child-safe series (and current American film) “Astro Boy” to the likes of “MW,” a story about a gay priest sexually entangled with a schizo-psychopath whose mind was messed with as a child by exposure to a US-made chemical weapon.

Since Tezuka put pen to paper manga has never looked back, providing the inspiration for anime films, TV series, video games and e-manga. What is on the page is on the screen. And as entertainment in general became increasingly hardcore so did manga in its über violence and graphic sex, particularly in genres such as “yaoi” (“boys' love”) and dojin.

But while manga comics in Japan are a $5 billion-a-year business, outside the Far East just a fraction has been translated or is readily available. Annual Japanese sales of manga magazines are estimated at $2.2 billion and manga books at $2.5 billion, while best selling magazine “Shonen Jump!” has a weekly circulation of 2.9 million copies. Manga is such big business that in 2009 the Japanese government made manga part of its economic recovery plan by aiming to boost exports of manga, anime and pop music from the current two percent of the country’s total exports to 18 percent over the next decade.

“Japanese content, such as anime and video games, and fashion draw attention from consumers around the world,” said Taro Aso, the then prime minister and a self-confessed manga addict. “Unfortunately, this soft power is not being linked to business overseas. By linking the popularity of Japan's soft power to business, I want to create a $212-$318 billion market by 2020 and create 500,000 new jobs.”

This is great news for manga aficionados around the world, some of whom are so starved of new content that they learn Japanese to be able to delve into the ever expanding universe of manga, while more translations will make manga grow beyond the largely “geek” sub-culture following it has in the West.

Yet for manga to hold truly global appeal, merely translating content may not be enough. Perhaps it is about time the “value added” visual entertainment readily available in Tokyo is exported alongside the newly translated content, so we can enjoy dojin, college-age girls dressed in drag and manga kissaten on the streets of Berlin, Paris and Beirut.

GLOBAL MANGA CAPITAL: TOKYO, JAPAN

PRIMARY RETAIL DISTRICTS: AKHIBARA AND IKEBUKURO; CONVENIENCE STORES EVERYWHERE

PLACES TO READ MANGA ON THE CHEAP: 24HR MANGA KISSATEN (CAFES)

MANGA READERS TO BE SEEN: ON PUBLIC TRANSPORT, PARK BENCHES, AT NOODLE VENDORS, STRETCHED OUT ON THE GRASS UNDER CHERRY TREES...

READERS: ALL AGES, GENDERS AND SOCIO-ECONOMIC GROUPS

MARKET VALUE: $5 BILLION A YEAR

All photographs by Paul Cochrane

Hayao Miyazaki: The Akira Kurosawa of anime

Plastik magazine
By Paul Cochrane in Beirut

Spirited Away

Film maker Hayao Miyazaki hates the nickname that has been pinned on him in the West, “the Walt Disney of Japan”. He may have teamed up with Disney to translate and distribute his movies, but Miyazaki is certainly no Walt. If any monikor should apply it's the “Akira Kurosawa of animation.”

While a small man, at just 1.64 meters tall, Miyazaki is the towering figure of anime in Japan and renowned internationally for his children-orientated, yet agelessly appealing stories that continue to emerge from his sublime imagination.

Consider the train that traveled across the surface of an aquamarine sea in Spirited Away, the cat bus in My Neighbor Totoro, or in his latest film, Ponyo, of a girl leaping from one tsunami size wave to another. Pure movie magic.

Indeed, Miyazaki's work is anything but staid or formulaic; neither do his creations suffer like James Cameron's recent blockbuster Avatar did, from being visually stunning in portraying a fantastical “other” world yet weak in character development and storyline. Miyazaki's plots are entertaining, the characters are compelling and his artwork breathtaking in its scope and vision.

My Neighbor Totoro

Ironically it was because of a crap English language release of Nausicaä of the Valley of the Wind (1984) in the US, which cut nearly 30 minutes of time, changed character names and watered down the film's themes, that Miyazaki's films were not available in English for an overly long time. The director was reportedly so angry about how the film had been butchered that he would only grant distribution rights for his movies - eventually to Disney - if there was a strict translation of the Japanese dialogue and no scenes were removed, even if they might puzzle the audience, as he admitted during an interview.

“I can't believe companies distribute my movies in America. They're baffling in Japan! I'm well aware there are spots where I'm going to lose the audience. Well, it's magic. I don't provide unnecessary explanations. If you want that, you're not going to like my movie. That's just the way it is,” said Miyazaki.

Given his commercial success it is exactly because his movies have that magical touch that Miyazaki's work has resonated with audiences worldwide. Yet while a multiple award winner in Japan, his talent was only recognized in the US in 2003 when Miyazaki won an Academy Award for best animated feature film, Spirited Away.

Castle in the Sky

What also makes Miyazaki's films stand out compared to the crowd-pleasing Disney films is his frequent references to nature, ecology, and pollution by humankind; his homages to the working class; and the promotion of peaceful dialogue over violence.

But in that Miyazaki (born in 1941) is not alone in Japan, part of a generation of artists that grew up in the wake of two atomic bombings that had profound impact on Japanese cinema and its depictions of a hypothetical, post-apocalyptic world. The difference between Miyazaki and his Japanese counterparts is that his imaginings of such a future is not of one destined to be a dystopia ad infinitum but can be overcome – the silver lining – by respecting and living side by side with nature, as in the film Nausicaä.

Miyazaki has also never let his own misgivings about the direction the world is taking or his own political stance – he famously refused to attend the 2002 Academy Awards out of protest over the US invasion of Iraq - result in a negative story.

“When I'm making a film, I don't want to transfer my pessimism onto children. I keep it at bay. I don't believe that adults should impose their vision of the world on children, children are very much capable of forming their own visions,” he said in an interview.

Miyazaki's opus very much indicates hope, of creating enchanting worlds and through letting his imagination run wild inspire the next generation to do the same, to imagine another world.

Ponyo

“Virtual reality is a denial of reality. We need to be open to the powers of imagination, which brings something useful to reality. Virtual reality can imprison people. It's a dilemma I struggle with in my work, that balance between imaginary worlds and virtual worlds,” he said.

Miyazaki's reliance on drawing in creating his anime reflects his stance, not allowing more than 10 percent of footage in his films to be computer generated (CGI). “I've told the people on my CGI staff not to be accurate, not to be true. We're making a mystery here, so make it mysterious,” he said. “Do everything by hand, even when using the computer,” he has said elsewhere.

There is also a degree of mystery in how he develops a film and the script. “I don't have the story finished and ready when we start work on a film. I usually don't have the time. So the story develops when I start drawing storyboards. The production starts very soon thereafter, while the storyboards are still developing. We never know where the story will go but we just keeping working on the film as it develops. It's a dangerous way to make an animation film and I would like it to be different, but unfortunately, that's the way I work,” he said.

Experience is a central part of Miyazaki's ad hoc method, something he has decried among contemporary animators. “When I think about the way the computer has taken over and eliminated a certain experience of life, that makes me sad. When we were animating fire some staff said they had never seen wood burning. I said, “Go watch!” It has disappeared from their daily lives. I don't think you can become an animator if you don't have any experience,” he said.

Miyzaki, curiously enough, studied political science and economics at university – no doubt giving him a taste of the big, bad real world – while his fondness for depicting flying machines (evident in Nausicaä, Porco Rosso, Castle in the Sky) stems from his early exposure to aviation due to his father being the director of a company manufacturing fighter planes.

Porco Rosso

Taking experience to a further level is that the majority of characters in Miyazaki's work are based on people he knows in real life. In Spirited Away, for instance, the main character, a young girl called Chihiro, is based on the daughter of one of his friends.

Miyazaki's belief in experience and relying on his own mind for stimulation has meant that he pretty much shuns watching contemporary pop culture, saying the only images he watches regularly are on the weather report.

Nevertheless, it was Miyazaki's incredible attention to detail, exceptional drawing ability and endless supply of new ideas that got his career started in 1963 as an animator at the Toei Douga studio in Tokyo. This lead to work at other studios until he brought out Nausicaä of the Valley of the Wind in 1984.

The film's commercial success provided him with enough capital to establish Studio Gibli, from where he has developed all his movies since – such as Howl's Moving Castle, Whisper of the Heart, and Princess Mononoke - while a few years ago creating the immensely popular Studio Gibli Museum in Tokyo. His next film, currently in post-production, is The Borrowers.

Lebanese designer Basil Soda's interior ambitions

iO Magazine
By Paul Cochrane in Beirut

Kelly Rowland wears Basil Soda

The oblong, stone clad exterior of Basil Soda's new fashion house in Beirut oozes style. Inside, the design is minimalist, with graphite-colored tables, sofas and walls while the fashion collection itself is conspicuously absent, a handful of mannequins the only indication you are not in the lobby of some boutique hotel.

The collection itself is hidden behind mirrored cupboards, where on opening, taffeta and raw silk shimmer amid hues of purple, orange, red and sequined cocktail dresses. Attendants show around two Khaleeji ladies, giggling while admiring the dresses and imagining the possibilities presented when wearing such glamorous fashion.

The building is a perfect mix of fashion and interior design. Soda's designs emphasize women's curves, while the interior is linear and clean cut – mirroring the designer's pencil marks and the tailor's scissors - to optimize the fabric on show.

For Basil Soda who, since 2000, has carved out for a niche for himself as one of Lebanon's leading designers in haute couture, the 2009 building is a symbol of a decade of creativity and a lifetime's passion. “If I wasn't a fashion designer, I would've been an architect, for sure,” said Soda.

That the building has turned out the way it is, is down to a fusion of Soda's ideas and interior designer Danny Aoun's abilities. “After working on my house with Danny, it was different doing a work space as I needed a place I could be relaxed in - it's my playground,” he said. “But I knew what I wanted, and he's a good listener and artist.”

The layered building has a workshop on the lower floor, the boutique and a more private area upstairs for meeting customers. The decision to use gray for the custom-made furniture and walls was a reflection of modernity and unity. “It will last longer in terms of trends, unlike black and white. And you can combine gray with any shades of a fashion collection. The choice was also influenced by my liking of the graphite look, as I don't use pens but pencils,” said Soda.

The use of mirrors that encase the front of the wardrobes – but not the sides, allowing for another perspective of the dresses within – reflects a careful blending of artificial and natural light while imposing the vegetation around the Horsh Tabet area of Beirut.

“How many thousands of graphics do we see everyday? I think the eye needs to be more relaxed to see beautiful things,” he said.

But while Soda is a perfectionist, he sees the importance of contrasts and mixing styles, as in his fashion when using raw silk. “To see an unfinished product has a beauty. Raw materials are like a chandelier with rope, and such a mixture gives a new view,” he added.

And while the interior is all straight lines to not detract the eye's attention, Soda carried out a tiny touch that makes all the difference in such a minimalist environment – the tables are gracefully curved, “for some femininity and allure.”

Time to lay tracks

Railways are a need, not an option for the Middle East
Commentary - Executive magazine

An undated postcard shows the old Rayak train station in Lebanon’s Bekaa Valley

The Middle East and the United States have a lot in common when it comes to transportation. Both places have a love affair with the automobile and both had long-distance train networks well over 100 years ago. Both now also have an over abundance of private vehicles clogging up the roads while railways and public transport systems are substandard, if they exist at all.

There is a clear correlation that can be drawn here, between the rise of the car and the demise of rail transportation. But what is more noticeable on a macro-level is how the Middle East and the US stand out from nearly everywhere else in neglecting and underfunding their respective railway networks. Around the world, from South America to South Korea, investment in railways, metros and high-speed trains has been ongoing for decades.

In recent years a growing web of tracks has enmeshed the globe, with China alone earmarking $300 billion over the next decade to build 25,000 kilometers of high-speed railroads. By comparison, the US has just 735 kilometers of high-speed track. The Middle East has, well, zero.

The tide seems to be turning in the US, which had long practiced a policy of “starving the beast” — underfund the railways then shut them down due to inefficiency — until the American Recovery and Reinvestment Act in 2009 allocated $13 billion to improve the railways over the next five years.

It's been a long time coming but the Middle East is also finally undergoing a railway renaissance. Jordan and Syria are both reinvesting in train lines that were built in the early 1900s and once linked Damascus to Mecca, part of the famous Hijaz Railway.

Meanwhile, in the Gulf Cooperation Council investment in railways could reach $109 billion over the next decade, according to a report by the Kuwait Financial Center. Saudi Arabia is expanding its railway network, which will include a $1.8 billion high-speed railway between Mecca and Medina; Qatar is spending nearly $25 billion on railways and a metro; and the United Arab Emirates is mulling a railway network to compliment the Dubai and Abu Dhabi metros.

All three countries would then link to the 2,177 kilometer GCC rail network slated to open in 2017. With an estimated cost of $25 billion, the network will run from Kuwait through Saudi Arabia, Bahrain, Qatar and the UAE before the last stop in Oman, or possibly Yemen. This will be money well spent, as an effective railway will better connect the people and economies of the region and reduce the environmental impact of travel.

What is remarkable is how long it has taken the GCC to roll out a regional track, despite its obvious benefits, and to not have done so as a priority over other major infrastructure projects. The same incredulity can be applied to Lebanon, with the government squandering the opportunity in the early 1990s to implement a comprehensive railway network alongside all the other post-civil war reconstruction work. A train line running down the coast between Tyre, Beirut and Tripoli would be a dream; connecting Beirut to Damascus beyond a fantasy.

But Lebanon may yet take part in the Middle East's railway revival. The French government announced in May that they plan to fund a study to rehabilitate Lebanon's coastal railways, which would be a start. The traffic situation around Beirut is appalling, and is set to get even worse as more cars pile onto the roads. It is the same in pretty much every major city in the region.

The public will be hoping that for once, talk of improving Lebanon’s transport network goes beyond the planning stage. But judging by some of the discourse on transportation heard in Beirut of late, they shouldn’t hold their breath.

Earlier in the year Beirut’s muhafez (governor) came up with a creative idea to solve the city's traffic problems: sidewalks should be no wider than one meter. And in 2005, during discussions of the national master plan, investment in public transport was dismissed with the claim: “Lebanese like their cars and don't like public transport.”

Considering the problems that the region’s cities face in terms of congestion, pollution and infrastructure, governments need to get serious about public transport planning. Their citizens deserve better than smaller sidewalks and clapped-out old taxis: it’s time to wean people off their love affair with cars and start laying tracks.

PAUL COCHRANE is the Middle East correspondent for International News Services

Eruption disruption

Iceland's volcanic disaster shows the need for real contingency planning Commentary - Executive magazine

Expect the unexpected” is a terrible cliche, but given the wars, natural disasters and financial crises of late, it could be considered standard procedure for our times. While a volcanic eruption was to be expected — at some point or another as volcanologists frequently warn — Icelandic volcano Eyjafjallajökull's burst of ashy activity on April 15 caught everyone with their pants down. Military powers had developed no secret weapons able to stop it and all the 'enhanced' airport security measures and full body X-ray scanners could do nothing to screen the threat.

As the ash cloud's creeping tendrils closed one major Northern European airport after another, it became starkly obvious how easily aviation — the predominant means of international travel — could have its wings clipped. One day of inactivity might have been tolerable, but five was catastrophic. The impact of the volcanic eruption was staggering: 29 percent of global aviation was grounded, 1.2 million passengers were affected, airlines lost some $1.7 billion in revenue and the International Air Transport Association (IATA) said it may take up to three years for airlines to recover.

The volcanic eruption also exposed supply chain vulnerabilities, such as Gulf supermarket chain Lulu saying they were running out of fresh produce, usually flown in from Europe. Personally, I was scheduled to be back in Beirut April 16, returning from Tokyo via Paris' Charles de Gaulle (CDG) airport. Instead, after the 14-hour flight from Japan, I was diverted to Lyons in Southern France, where passengers were herded onto a bus for a further seven hours on the autoroute to Paris to spend the rest of the day lining up for assistance in CDG. After that, we waited in limbo, unsure whether tomorrow the ash cloud would clear to allow for take-off.

Yet, where one pillar of the globalized world fell, another, telecommunications, stood tall to save the day. On the second day stuck in Paris, Air France became “unwilling” to provide another night's accommodation. I put out the word, via my Facebook status, that I was stuck in Paris and needed a place to crash until April 20, my re-scheduled departure; within an hour I received an SMS message on my mobile offering me a bed. One clear lesson for individual contingency planning is that access to cash and telecommunications is essential; judging by reports and personal experience, airlines overwhelmingly failed to live up to their legal obligations to comprehensively assist passengers during the “volcano crisis.”

Many passengers, left to fend for themselves with their own funds, took to more old fashioned means of transportation — by land and sea – to complete their connection. In my case I pondered how to get from Paris to Beirut the fastest way possible: 40 hours by bus to Plovdiv, Bulgaria, another seven-hour bus to Istanbul, and from there a flight to Beirut. As fate would have it though, the ash cloud cleared just enough on the morning of my rescheduled flight to permit takeoff, before closing in again later in the day to silence the runways. Had the eruption continued — as some predicted it would — adaptation would have set in, with streams of people moving up and down Europe by any means possible.

Still, this would have been far less tragic than the last big Icelandic “volcano crisis” in 1783, when the eruption lasted eight straight months, spread ash as far as Damascus, causing massive crop failure and livestock loss leading to the death of some 9,000 people.

With the spate of natural disasters to hit the world recently — from Hurricane Katrina in the United States, to the Asian tsunamis and the Haitian earthquake — one might have thought airlines and governments would have planned for a volcanic occurrence. Contingency plans, however, were not effectively in place to deal with widespread airport closures, governments dithered and insurance companies pulled the “Act of God” clause to escape claims. Few can predict when natural disasters will occur, but we know for certain that they do occur, and so it is prudent for governments, businesses and individuals to prepare.

Crises, by their nature, arrive unexpected — we should expect that.
PAUL COCHRANE is the Middle East correspondent for International News Services

Dancing the night away

Aishti/Gossip magazine

By Paul Cochrane in Beirut

The New York Times ranked Beirut as the number one destination to visit in 2009, while the travel guide Lonely Planet named the capital as one of the top 10 liveliest cities in the world. Deserving accolades for this party town, but when it comes to dancing, Beirut would not seem to be a natural contender for a ranking as one of the top 10 cities to shake your booty.

Indeed, when dance-starved friends descend on Beirut from the Gulf, Damascus, Egypt or the more provincial cities of the West, there are the inevitable questions about where to go out and party, as well as where to dance the night away. It's easy to answer the first question, but the second requires a bit more brain power, simply because there aren't that many places to dance. And by dance I mean really dance, where your cares are lost in the beat and your body is at one with the rhythm, not shuffling between revelers, shaking your shoulder blades, or trying to dance without kicking a chair or risk falling off a table. For while the Beiruti two-step is an acquired skill to carry off gracefully, confined as it is to a half a meter square radius, it is not a carefree dance.

That all said, Beirut is not devoid of dance spots, it's just thin on the ground when it comes to dance floors. And what's more, cavorters don't seem to mind being crowded into a tight space, shaking, gyrating and swaying their bodies amid all the other dancing bodies. It's a “fuck the dance floor” mindset as any space will do.

One of Beirut's liveliest night spots, Basement used to have a good amount of dance space, but was reworked to pack in more tables. Music Hall, Buddha Bar, Element and the like in downtown and off Monot street mix up the table-and-dance concept, as White and the notorious Sky Bar do in the summer.

BO18 remains the perennial favorite as a dance hub in the early hours, pumping out electronic beats from 2am until sunrise, whether under the stars when the roof is open or coffined in the macabre interior. Acid in Sin el Fil is still a magnet for frenetic dancing, and in Gemmayzeh, Electro Mecanique, Trend and Green Door are warm up dance spots for after-hours clubs.

Those are the permanent places. With Beirut on the map as one of the world's hottest cities, there is a steady stream of international big-name DJs playing at events, usually summertime in the capital or at beach clubs. Then there are the independent, entrepreneurial dance organizers that have one-off, biannual or regular events at different locations to keep the more hardcore dancers dancing. Cotton Candy has become a regular on this circuit, building up a reputation for often outrageous parties in offbeat venues with heavy rhythms fueled by an open bar.

So while circling tables may be the standard Beiruti dance, there is plenty of full-on dancing happening on the sidelines, under the stars, and even in abandoned places reclaimed for the night. Perhaps it all just depends on your spatial needs as a dancer.

Photograph - Kate Brooks/Polaris, for The New York Times

Treasure Ships: Somali piracy and the spectre of money laundering

Money Laundering Bulletin (March, 2010)

Piracy has increased exponentially off the coast of Somalia in recent years, with ships hijacked deep into international waters despite the presence of a multi-national naval task force and pirates demanding ever higher ransoms from shipping companies. But while the spoils of piracy are evident in coastal Somali towns, tracking down where the remaining millions of dollars disappears to is hard to pin down, with allegations circulating of ransom money entering the real estate markets of Kenya to money laundering in Yemen and Dubai. Paul Cochrane in Beirut investigates.

Over the past two years, the number of vessels attacked has spiked, from 111 ships attacked in 2008, to 214 attacks and 47 hijackings in 2009, according to the International Maritime Bureau (IMB). And while the number of attacks has increased, so has the area the pirates are operating in, with the United Nations mandated naval force patrolling an area of 9-million square kilometers, almost the territorial size of the United States.

The presence of the 20-nation UN naval task force has led pirates to be increasingly audacious, using faster boats and 'mother ships' to target vessels as far as 1,200 nautical miles from the Somali and Yemeni coasts, from where pirates are based. This has heightened the ransoms demanded to fund the more sophisticated and costlier operations. “When the navies united under a task force, ransoms went up. Before it was $250,000, but now it is an average of $1.25 million per ransom,” said Simon Davis, a former detective and special investigator with Scotland Yard and a consultant on financial crime and piracy in East Africa. “That [ransom] pie graph is getting more and more cuts in it as the money is shared around,” he added.

In January (2010), the highest-ever ransom was paid out to release oil supertanker Maran Centaurus, with reports of anywhere between USD$5.5 million to USD$9 million. According to Chatham House in London, Somali pirates have been paid over USD$100 million in ransoms in the past two years, with USD$80 million accrued in 2008 alone. But where is this money going, especially given that Somalia effectively has no functional banking system?

According to a 2008 UN report using information gathered from the pirate town of Eyl in Somalia, the ransom money is divvied out, with the maritime militia – the pirates involved in the hijacking – getting 30 percent, the ground militia that secures the pirates' bases 10 percent, the local community – elders and officials – 10 percent, the financier 20 percent, and the sponsor 30 percent.

The 50 percent that ends up in the hands of pirates and the local community is having a direct impact on the Somali economy. Cyrus Mody, Manager of the IMB, said that living standards are going up due to “lavish spending by pirates, which is encouraging local industry to build up, and flashy new cars to be driven around because of the new money.” Other parts of the loot is earmarked for investment in the next venture, including faster boats, weaponry and more sophisticated nautical tracking devices.

The pirates run what Mody called an “extremely business orientated” operation, similar to many organized crime syndicates around the world. The three to five major pirate groups that operate from bases on the Somali coastline are either self-funded or financed by external investors.

This is where it gets interesting, and increasingly vague as to where that remaining 50 percent of the ransom money goes out of the hands of the organizers, as well as money the pirates may wish to stash somewhere.

“Somalia is a cash based economy so money disappears before anyone knows where its gone,” said Mody. “And from what I've heard is that they demand bills [in US dollars] of low denominations, X amount in 100s, 50s, 20s, and 10s, specified for the drop offs.”

The Kenyan connection

For the money to enter the financial system, it will have to leave Somalia. Kenya is an obvious choice, sharing a 500-mile border with the country and home to some 200,000 Somali refugees. From there, the money could be transferred out through banks or using the informal remittance system hawala to the rest of the world. “The Somali diaspora is a lot wider than people think,” warned Davis.

Furthermore, Kenya is “developing into a major money laundering country”, according to the US State Department's International Narcotics Control Strategy Report 2009, while the Kenyan government has not passed a law that explicitly outlaws money laundering, created a financial intelligence unit or developed “an effective anti-money laundering (AML) regime”. The report further highlighted that Kenya’s financial system “may be laundering over USD$100 million each year”.

In January(2010), Nairobi opened an investigation into property owned by foreigners as real estate prices in the capital have soared in recent years and there have been allegations that Somali piracy money is being invested in the country.

“We do know a lot of money gets siphoned into Kenya where a lot of real estate is being picked up at double and triple the price it really is,” said Mody. “One could speculate that the money is going into property, but we need more evidence.”

The Middle Eastern angle

Maritime consultancy company Idarat Maritime Ltd. (IML) has stated that the pirates use forward operating bases in the Seychelles and also work with Yemenis to launch attacks. According to an AML report, the pirates “are believed to have received financial support from wealthy individuals in the Middle East, seeking to make good returns in this business. There have also been suggestions from the Saudi military that Iran’s Revolutionary Guards have assisted the pirates, a move that may make sense given Iran’s covert involvement in Yemen’s civil war.”

Yemen's president Ali Abdullah Saleh also has close links to Somali leaders, which could be hindering security developments in preventing piracy, while the Yemeni government is notoriously corrupt, ranking 154 out of 180 countries in Transparency International's Corruption Perceptions Index 2009, making the country a possible money laundering haven. Yemen has AML regulations and is a member of the Middle East and North Africa Financial Action Task Force (MENA-FATF), but the country is “vulnerable to money laundering and other financial abuses,” said the State Department report.

“Ransom money could be entering Iran, Yemen and maybe the United Arab Emirates,” said Davis.

In April 2009, a US Naval Institute confirmed that piracy funds are being deposited in Dubai, where they are then laundered. However, the UAE authorities said such allegations were “baseless.” Beirut was also flagged as a possible money laundering destination, but again the Lebanese authorities denied any illicit activity.

Indeed, more evidence is needed all round. “You will never find “evidence” that funds have been dealt with by any bank or city, all you will get is denials,” said one maritime analyst that wished to remain anonymous. “All you need to do is to follow the same rules that you apply to any criminal organization, there really is no difference, and terrorists are normally also gangsters as well, so the same rules apply. Remember that the IRA used to hold up banks and sell drugs, while the Rajah Sulaiman gang in the Philippines used terrorist means to get protection money from ferry companies. So you cannot say that Dubai, London, or New York are involved,” he added.

Illicit money?

While concrete evidence linking the ransoms to money laundering is lacking, a further complication of the piracy issue is whether the ransom money is actually proceeds of crime, and therefore illicit funds to be watched out for. “The money is not from an illegitimate source, there are no claims of mistreatment, the ship is freed and the owners are happy they got the ship back – insurance is collecting, so no one is complaining,” said Davis. “It is not a suspicious payment but a business transaction,” he added.

Davis said other factors should be investigated, particularly given the presence of the UN task force, which is supposed to secure the Horn of Africa for shipping. “Are sea faring companies ignoring advice and gambling by plying certain routes? Have companies been approached to pay off pirates not to be hijacked? And why is there no true Maritime Law to cover all and everyone who arrests pirates?” he queried.

However, the situation on the ground in Somalia is clearly exceedingly complex, with a UN arms embargo monitoring group reporting that Egypt, Iran, Libya, Saudi Arabia, Syria, Yemen and Lebanon’s Hizbullah were all supporting warring factions, while the maritime analyst said that secret services from numerous nations are involved in gun running and criminal activities.

Nonetheless, the proceeds of Somali piracy can be considered high risk.

“Given that the US has taken a strong stand on the piracy issue, that there are known designated terrorist entities inside Somalia who could be involved, and that world opinion is squarely against anything involving these pirates, you do not want to be on the wrong side of the United States on this matter; Watch yourself,” said Kenneth Rijock of World-Check, a British company that maintains a database on politically exposed persons (PEPs) and high risk individuals and entities.

The company has advised compliance officers to raise the country risk on neighbouring Eritrea, Yemen and Kenya, while being vigilant about transfers out of Dubai.

Money Laundering Bulletin - Informa UK Ltd

Liquid Gold - The Syrian Olive Oil Sector

Syria Today magazine

Syria’s burgeoning olive oil sector has expanded from small producers catering solely to the domestic market into a SYP 23bn (USD 500.5m) industry. The country is now the fourth largest producer in the world. In just over a decade, exports from the sector have reached European and regional markets and now look set to hit Asia.

The sector could get a further boost when the Association Agreement (AA) between Syria and the EU is finally inked. The deal will make it easier for Syrian producers to do business in Europe, although just how much the sector will benefit from the agreement depends on prices and economies of scale.

On average, Syria produces 150,000 tonnes of olive oil per year, with some 100,000 tonnes consumed locally, Samir Jazzar, general manager of Olive House, said. However, annual production is highly dependent on the season and tree yield – one year a tree will provide a 100 percent fruit yield, the next year a 55 percent yield and the following year a 60 percent yield.

Last year’s olive harvest was down by some 20,000 tonnes. This year, however, the sector has recovered.

“This season was a good season, a bumper season,” Hassan Zeno, director of Zeno Oil, which exports 1,000 to 2,000 tonnes of olive oil a year, said. “But due to the Mediterranean fruit fly infestation, we produced 70 percent virgin and 30 percent extra virgin oil. Normally it is the other way around.”

Indicative of this season’s good crop is the price of 1kg of olives costing SYP 136 (USD 2.95), compared to last year’s price of SYP 150 (USD 3.25).

“Syria has jumped [from being the fifth] to the fourth largest producer in the world because there was a crop failure in Tunisia,” Philippe Chite, an export promotion consultant with the Syrian Enterprise and Business Centre (SEBC) in Aleppo, said. “If the crop fails in Spain, there is a need for Syrian oil, so sales are very dependent on the season and how it is sold in the world.”

Long-term rise

There are currently 93 million olive trees in Syria, predominantly around Aleppo, the north-west and in the Dera’a region in the south. Some 65 million trees are currently bearing fruit. When the remaining planted trees mature over the next 10 years, production is expected to increase to more than 200,000 tonnes annually, according to Omar Adi, executive manager of Near East Olive Products (NEOP), the country’s leading olive oil exporter with a 40 percent market share.

“Back in 1997, Syria only had two or three serious companies,” Chite said. “Now it has developed and there are 20 serious companies in the sector, such as NEOP, Zeno, Zaitoun, Emoc, Al-Khair, Al-Mutawasit and United Olive Oil.”

Unusually for Syria, the sector has no state involvement and is totally in the hands of the private sector. The government has, however, provided assistance to farmers.

“The government has played a big role in providing trees at a competitive price, making farmers plant in areas where there is not much rainfall and introducing irrigation,” Chite said. “This has helped as production in the coastal areas has been declining.”

The government also backs a research centre in Idleb that carries out studies on developing the sector, such as gene research and agronomy, as well as tastings and tests to produce oils tailored to the palates of individual markets. To boost production and create better coordination between producers, private companies have teamed up to establish the Association of Syrian Olive Oil Exports. But further assistance from the government is needed to bolster the sector, Adi said.

“The first thing the government could do is give subsidies to exporters,” he said. “Another option is to give subsidies to farmers, not in the form of money but in infrastructure. The third thing that would help is if we could create farming cooperatives since all the land is owned by small landowners.”

Barriers to expansion

The lack of economies of scale – in field size, collective ownership and mechanisation – is a major disadvantage for the competitiveness of Syrian exports. This is further compounded by the fact that EU producers receive agricultural subsidies to produce an estimated 2m tonnes of olive oil per year.

“New laws are being studied to bring farmers together into collectives,” Adi said. “But if it stays like it is today, it is hard for companies to compete internationally, especially with all this competition from countries in South America such as Argentina, Chile and Brazil where the cost of production is low. The problem we have is that we don’t have economies of scale – production is too small and that increases costs at the end of the day.”

Adi gives the example of Syrian olive oil exports to Europe costing SYP 151 (EUR 2.40 / USD 3.28) per kilo and Tunisian exports to Italy costing SYP 126 (EUR 2 / USD 2.74) per kilo, a 20 percent difference. Extra virgin oil from Syria sells at SYP 200 (EUR 3.17 / USD 4.35) per kilo, while Spanish companies are buying oil for SYP 139 (EUR 2.21 / USD 3.02) per kilo from local Spanish producers. With logistics and transportation costs added on top of this, as well as EU customs duties, the cost of Syrian oil on EU supermarket shelves is simply too high.

It is no small problem, given that the future of the sector lies in exports.

“Looking to the future, a surplus of 60,000 to 70,000 tonnes of olive oil needs markets which will pay a reasonable price to the farmer, otherwise they will lose interest in planting,” Adi said. “Some 70 percent of business will go away if we can’t export.”

A further issue the sector is facing is the high acidity of its olive oil. As a result, most Syrian oil sold to the EU is blended.

EU deal on the way

The pending AA will abolish many duties imposed on bio-based oils – oils which break down naturally such as olive, canola and soya – in both Syria and the EU. The duty on Syrian oil, currently SYP 6,942.60 (EUR 110.20 / USD 150.93 ) per 100kg, will disappear, while the 50 percent tariff imposed by Syria on EU-produced olive oil will gradually be phased out. The agreement was initialled by both parties in 2004, but its formal approval has been held up by diplomatic complications. Jazzar, Zeno and Chite all said that the AA will be beneficial to local olive oil producers.

“It will help a lot because it will give Syria an advantage and a guaranteed amount to be exported, whether that is 8,000 or 15,000 tonnes,” Zeno said.

Adi is less optimistic about the agreement, pointing out that the deal will open up the Syrian market to imports while the EU market will not consume all of the country’s surplus stock.

“This agreement is interesting, but not a revolution,” he said. “We are not going to be able to export our entire surplus just from this agreement, but it will help the sector if Syria has a 10,000 tonne quota for bulk sales.”

However, Zeno said that Syrian brands will have to target niche markets.

“Europe is already saturated with Italian, Spanish and Greek brands and it is hard to change the mentality of consumers, even though Spanish buyers say Syrian oil is the wine of oils for its aromatics and great quality,” he said. “Consumers are too used to Spanish and Italian oils.”

The high cost of entry into EU markets also stands as another barrier to local producers, Adi said.

“I think most Syrian companies lack the finances to get into the market because there are only a few brands on [supermarket] shelves,” he said. “European retailers are trying to limit the number of brands.”

Looking east

Due to these factors, Syrian exporters are increasingly eyeing up the Gulf and Eastern markets to offset their surplus.

“Everybody is betting on the Gulf and Asia,” Adi said. “With Chinese purchasing power increasing and rising health awareness, it’s a new market that is opening up.”

Syria is also entering markets where the Mediterranean diet is being adopted, particularly in the Gulf, to cater to expatriate diets.

“The Gulf has great potential and there is the advantage of proximity to Syria, taking just three or four days to deliver goods,” Zeno said. “And they are used to our quality.”

Photograph courtesy NEOP

The Middle East's rising risk

As the saber rattling continues financial ratings come under pressure

Commentary - Executive magazine

Getting labeled as a high risk country for firms to operate in, or receiving a low financial rating by an agency, is like a movie getting slapped with a XXX rating instead of the General Release investors had hoped for — meaning the mainstream conservatives are going to stay well away. Recently, ratings agency Moody`s downgraded seven state-linked firms in Abu Dhabi by a notch or more due to “no explicit formal” government guarantee to support the companies, and is considering downgrading four United Arab Emirates banks.

This comes as predominantly Western financial analysts are mulling not only higher risk ratings for Middle Eastern and North African (MENA) countries, but the region at large. The recent situation in Yemen, ongoing insurgency in Iraq and Israel’s sabre-ratting on Lebanon’s border are all causes for concern, as is as the potential for widespread conflict if the situation between Iran and the United States/Israel deteriorates into actual war.

On top of this, US regulatory watchdog, the Treasury Department's Financial Crimes Enforcement Network (FinCen), is widening its offensive on the global financial system, from the now well-established anti-money laundering and counter terrorist financing regulations all banks operating with the US have to comply with, to a heightened focus on corruption – the Foreign Corrupt Practices Act (FCPA). This onslaught by Washington and US-based ratings agencies is making life hard for Middle Eastern financial institutions and foreign firms that work in the region, and in particular for raising capital in an already tight lending environment. But while the UAE is being a touch sensitive about the downgrades — after all, British and American banks received lower ratings following the financial crisis and resultant government bailouts — the regulatory side is decidedly political.

Since the creation of the US Patriot Act in 2001, doing business with the “wrong sort” has been taken increasingly seriously. Early last year, British bank Lloyds TSB was slapped with a $400 million fine by a New York court for illegally transferring funds on behalf of clients in Iran and Sudan, both of which are under US sanctions.

The lesson to be learned is clear: if you do business with the likes of Iran, don’t get caught, and if you do get caught, make sure you are making enough profit to pay the fines. Lloyds TSB was slapped on the wrist financially — eventually agreeing to pay $350 million — but the bank was not blacklisted by the US. It is hard to imagine a Middle Eastern bank, caught playing the same game, would be let off as easily.

As for the FCPA, FinCen going after firms using bribes to get deals in the MENA region would open a Pandora’s Box given the rampant and endemic nature of corruption here, as a cursory glance at Transparency International’s Corruption Index shows. British aerospace firm BAE felt this when it was investigated in London for greasing palms in Saudi Arabia to secure multi-billion dollar contracts. While cracking down on corruption is laudable, the case of BAE, like Lloyds, is a relative exception to the rule; corruption is blatantly practiced by Western firms, domestically and internationally.

In any case, a greater focus on corruption and a higher collective risk level for the MENA would not necessarily dampen business or financial confidence; if that was the case, many firms and multinationals would have given the region the cold shoulder long ago. There is, after all, the maxim that big risks equal big rewards. Then there is the classic of “getting around” the rules and the regulations. On the regulatory level, institutions use tactics such as acquiring stakes — silently or not — in local banks and firms to operate in riskier markets. What such international firms need to watch out for is how far down the money trail US regulators may want to go. But unlike in the movies, financial institutions cannot edit or re-write the script where politics is involved; risks have to be faced head on, and it will no doubt come down to who you know.

PAUL COCHRANE is the Middle East correspondent for International News Services and writes for Money Laundering Bulletin

Fixing it on the cheap - Lebanese cars dealers feel the pinch as fake and second hand parts see a surge in sales

Executive magazine

The use of counterfeit spare car parts is a growing phenomenon in Lebanon due to the high number of luxury and used cars on the roads, coupled with the country’s low per capita income.

There are an estimated 1.646 million vehicles in Lebanon, of which 76.5 percent are more than 10 years old and a mere 3.7 percent were manufactured in the last three years, according to data compiled by research firm Information International. While the new car owners are provided with warranties that require them to service at dealerships — or void the warranty — used car owners have an open market to choose from: brand originals, certified parts from original equipment manufacturers (OEMs), cheap but still legal parts and outright counterfeits.

The value of the branded spare parts market is estimated at $70 million to $100 million, with dealerships and retailers dividing market share at 50 percent each, while the OEMs and other legal parts are valued at a further $100 million. Some estimates peg the fake parts market to be worth more than $10 million, while others put the figure at 20 to 30 percent of the market. The cost differences can be startling, with a pair of fake brake pads selling for as low as $11, compared to $66 at a dealership. On average, the price difference between real and fake parts is around 60 percent. But the difference in quality is equally alarming, especially in fast moving products related to safety.

“Everyone talks of pirated DVDs and fake medicine, but on the car side the situation is really gliding out of hand in Lebanon — the danger is high,” said Joachim Zeitler, after sales director at T. Gargour & Fils, distributor of Mercedes-Benz. “Everybody has a copied movie, but it’s not killing anyone. It’s wrong if you can’t cross a road because you’re worried about being hit by a guy who has saved $50 on his brakes.”

In addition to counterfeit, fast-moving products, everything else is available to fit out a car, from windshields and discs to shock absorbers and tires. “There is, amazingly, a lot of fake suspension items, and I even saw a fake hood. It was 1 millimeter less in width, definitely in thickness and maybe 50 percent cheaper,” said Ronald el-Khoury, quality manager at Rasamny Younis (Rymco), dealer for Nissan, GMC and Infiniti. The majority of fake parts that enter via the Beirut port are from China and Turkey, or are transported via the Gulf, where the goods are packaged for distribution throughout the Middle East.

Luxury fake

The Lebanese penchant for luxury cars, even if used, means brands like Mercedes and BMW are particularly affected in spare parts sales. Mercedes is the most popular brand in Lebanon, with more than 309,800 vehicles, or 18.9 percent of the total volume. Next is BMW with some 150,800 vehicles, or 9.2 percent of the total.

“We are selling the most, so that’s why we are affected the most, as Mercedes parts are not cheap,” said Zeitler. “In a market where a large part of the population has a low income yet is driving a luxury car, the risk is higher than elsewhere.”

Zeitler backed up his statement with research carried out by Mercedes in Lebanon, which showed some 60 percent of counterfeits are sold outside of Beirut.

It is not just parts that are counterfeit and increasingly sophisticated, at least in appearance. The quality of packaging has improved in recent years from bad spelling, copied holograms and other minor differences to near perfect copies that only the trained eye can see.

“Counterfeiters are very professional. It used to be easy to spot them, but not now,” said Zeitler. “They are even faking invoices from our company [which show] the parts were bought from us.” While fakes are dangerous, so are used car parts, which are increasingly coming onto the market. “The amount of competition here in spare parts, it’s unbelievable,” added Zeitler.

Rent-a-part

Curbing counterfeits is an uphill struggle, given minimal governmental oversight and insufficient punishment for offenders. “It is a business like organized crime, with a whole supply chain,” said Zeitler. “This is how it should be treated by the police as counterfeiting is highly profitable, but the risk of being punished is minor. Drugs have a lower profit margin, but if you’re caught with cocaine you are in big trouble.”

Fake and substandard parts are also not being checked during a vehicle’s annual roadworthiness test, the “mechanique.” Khoury said that it is easy to pass the test by renting spare parts from vendors nearby the inspection center, which are then returned after being given the green light by the mechanic for another year on the road. “And who is controlling cars driven in places like Faraya?” he queried.

“Only 500,000 cars go through the mechanique every year, so 40 percent or less of all cars on the road,” said Walid Rasamny, chairman and chief executive officer of Century Motor Company, dealership for Hyundai. “The government is being lax in enforcing inspection,” he added.

While enforcement is lackluster, there have been raids of late. Three illegal businesses were shut down, there were 12 nationwide raids on warehouses and mechanics, five shipments containing counterfeit parts were seized at the Beirut port, and 933 windshields and windowpanes were confiscated and destroyed.

“In the last three years there has been progress,” said Zeitler. “The customs has a special department for spotting fakes, and they are really good.”

Affordability vs. safety

“It is impossible to stop counterfeits in a free market – they can be smuggled in, and it can’t be controlled. Car dealers should have competitive prices to have higher customer retention,” said Farid Homsi, general manager of IMPEX, distributor for GM, Chevrolet, Cadillac, Hummer and Isuzu.

Many dealerships share Homsi’s view that lower prices for original parts could drive down sales of fakes, while dealers such as IMPEX buy parts in bulk to lower costs. Dealers are also developing service “menus” for customers with a variety of options and prices.

“We mark down and don’t overcharge,” said Rasamny, who added that fake spare parts had not overly affected the South Korean-based Hyundai brand. “Japanese brands are very affected, as I think they mark down the price of the vehicle and make up the difference in spare parts, by maybe 20 to 30 percent. What’s encouraging the grey market is the fact that distributors mark up; they should be more competitive.”

Luxury car dealers, however, point to the fact that significant amounts of research and development go into manufacturing the original parts, and have embarked on publicity campaigns to inform consumers about the safety risks of fakes.

Revoking a car’s warranty if fake parts are used is another policy.

“The only fighting point we have is to relay to the customer that you have to preserve the warranty,” said Khoury. “But manufacturers must also revise prices. A difference of 20 percent is acceptable, but not 50 or 60 percent.”

Curbing the number of used cars in Lebanon is a further policy that dealers want enforced, which would be a boon not only for sales of original parts but also new car sales.

“Much more serious [than fake parts] are the wrecked cars coming into Lebanon. You have cases of a car with a back-end collision and a car with a front-end collision, and the cars are split apart then welded together. Innocent customers believe they are buying an average used car,” said Rasamny. “Eight year old cars should not be allowed to be imported, as we get all the junk of Europe and the United States, especially as neighboring countries and the Gulf don’t allow imports of used cars,” he added.

Lebanon's automotive sector - The end of the road?

Executive magazine

After two exceptional years, Lebanon's car market may finally begin to slow

In 2008 and 2009 sales of new cars in Lebanon hit record highs, setting the benchmark for annual sales at well over 30,000 units. But over the past five months the sector has slipped a gear, down 12 percent in the first two months of 2010 (compared to last year). This has prompted dealerships to question whether that annual benchmark will be reached for the third year running.

“The best year we’ve ever had was August 2008 to August 2009. From September 2009 onwards the whole market has gone down dramatically,” said Nagy Heineine, general manager of Bassoul Heineine, dealer for BMW, Mini, Alfa Romeo, Dacia and Renault. “In October, the total market dropped by 31.52 percent on 2008; in November, it was down 24.65 percent; in December, it was down 8 percent and down 13 percent in February. It’s a real slowdown in the market altogether, a 17.68 percent drop.”

“The financial crisis hit Lebanon later than other [markets],” he added.

While dealers point to the delayed effect of the global financial crisis for lackluster sales, the other culprit is instability and the potential for regional conflict, which has psychologically dented consumer confidence.

“We are always operating under the specter of war, which is not conducive to business,” said Walid Rasamny, chairman and chief executive officer of Century Motor Company, the dealership for Hyundai. Used car sales are the third factor that is biting into dealership sales, with roughly two used cars sold for every new car. Nearly 67,000 were sold in 2009, up from some 46,600 in 2008. Last year just less than 34,800 new units were sold.

But while overall sales of new vehicles has gone down, this is not the case across the board. For instance, while Honda sales dipped 75 percent and troubled Toyota was down 55 percent in the first two months of the year on 2009 figures, Hyundai spiked 80 percent in the same period and Mercedes-Benz sales were up 13 percent on January 2009.

Hyundai attributes its sales increase to an expanded dealership and the growing rise of the brand, number two in the Middle East and fourth globally in terms of sales. Mercedes’ dealership T. Gargour & Fils however could not explain the uptick in sales, a fairly common answer given the complexities of the Lebanese market.

“Our advertising has been consistent, so I’m not sure why sales are up,” said Negib Debs, brand manager. “I asked myself this question in early 2009, ‘Will the market stay like that of 2008?’ and it did. This year, I’ve no idea. It all depends on what happens in the country; if there’s a war, we’re screwed, but if it is like June 2009 onwards — we’re selling 80 cars a month — we’ll have our best year ever.”

Farid Homsi, general manager of IMPEX, distributor for GM, Chevrolet, Cadillac, Hummer and Isuzu, said he thought 2010 would be a good year for the sector. “Although every year I’m afraid of giving an opinion,” he added.

Back to “normal?”

Homsi said that the sales spikes of the past two years were not normal, jumping from the previous benchmark figure of just more than 19,100 in 2004 — the intervening years were hit by political instability — to some 35,400 units in 2008.

“It was not a normal year; 2008 was a year when frustration went away after the Doha Accord. Logically speaking a wonderful year is 20,000 units but 2008 raised the bar,” he said. “This year, until now, the sector has sold an average of 1,750 cars a month. Multiplied by 12, that is 21,000 units, so I think no more than 25,000 units this year.”

Whether the market will revert to a more sustainable growth rate over the year is unclear, but it appears unlikely to top 2008 or 2009 figures. “It will be very tough to reach this benchmark, judging by the first two months. I think we may reach 30,000 or 31,000 units,” said Heineine.

Such variable swings in the market — from dips to double-digit growth — is making it hard for dealers to plan ahead.

“Every month we forecast for five months. [If we request] too low an inventory then maybe manufacturers will not supply it. After the crisis, they want maximum efficiency and to not have high overheads,” said Homsi. “It’s tough when living in a volatile country and the market changes a lot. We adopt a system of nus wa’ayi, nus majnoun: half sane, half mad.”

While reading the Lebanese market is complex, there is a degree of certainty to be found in the first half of the year. Homsi pointed to the upcoming car show in early April, the first to be held since 2004, after the last two biennial events were canceled because of political instability. With new models on display and automotive events, the 10-day show is expected to bolster sales.

“It will drive traffic and help sales in the second quarter. Shows have an effect for months afterwards,” he said.