Knit Refuge

Knitting International magazine
www.wtin.com/e-store/knitting-international

Although Syrian refugees appear to have a high demand for knitwear, satisfying this demand is fraught with complexity and is having an effect on local knitwear markets, as Paul Cochrane describes


Movements of refugees can involve millions of people – all of whom are potential consumers – but tapping their purchasing power can be difficult for knitwear companies, even though their products are clearly useful for displaced people in poor accommodation.
The conflict in Syria has forced 2.5 million refugees to flee to the neighbouring countries of Lebanon, Jordan and Turkey. While this might suggest a burgeoning sub-economy, such an influx of Syrian refugees has not, however, led to spikes in retail sales of clothes.
Rather the refugees and Syrian conflict itself has damaged the economies of the host countries because of the costs of supporting such visitors and the dislocation they can cause to local markets.
Indeed, losses have been estimated at $7.5bn in Lebanon, $2.5bn in Turkey and $2bn in Jordan, according to World Bank 2013 figures.
Also, the refugee crisis has led to a flurry of activity by amateur knitters around the world to donate hand-knitted items to refugees. And while this clearly weakens commercial markets, there are potential benefits for companies in terms of marketing and staff motivation: some clothing firms are involved in supporting knitwear production initiatives as well as donating knits and clothes.
While Syrian refugees are clearly buying essential items, including warm clothing in the winter months, gauging who is buying what is stymied by an estimated 85% of refugees living outside of camps in the three countries, according to Samer Abboud, a visiting scholar at the Carnegie Middle East Centre in Beirut.
“What complicates things like sub-economies is that so many people are outside of camps, so it is hard to speak of a distinct sub economy.” This is particularly evident in Lebanon where
there are no camps - there are 21 in Turkey and two in Jordan, including the second largest in the world, Zaatari, with 150,000 refugees, making it the fourth largest city in the country.
“The refugees were buying jumpers and blankets in the winter, but usually the cheapest items as they don’t have much money,” says Ahmad Beydoun, a Beirut retailer that sells low priced clothing.
Indeed, according to the International Labour Organisation (ILO), the average monthly salary of a Syrian refugee in Lebanon is $277.30. Indicative of low purchasing power among the one million refugees in Lebanon and a drop in local consumer confidence due to the impact of the Syrian conflict on the economy, there was a drop of 15.5% in the sales of footwear and 2.5% in the sales of clothing in the first quarter of 2014, compared to the same period last year, according to the Beirut Traders Association. In Jordan and Turkey, shops catering to refugees have sprung up over the past three years, but in knitwear it is primarily low-end imports.
Stepping in to fill the gap in services and provisions are the aid agencies. Smaller charities and organisations have also sprung up to provide winter knits, revolving around a common theme: knitting. Knitters from all over the world are knitting baby clothes, jumpers and hats that are sent for donation.
Jean Bradbury, founder and manager of Studio Syria, which brings creative educational opportunities to refugees in Jordan, is acting as a conduit for online knitting community website Ravelry to get knitwear to refugees. Last year some 4,000 woollen hats were donated at the Zaatari camp, and she has already received 1,000 hats for next winter.
Also in Jordan, Laurie Balbo, a volunteer at the Collateral Repair Project, has enabled donated knits to reach refugees. “People are looking for someone to knit for, and that’s why we got 4,000 hats from Ireland; knitters don’t want publicity, just quick giving. We will get another 1,000 hats in New York soon,” she says.
Such informal groups have faced major obstacles, however, primarily importing the knitwear as well as distribution issues in camps, if not working with a major donor agency. “It probably didn’t help that our project followed a (Jordanian) Cabinet decision to slap a 20% customs duty on imported clothes,” says Ms Balbo.
In Turkey, only 2kg parcels are allowed in customs-free, says Dianne Jones, founder of Lily – Love in the Language of Yarn. “At the moment we are just giving, but in the process of starting a knitting and crocheting group in Reyhanli (in eastern Turkey near the Syrian border) with widows and women living in the camp there to sell items to make a living,” she says.
With thousands of woollen items being donated, Ms Jones believes sales of yarn and wool must have spiked because of this charitable action, albeit across a wide geographical area. “There must have been an increase in wool sales as we have sent more than 10,000 blankets, with 64 squares in a blanket,” she says.
Some knitwear and clothing companies are involved in donating items, including wool producers in Turkey, according to Ms Jones. Outdoor clothing manufacturer Patagonia, for instance, recently donated 5,000 fleeces to refugees in Jordan, while Japanese clothing firm Uniqlo teamed up with the UN High Commission for Refugees (UNHCR) and Japanese non-governmental organisation (NGO) JEN to deliver 550,000 items of second-hand Uniqlo clothing to refugees at the Zaatari camp as part of the company’s decade-old All-Product Recycling Initiative.
“We donated mostly warm clothing such as ‘Fleece’ and ‘Ultra Light Down’ jackets. The winters there can get very cold and the need for warm clothing is critical,” says a Uniqlo spokesperson in Tokyo. “We do not consider donation of clothing to the Middle East as a branding or market expansion opportunity. It goes back to our mission to help people in need through our business.” Britain’s Xamax Clothing Company teamed up with SKT Welfare, which has a project called Stand4Syria, to donate £5,000 ($8,400) worth of excess children’s clothing, including hooded tops and branded T-shirts for distribution to some 100,000 Syrian children in Jordan and Turkey.
Premier Yarns in the US, on the other hand, opted for a more novel way to aid children in need around the world through a partnership with charity World Vision that aims to collect 100,000 handmade knitted items this year for distribution.
“We have yarn, so the idea was, how can we give back and where is the need? And there is always a need to help kids, for warmth. The partnership with World Vision gave us the ‘how to do it’ and we have the retail partners,” said Jenifer Strong, key account manager at Premier Yarns.


Photo courtesy of Uniqlo.

Green Sukuk

Accounting and Business magazine
www.accaglobal.com/ab

Certain Gulf countries, such as the Emirate of Abu Dhabi (pictured), are investing in solar power.

A recent initiative from Malaysia — one of the main Islamic finance hubs — could help turn Islamic bonds into the financing option of choice for environmentally friendly investments.

The ethical traits of sharia-compliant financing, such as not permitting interest or investments in gambling and tobacco, have made sustainable and socially responsible investment (SRI) and green funds an obvious extension for the sector. But Islamic finance is a niche market already, and its SRI initiatives have struggled. Indeed, some initiatives have not got beyond the press release stage and few have been successfully funded. However, SRI and green project funding has been revitalised by the launch of SRI sukuk (Islamic bonds) guidance this August by Malaysia, one of the main Islamic finance hubs.
The internet is awash with articles about a handful of green Islamic finance projects launched in recent years, such as an Islamic green fund issued by Malaysia's AmanahRaya Investment Bank and Asian Finance Bank (AFB), and the Green Sukuk Working Group (GSWG) set up in Dubai in 2012 to promote sukuk for renewable energy projects. But the GSWG is still a work in progress — no sukuk have been issued — and the Malaysian initiative did not take shape as expected, highlighting some of the issues faced by Islamic finance. 'Unfortunately the infrastructure was not there, nor the working capital,' says AFB CEO Mohamed Azahari Kamil.
More recently, London-based financial advisory service Simply Sharia set itself the target of raising £3m (US$4.9m) by June 2014 to build a solar energy plant through a sharia-compliant  funding structure, taking advantage of the UK government's Enterprise Investment Scheme (EIS). However, investors did not come on board in time, and legislative changes disallowed tax exemptions through the EIS as well as government subsidies, affecting the project's viability. A primary factor, however, was the performance differential between Islamic finance structures and conventional financing for the project.
'The non-sharia version had 50%-plus debt to equity whereas ours was a pre-equity play, so the debt cost 5% a year, which leveraged up the returns for equity players,' explains Faizal Karbani, CEO of Simply Sharia.
He adds: 'A key lesson for future investments is to have parity of returns for sharia and non-sharia, so returns are comparable or equal to any non-sharia investment out there. A lot of businesses that want to raise sharia finance are basically struggling as most financing is dominated by interest-bearing loans.'

Double bubble

Such experiences underline the issues that both Islamic finance and green energy have faced over the past decade — being overhyped in terms of potential and investor interest. As with Islamic finance, many green financing projects have been announced but not come to fruition, in part hampered by capital issues following the global financial crisis.
United Nations figures from January 2014 show that global clean-energy investment dropped by 12% in 2013, while Bloomberg New Energy Finance numbers show investments of US$254bn last year, significantly below the US$1 trillion a year the International Energy Agency estimates is needed to curb climate change.

'Our market soundings have shown returns on green bonds still need to be there, yet they may garner more attention by having those credentials,' says Michael Grifferty, president of the Gulf Bond and Sukuk Association (GBSA) in Dubai.

As for Islamic finance, the sector was valued at US$1.7 trillion in 2013, according to EY, dwarfed by the conventional capital markets, valued at US$64 trillion in 2012 by PwC.

'One issue with the green Islamic space is that it is a niche of a niche, so to really make that work you need to get distribution channels in place and sufficient momentum to pull away and gain maturity, which needs a push at the government level,' says Fergus McDonald, co-founder of VTA, a banking advisory firm in London.

Malaysia's August announcement is a welcome move, with its SRI sukuk framework requiring information on use of proceeds, choice of eligible projects, disclosure and reporting of various elements, and rules on appointing independent parties for deals.

Siew Suet Ming, senior general manager for structured finance at RAM Ratings in Kuala Lumpur, says: 'In green Islamic finance there has not been a lot of transparency and consistency in the numbers quoted, while green sukuk  have been fairly loosely bandied about with regard to green projects as they lack formal certification. As far as developing governing frameworks, it is quite nascent and I believe the first formal guidelines are from Malaysia.'

Malaysia is promoting Islamic finance and green projects to develop a more sustainable economy, having launched a national action plan on the subject in 2009, and in 2010 a green technology financing scheme with an initial budget of RM1.5bn (US$465m), which was subsequently expanded to RM3.5bn (US$1bn). So far, RM1.95bn (US$604m) has been distributed, almost 40% of which is in participation with Islamic financial institutions, according to Suet.

Government involvement

'Larger-scale financing has been quite limited for green sukuk to come in, and that's why the government has been involved in the framework,' adds Suet. Investment is expected to focus on green technology rather than farmland, as has been the case elsewhere in green finance worldwide, but there are challenges ahead. 

AFB's Kamil says: 'A lot of capital investment is involved, so the development of the sukuk market will play a critical role for long-term investment structures. Challenges are registration, infrastructure and capital, and more importantly the human capital expertise in this sector, especially sharia scholars with IFE [Islamic finance expert] accreditation.'

Over in the Persian Gulf, Dubai is trying to position itself as an Islamic finance hub by supporting green sukuk, while the national plans for 2030 of fellow UAE emirate Abu Dhabi and nearby Qatar both feature environmental sustainability and different kinds of capital markets.

'Green Islamic finance connects the two, and we are trying to connect them, not just on paper but in reality, to get the best choices for project selection,' says Grifferty of the GBSA, which is involved with the GSWG. To move forward, green Islamic finance will need to develop further, along with the sukuk market itself. 'Both sukuk and green bonds are getting more attention and will definitely draw in more issuers and arrangers that can bring the [green project financing] successes of Europe and elsewhere to Dubai, so it's worth keeping an eye on this space,' adds Grifferty.

 Indeed, Simply Sharia has learned from its recent experience, and is not daunted by the challenges ahead, having successfully worked on a sharia-compliant farmland project in Argentina, and currently working on a 10-year, £lbn (US$1.2bn) project on electric cars in Europe with the potential for a sukuk. 

'I think the sector is going in the right direction and while a huge amount has been said about the sector's potential,  it is time for action by marrying Islamic finance and SRI,' says Karbani. 'Our vision is that Islamic finance needs to be positioned very much as an ethical alternative for people to invest in, which is the future of Islamic finance.'

Syrian livestock sector feels the effects of conflict

By Paul Cochrane, in Beirut, 27-Aug-2014
http://www.globalmeatnews.com/content/view/print/957871 

The livestock sector in Syria has been seriously impacted by the country’s ongoing civil war, with poultry production down by over half compared to pre-conflict levels, cattle herds by 40%, and the number of sheep down by 30%. Meanwhile, veterinary services have almost collapsed.
In May 2013, the Syrian ministry of agriculture and agrarian reform (MAAR) estimated that less than 35% of pre-war poultry units were still operational and at least 50% of jobs in the sector had been lost. The poultry sector was 90% privately owned, and had employed over 1 million people in 2011, according to data from the Food & Agriculture Organisation of the United Nations (FAO).
Indeed, an FAO and United Nations World Food Programme study, released in 2013, estimated that poultry production had dropped 50% compared to 2011, the year when widespread protests developed into an armed revolt against the government of Bashar al-Assad. However, over the past year, as the conflict has continued, the situation has become increasingly dire.
"The situation is only getting worse, as nothing has improved since the report was published. It was a conservative estimate of 50% back then, and has dropped further as fighting has continued," said Markos Tibbo, FAO livestock officer for the Near East and north Africa.
Poultry production was particularly concentrated in the area surrounding the western Syrian city of Homs. However, the area has seen heavy fighting, resulting in production being moved to government-controlled areas on the coast in Latakia and Tartous.
Syrian Arab language newspapers have reported that imports of frozen chicken have increased to offset the fall in production, primarily from Turkey as well as Iran, with imports from the latter amounting to SYP7.183 billion (US$47m) in the first six months of 2014. However, importing, distribution and storage have proved difficult due to the conflict, power shortages, and fluctuations in the Syrian pound.
In 2010, the FAO estimated that Syria’s livestock sector consisted of 15.5 million sheep, 2.01 million goats, 1.01 million cattle and 7,000 buffalo. The FAO now estimates the national sheep flock has dropped to under 11 million, and the national cattle herd by 40% to just over 600,000. "State sheep breeding research farms have been decimated, with almost all gone," said Tibbo.
Mutton exports have also plunged, with Syria having exported between two and three million sheep (of the Awassi breed) valued at US$450m to the Gulf countries per year, but since the conflict dropping to 100,000 head, according to FAO.
Further impacting the sector is low barley production, a key livestock concentrate, which has dropped 65% due to drought and poor rainfall, although this year’s better harvest is expected to ease the situation for the year ahead.
Nonetheless, imports of livestock feed have plunged as well, from 2.26 million tonnes (mt) in 2010, to 1.4mt in 2012, and has continued to fall, according to FAO. Wheat production is currently 2.4mt, or about 40% less than before the conflict started, and 18% lower than 2012/2013, according to the FAO.
There are growing concerns about diseases and the health of livestock as vaccines are no longer produced and existing stocks are running out. Vaccines had been produced at 54 private factories, but as of May 2013, FAO estimated 40% had been destroyed and the rest had shut down.
"If you look at the veterinary sector, before the crisis it was very good in terms of veterinary supplies and services, but since the crisis it has nearly collapsed, and the government is only able to serve a handful of areas it controls. Because of this, we are really seeing a serious animal health crisis in the neighbouring countries and the situation in Syria is expected to be worse," said Tibbo.
In Turkey, there have been confirmed cases of bovine tuberculosis, peste des petits ruminants, and rabies, and there are reports of lumpy-skin disease in Lebanon, Jordan and the West Bank, all of which are suspected to have come from Syria.

Copyright - Unless otherwise stated all contents of this web site are © 2014 - William Reed Business Media Ltd - All Rights Reserved - For permission to reproduce any contents of this web site, please email robert.proctor@wrbm.com - 

Syria Conflict Impacts Cosmetics Sales

Paul Cochrane discovers how Syria’s civil war and refugees are affecting the cosmetics sector
Soap, Perfumery and Cosmetics magazine - www.cosmeticsbusiness.com

The conflict in Syria, now in its fourth year, has had a major impact on the cosmetic market and industry, both in the troubled country itself and the neighbouring region. Exports to Syria and the distribution of cosmetics have been severely hampered by the civil war, while the conflict’s spillover is impacting other countries, compounded by the 2.9 million Syrian refugees currently registered in Lebanon, Jordan, Turkey and Iraq.
“Syria was a good market before the crisis and Jordanian manufacturers depended on exports to Syria and Iraq. But due to the crisis the border with Syria is often closed and goods cannot easily enter, which is the same with Iraq now. Most manufacturers are feeling the pinch,” said Ifani Igboanugo, owner of Ransel Industries in Jordan, which manufactures its own line of cosmetics for Middle Eastern and African markets.
Despite 600,000 refugees having fled to Jordan, it is only sales of low cost cosmetics that have been bolstered. “Refugees do not buy branded cosmetics, just cheap items, while the NGOs [non governmental organisations] and the United Nations are providing them with low cost shampoos and soaps. Some of it is sourced from Jordan, but it is a very small boost as margins are very low,” added Igboanugo. Lebanon has been particularly hard hit, losing a profitable export market and also sales from tourists who have been frightened away (Beirut is just 52 miles from Damascus). The conflict has caused economic losses in Lebanon of US$7.5bn, according to World Bank figures. “Gulf Arab tourists were always good for turnover and we’re affected even more by the absence of Lebanese expatriates, as they would consume a lot on their trips. The loss of both segments has made a big difference to the market,” said Fadi Sawaya, CEO of Beirut based Sawaya Group.
Over one million Syrians have fled to Lebanon, equivalent to 25% of the population, but the cosmetics market has not prospered as a result. “When the Syrians came to Lebanon we thought we would benefit from the additional population, but unfortunately that has not been the case as Syrians are getting aid from the NGOs. Very few Lebanese manufacturers have collaborated with the NGOs to provide needed items. It is not the Syrians’ fault, as the Lebanese government did not negotiate with NGOs to require them to source locally,” said Joanne Chehab, General Manager of Lebanese cosmetics firm Ch. Sarraf & Co., part of the Malia Group, which has its own line of cosmetics, Cosmaline.
The firm is still exporting to Syria, however. “We invested in brands and don’t want to withdraw as we know retailers are struggling to get foreign brands in Syria, and we wanted to ensure the continuity of our brand in the market, as we intend to come back strongly as soon as the situation
settles down,” added Chehab.
Her company is also manufacturing for Syrian companies that had to close facilities in the country due to the conflict and a shortage of raw materials. “Syrian manufacturers either brought machinery to Lebanon or outsourced production.
Although they’re competition, [we thought] if we didn’t produce at our plant, they would just go elsewhere. So we have manufacturing profits and don’t lose out on the market,” said Chehab.
Cosmetics manufacturers in Turkey have also indirectly benefited from Syrian companies closing down and being unable to meet domestic demand. In 2011, Turkish cosmetics exports were estimated at $6.6m, but in 2012 – as the conflict worsened in Syria, particularly in the north, which borders Turkey – exports dropped to $4m.
In the first half of this year, exports reached $5.8m, according to figures from the Istanbul Chemicals and Chemical Products Exporters’ Association (IKMIB). “We will close the year at $12m,” said Murat Akyüz, IKMIB Chairman. He added that figures are probably higher as cosmetics products
exported to Iraq and Iran may be re-exported to Syria. Turkish exports to both markets have surged in recent years, with exports to Iran going from $68m in 2011 to $77m last year, and in Iraq from $150m to $180m in the same period.
Syrian cosmetics manufacturers have not relocated to Turkey due to laws based on European Union cosmetics regulations. “This is why Syrian producers are not able to produce here, as Syrian and Turkish regulations are totally different, so it is not easy to set up the same facility and get a production licence,” said Akyüz.
As the conflict continues, Akyüz expects Syrians will start manufacturing in Turkey and will be forced to adopt EU specifications, which would have long-term benefits. “If Syrians set up here, they will improve production quality and this will have a positive impact on the Syrian cosmetics market in the future,” he said.

Multiple shades of amber

A world of opportunity is opening up for Lebanese beer lovers

http://www.executive-magazine.com/business-finance/business/beer-multiple-shades-of-amber

To many Lebanese, Almaza has been synonymous with beer. Ask for a beer at a bar or restaurant, and it was a chilled bottle of Almaza that you invariably got. But the Heineken-owned Brasserie Almaza’s monopolistic grip over the beer market is over. The omnipresent Almaza is no longer the only large scale brewer in the country, with Kassatly Chtaura’s Beirut Beer having hit the shelves this summer, while a third commercial brewery is in the works.

The craft beer, or microbrewery, scene that has been dominated by Gravity Brewing’s 961 Beer since 2006, also has a new contender with Colonel Beer launched in July. It is boom times for beer drinkers — provided you like lager. 

A lager market

Kassatly’s new beer is a lager — like Almaza based on Czech Pilsner, a type of lager — as is Colonel’s biggest seller. Pale lager, typically drunk very cold, is the most popular and commercially available beer on the planet, although to beer lovers it pales in taste and complexity compared to ale, bitter and stout.

Locally, however, beer is equated with being a thirst quencher to be drunk on a hot summer day, with the bulk of beer sales in the summer months. “Most Lebanese have a low beer culture, that it should be cold and drunk from a bottle or a glass that has been in the freezer, which is why people don’t drink beer in the winter,” says Omar Bekdache, head of operations at Gravity Brewing.

Ironically, ale would be more suited to Lebanon’s moderate climate, from the brewing process, which does not require such a cold temperature, to storage and drinking the ale itself, as ales do not have to be consumed super cold. Brewing costs would also be lower, meaning breweries would have better returns.

However, market demand is not there. “Ale costs half the price of lager [to brew] but that is not the point, as you wouldn’t be able to sell it,” says Jamil Haddad, CEO and brewmaster of Colonel Beer in Batroun.

Almaza’s domination of the market since the brewery began in 1933 — bought out by multinational Heineken in 2002 — is the prime reason. Knowledge of beer is low, driven by consumers being used to primarily one taste, lager. 

Until earlier this year, Almaza had a 74 percent share of the beer market, according to BLOM Bank data (see chart). Coupled with Heineken having roughly a quarter, or 24 percent, of the 21 percent import segment, Heineken-Almaza has approximately 80 percent of overall market share. As a result, any new brewery entering the market has to take popular taste into account. 

“It is pure marketing reasons why lagers dominate the market, and I can’t blame the new breweries for bringing out lager as they wouldn’t get the same return on investment if they brewed ale, so they went the easy route,” says Elie Haber, head of the biomedical department at St. Joseph Hospital and a nano-brewer.

Creating a taste

Haber started brewing for himself several years ago, after sampling ‘real beer’ in Germany and being frustrated by the lack of choice in the Lebanese market. He has since invested around $10,000 to brew a range of beers in a small room at the top of his building in Mansourieh–Bhamdoun. Haber is one of just a handful of craft brewers who import their own ingredients and sup their home brew with friends. They were invigorated when 961 entered the market several years ago, bringing out craft brew lager as well as red and pale ales.

It was 961 that blazed the way for the new breweries today, single handedly creating a buzz around beer. Being the first to take on Almaza was a challenge, and it has been an uphill battle to change consumer behavior. “When we entered the market, people didn’t know about craft brewing. Our lager was considered completely different from what people were used to; a highly carbonated beverage. Some comments we got were, ‘Is this really beer?’” says Bekdache. “We had four beers and people didn’t know the difference, but today people ask for a porter or red ale.”

961’s foray into the market prompted Almaza to react by bringing out a malt beer, and later a light beer to diversify its offerings. Bekdache’s beer, branded as 961, also launched a separate line, Lebanese Brew, or LB, indicative of the continued demand for lager.

Like all locally brewed beers, it is only the water that is Lebanese. The hops, barley, malt and yeast are all imported. This has raised the cost of production, especially compared to Almaza which is able to leverage the economies of scale of the Dutch mother company. The same applies to bottling.

“Shipping costs are a killer. That is why it’s really hard to compare us to a commercial brewery — even the price of buying bottles is totally different,” says Bekdache.

Despite such challenges, 961 was able to corner about 5 percent of the market, according to BLOM Bank data, and go from an initial 400,000 liters per year capacity to 1.8 to 2 million liters at its new Mazraat Yachouh facility. 

Bekdache has welcomed Beirut Beer’s entry to the market, shaking up Almaza’s dominance and the two companies’ aggressive marketing is raising awareness about beer in general. “I am happy Beirut Beer is out, it’s a good thing, as they [and Almaza] can fight each other,” he says. “The market has also grown bigger, and has the potential to grow given the effect of the marketing campaigns both are doing.”

Bekaa brewed

Kassatly Chtaura, which also manufactures juices, energy drinks and wine, opened its $15 million brewery in the Bekaa Valley in July. The facility has an annual capacity of 2 million cases of Beirut Beer. “It is a state-of-the-art German built facility that runs at the push of a button,” says the firm’s export manager Reem Kassatly Ragy.

With Kassatly having the bottling and packaging facilities, half of the brewery was already there, making an annex for the brewing and fermentation of Beirut Beer a relatively limited investment, while the firm has an extensive distribution network already in place to market its beer alongside its other brands. The company was not daunted by going head to head with Almaza, believing the market is growing while having learned from the success of its winery, Château Ka, about taking on the giants.

“We believe there is demand and it is company philosophy to expand into new beverage production endeavors, so beer was a natural expansion,” says Kassatly Ragy. “Average consumption in Lebanon amounts to some five liters of beer per capita per year, whereas average consumption in the US and Europe varies from 80 to 120 liters of beer per capita per year. Our aim is not to eat the market share of our competitors, but increase Lebanon’s average consumption to 10 liters or more.”

That said, Beirut Beer is retailing for LBP 250 less than Almaza, at LBP 1,250 for a 330ml bottle, and has 220 ml and 500 ml bottles, and a 250 ml can on offer to bolster its market presence. Its entry has reinforced the penchant for lager as a beverage to be drunk cold in the summer months, reflected in its ad campaign for the small 220 ml bottle: “Cool till the last drop.”

With Beirut Beer coming out, Almaza introduced a Radler (a shandy mix of lemonade and beer) and Rayes Beer. The company also re-labeled its lager for the FIFA World Cup in different national flags, and in August launched specially-packaged bottles for Iris, a Beirut nightclub, as a way of product diversification (Almaza were contacted by Executive but were not available for an interview).

More competition is in the offing, with Interbrand, which manufacturers juices and soda under license as well as its own brands, planning to follow in Kassatly’s steps by investing $10 million to open a brewery next year.

Craft brews

While Kassatly and Interbrand are using foreign expertise to develop their beer, 961 helped the nascent craft brewing scene to take off. Bekdache and his partner Mazen Hajjar provided guidance and imported ingredients to Haber, in addition to offering support to the country’s smallest brewery, Schtrunz, run by Emile Strunc, as well as to newcomer Colonel. “We’ve worked with Emile and Colonel, they are good friends,” says Bekdache.

Strunc, who is Czech–Lebanese, is a consultant by trade and in his spare time a beer enthusiast with a master brewer diploma. His father had brewed beer at home in the 1970s, and Strunc decided to brew his own in a small room at his home north of Jounieh. Producing under 600 liters a month, Strunc brews different beers throughout the year, ranging from black ale, India Pale Ale (IPA) and summer ale, to Munchen, Vienna, Kolsch and two wheat beers, Weiss and Dunkelweiss.

Initially drinking the beer just with friends, Strunc started to sell to friends of friends, and its popularity spread. This year he has moved into a 75 square meter facility in the Ghazir industrial zone (a government requirement for commercial beer brewing), and plans to double output. “I have a commercial license and am working on the industrial license,” says Strunc. “I’ll soon have one selling point in Beirut, a high quality alcohol store that I can’t name yet.”

Haber, Bekdache and Strunc were all at the opening of the Colonel brewery in Batroun in July, reflecting the camaraderie between the microbrewers. Haddad’s main brew is Colonel Lager, at around 80 percent of production, followed by German Light (a Pilsner), Irish Red and Irish Black, which is sold in 750 ml bottles provided by Strunc. “I did a deal with Jamil [Haddad], I provide the large bottles and he provides the 330ml bottles. There is fantastic cooperation between us,” says Strunc. Haddad invested $2 million to set up the microbrewery, an eco-friendly structure made of recycled plastic bags and eco-board, that is a brewery, bar and restaurant. “What I’ve done is bring the concept of the microbrewery, with transparency between the bar and the brewery,” he says. “Basically, a microbrew is craft beer as it is limited quantity, whereas industrial beer adds corn or sugar and is pasteurized. We only filter. These three ingredients change the whole product, as otherwise you get a full belly from the sugar and corn, and a headache.”

While bringing out four beers, Haddad was careful not to hit the market with too many brews, knowing that while the sector has improved in recent years, it is still predominantly a lager market. “I learned from 961 and their mistakes, which went to the market with several flavors which confused people. You need to build on it,” says Haddad.

Colonel, which is named after a popular windsurfing spot that Haddad and his friends would frequent, has already exceeded expectations. Haddad did no advertising, relying purely on word of mouth, and its success was pushed by his hometown. “People in Batroun are treating it as their product, it is at all the beach resorts and restaurants, and now in Beirut bars. It is getting bigger and bigger,” he says.

The beer has proved so popular that Haddad has already had to change his business model. “The plan was to be on half capacity for three years and then have full capacity. But from the first day, we are at full capacity and selling out, which we didn’t expect in such a short time.”

Haddad has also sent four orders to Syria, and had demand from Iraq, but lacks capacity. “People want craft beer from Lebanon, with many dealers asking me to sell abroad but I’m not ready yet,” says Haddad.

Exports

While beer consumption is increasing domestically, exports are a further boon. BLOM Bank estimates Almaza exports roughly 10 percent, or 2.33 million liters annually, to various destinations such as Syria, the United States, Turkey and the United Arab Emirates. 

Kassatly has export plans and is configuring excess capacity, which can be exported to the rest of the Middle East as well as Africa, a factor in the beer’s name. “Beirut is a city with a rich culture, history and heritage, and is the center of Lebanese lifestyle,” said Kassatly. “What’s more, we are really thinking internationally, so we needed a name that refers to our Lebanese origins, yet has global appeal.”

961 is also exporting, to Europe and Hong Kong, while 60 percent of LB is exported. “We sell in the US, not just to Lebanese expatriates, and have a distributor in Britain, so an English distributor for our pale ale; that is outstanding for me,” says Bekdache. Domestically, Bekdache sees craft beer becoming a sizable niche market, and with a price tag to match. “If we go into a price war, we can’t win. Our strategy from last year onwards is to sell premium beer at a premium price so the quality doesn’t go down,” he says. 

Buoyed by his success, Haddad foresees many more breweries in the future and with more types of beer on offer as the market matures. “The world is changing to craft breweries and there is a new trend for microbreweries. I think there will be 100 microbreweries here in say 10 years time.”

Tobacco Lebanon: Boom times at the Régie

The Syrian crisis could provide an unexpected boost to Lebanon’s finances

http://www.executive-magazine.com/business-finance/business/tobacco-boom-times-at-the-regie

The cedar tree may be the national symbol, but when it comes to smoking the national cigarette brand Cedars, it is the Syrians that have the strongest affinity.

In fact, a correlation can be drawn between the number of Syrians in the country and sales of Cedars: more Syrians in Lebanon equals more Cedars sold. Back in 2005, in the months after the Syrian military withdrew along with thousands of Syrian non-military personnel, sales of Cedars plunged by 50 percent. Government-owned Régie Libanaise des Tabacs et Tombacs (RLT) attributed the drop directly to the withdrawal, with soldiers and low paid workers the main consumers of what was then — and still is now at LBP 750 ($0.5) per pack — the cheapest smokes on the market.

Several years on, with Syrians back en masse, sales of Cedars have rebounded, surging from 94,744 cases (of 10,000 cigarettes, or ‘sticks’ as they are referred to in the trade) sold in 2011, to 195,060 cases in 2013. With the number of registered Syrian refugees at well over 1 million, 2014’s sales have already surpassed 2011’s totals, with 108,418 cases sold in just the first half of this year.

Yet while sales are recorded, RLT does not know who the cigarettes are sold to, or if they’re consumed locally or exported by wholesalers. “We think [the rise in sales] is mainly due to the Syrian refugees, but also [due to] exports to Syria and elsewhere,” says Pierre Hedari, RLT’s head of import and export.

Rolling at full capacity

The turnaround in sales of Cedars is clearly a boon for the manufacturer at its Hadath facilities. “We’ve had very high sales, are at full production capacity, and will buy new machinery to satisfy the demand, having gone from one shift manufacturing Cedars to two shifts,” adds Hedari.

Overall sales of cigarettes have increased since the Syrian crisis, rising from 1.24 million cases in 2011, to 1.55 million in 2012. Sales dipped marginally in 2013, to 1.21 million cases, and in the first half of 2014 reached 539,415 cases, signaling annual sales similar to last year.

Last year’s drop was due to a rise in smuggling into the country, a negative spinoff from the Syrian conflict, estimated by international manufacturer British American Tobacco (BAT) at 800 million sticks, while the legal market is 10.7 billion sticks per year. The rise in smuggling and a downward shift in sales of Class A cigarettes in favor of cheaper Class B smokes — rising from 27 percent of sales in 2012 to 37 percent in 2013 — prompted RLT to introduce a new brand, Maestro and Maestro Light, in May.

“It’s at a low price to combat cheap smuggled cigarettes. Our goal was to sell it at LBP 500 ($0.3) per pack, but you have to give a share to the retailer, so Maestro is selling for LBP 750 ($0.5),” says Hedari. Although in its early days, sales so far have been below expectations, with Maestro accounting for no more than 10 percent of RLT’s sales. Even if the new brand does not boost consuming, RLT’s overall revenues to the state treasury from $565.2 million in 2013 to $1.1 billion are expected to rise.

And if sales of Cedars are anything to go by, RLT is on track to becoming a bigger contributor to the state coffers, with its total market share having grown from 7.6 percent in 2011 to 20.1 percent this year. Ironically, such a boon for the budget may be dependent on Syrians’ continued fondness for the nation’s Cedars.

Airstrikes may end up fueling militant wave

Op-Ed Global Times

http://www.globaltimes.cn/content/883995.shtml *

The airstrikes against the IS will have minimal effect. As with other militant Islamist groups, cut off the head and two more grow back, unless the core issues are addressed that give rise to such extremist movements in the first place. This US-led coalition will not do this, but will instead fuel further militancy.

 

Illustration: Liu Rui/GT

It has been several weeks since the US started airstrikes against the Islamic State (IS) in Iraq, with the operation recently expanding into northeastern Syria, the militant group's stronghold. While Washington has been quick to call the strikes a "success," facts on the ground tell another story.

The IS has adapted to and is rebounding from the coalition attacks. This has been noted by the Pentagon, with Lieutenant General William Mayville Jr. saying exactly that following the first raid on Syria, "They will adapt to what we've done [...] We have seen evidence that they have already done that."

While the IS is taking causalities and facing setbacks, such losses are being countered following a surge in recruitment since the attacks were launched, with more than 6,000 new fighters joining, of which 1,300 are allegedly foreign fighters, according to the Syrian Observatory for Human Rights. Such factors indicate the fight against the IS will be a drawn-out affair.

Not since the Mujahideen fought against the Soviets in Afghanistan in the 1980s, has there been such a well organized, well funded, and well armed campaign by a Sunni Islamic militant group.

The IS has had years to build up to a strength that enabled it to seize control of swathes of northern Syria and northern Iraq.

Its ranks are made up of seasoned fighters that earned their laurels in Chechnya fighting the Russians, in Afghanistan against NATO, and in Iraq fighting the US forces from 2003 until 2011.

Their operational expertise is bolstered by former Iraqi and Syrian army officers, intelligence officers and former policemen, and their governing capacity by former accountants and surgeons. It is a movement that should have been nipped in the bud early on before developing into a multinational menace, but was instead allowed to flourish by nearly every actor in the Middle East today.

Turkey opened its borders to allow militants to flow into Syria to overthrow the government of Bashar Assad; training and arms were provided to rebel movements by US and European special forces; Islamist rebels were financed by donors in Saudi Arabia, Qatar and Kuwait; and the Syrian government itself released several hundred Islamists from prison - many of whom had fought the Americans in Iraq - to weaken the rebels by turning the conflict into a national struggle against Islamic extremism.*

The IS is therefore very much a demon born from the Middle East's protracted problems and decades of failed policy decisions.

It is also what is feeding the IS' popularity among Jihadists, being a group that is challenging the established order, with its successes touted on social media.

Countering the IS is going to take more than bombs. It is about countering the ideology of the IS, which is to establish a caliphate based on Sharia law.

A major problem here is that the US-led coalition is made up of the very states that have promoted and funded such an ideology for the past 50 years.

The Kingdom of Saudi Arabia and Qatar are both Wahhabi, an extreme form of Islam that came out of Saudi Arabia in the 18th century, which petrodollars enabled to be exported globally.

From being on the periphery of the Middle East, militant Islamism has gradually moved to Iraq and Syria, and is now getting close to the center of Islam itself, Mecca and Medina.

That is what is causing concern among the Saudi elite, which had previously exported their Islamist "bad boys," only to find them back in the Saudi backyard trying to set up the type of state idealized by Saudi Arabia's fundamentalist theology.

Indeed, while the IS' highly publicized beheadings deserve to be denounced, the kingdom itself has beheaded 41 people so far this year.

The airstrikes against the IS will have minimal effect. As with other militant Islamist groups, cut off the head and two more grow back, unless the core issues are addressed that give rise to such extremist movements in the first place. This US-led coalition will not do this, but will instead fuel further militancy.  


* Addition made to published text.

Never the Low-Risk Bank Client, U.K. Charities Say Financial Woes Have Worsened

I was interviewed by ACAMS MoneyLaundering.com on charities and counter finance terrorism following a webinar I presented for Thomson Reuters on the topic, and based on a recent paper I wrote (see post below and to download clink on this link) -http://accelus.thomsonreuters.com/sites/default/files/GRC01499.pdf

 Irene Madongo, September 17

http://www.moneylaundering.com/News/Pages/132327.aspx

Recent political turmoil and ever-rising regulatory expectations for banks have made it significantly tougher for British charities to send financial aid abroad, according to a survey.

Those findings, confirmed by non-profit groups interviewed by ACAMS moneylaundering.com, will be released later this year by London-based Charity Finance Group (CFG). The majority of charities responding to the query characterized the shift as a consequence of banks’ growing averseness to serving risky clients.

“The consequences of greater de-risking by banks in terms of the additional administrative burden it places on charities and the limiting of their ability to operate efficiently can be significant,” said Caron Bradshaw, the group’s chief executive officer.

The findings by CFG follow complaints by Muslim charities about HSBC Holdings Plc.’s decision to drop their accounts due to risk concerns.

While charities have long found it difficult to open bank accounts to send money to third-parties in troubled parts of the world, their standing with financial institutions has worsened to the point that even the largest non-profits have encountered difficulties moving money.

Alternative routes

That happened last year for Oxfam International, which coordinates the efforts of 17 affiliated organizations to fight poverty and deliver aid to disaster victims. Although well-regarded, the group ran into hurdles that delayed aid for Syrians by five months, according to Bob Humphreys, the organization’s finance director.

“The last time I had a conversation with my peer finance directors, I think we were still one of the very, very small number of agencies that had succeeded in getting money into Syria,” said Humphreys. “So I suspect that it is still proving an issue.”

The delays largely revolve around internal controls intended to ensure that the funds don’t end up in the hands of blacklisted entities. Those efforts are then vetted by banks, said Humphreys, adding that smaller charities frustrated with the process may ultimately ask financial institutions in less risk-averse institutions in other countries to handle the transfers.

In such a scenario, small charities may turn to partners “willing to move the funds in some way across the border, and [the charities] simply won’t ask what the mechanism is that they are using because, as soon as [they] know, [they] will have to do something about it,” he said.

‘Chase and chase’

But charities aren’t finding trouble sending money to conflict zones only, according to Bradshaw. Some groups have encountered problems in “unexpected” places with tough regulations, such as the United States, she said.

Earlier this year, London-based Christian charity Tearfund ran into bank resistance related to funds destined for South Asia, according to the group’s finance director, Alison Hopkinson.

“We have had a lot of problems with sending money to India, which surprises me,” she said, adding that: “it just got held up and the banks were not willing to move and we just had to chase and chase until we got it through, and we were never given the explanation as to why.”

Elsewhere, financial institutions have implemented blanket bans on sending cash, according to Hopkinson.

“We have to find other banks, other ways of getting the money across,” she said. “You never know when the bank is going to change its attitude toward a certain country, so you have to keep your options open.”

Conflicting reports

Media reports—some misleading—have also contributed to the sector’s troubles.

Last October, the Telegraph amended a news story and headline claiming that “millions” of pounds from the Disasters Emergency Committee had ended up in the hands of Syrian terror groups. The newspaper changed the story after the Charity Commission, which regulates the non-profits in England and Wales, said it had “no evidence” that “huge amounts” had gone to terror groups.

“The story had to be retracted but reputational damage was certainly done, and Syria is a focus for the Charity Commission,” said Paul Cochrane, a Beirut-based freelance reporter who recently spoke on the topic during a Thomson Reuters webinar.

The commission has launched a separate investigation into whether Human Aid U.K. has implemented poor recordkeeping and fundraising controls as well as little oversight of its trustees. According to records filed with the agency, Human Aid’s income grew by 500 percent last year, with much of the money going to Syrian aid.

“Those working in counter-extremism networks were not surprised to hear that Human Aid is under investigation, given the kind of networks it is involved with here in the U.K.,” said Sam Westrop, director London-based anti-extremism group Stand for Peace. “Human Aid has hosted radical Islamist speakers such as Adnan Rashid, Abdul Hadi Arwani, Yusha Evans and Yvonne Ridley,” he said.

Human Aid denied wrongdoing in a statement posted to its Web site and characterized governmental scrutiny as “an active policy to restrict the work of charities in Syria through continuous monitoring and investigation.” In a statement to ACAMS moneylaundering.com, the group said it will cooperate with the commission.

Scotland, Independence and Global Impact

International Link magazine, Hong Kong

http://www.internationallinkmagazine.com.hk/home

The Scottish capital Edinburgh seen from Arthur's Seat

The United Kingdom of Great Britain and Northern Ireland, to use its full title, is facing its biggest internal threat as a geographical and political entity since the Republic of Ireland was formed in 1922. On Thursday, 18 September, Scotland will vote on independence.

If the outcome is 'yes' – the independence campaign's upbeat slogan – then it will end 300 years of political union – the United Kingdom (UK) – and Scotland will stand alone as a new nation as of March 2016. If the 'no' vote wins – London's slogans are “No Thanks” and “Better Together” - then the union will remain, although the issues raised by the referendum will mean it will not be totally 'back-to-business as usual'.

The independence vote has been four years in coming since the Scottish National Party (SNP) formed a majority government in the Scottish Parliament (created in 1999 with certain powers devolved from London) and announced plans for the referendum, which, as the party's name suggests, has long been a policy objective.

The battle for hearts and minds only really started playing out over the past year, and heated up in recent months as Alex Salmond, the Scottish Premier, set out his arguments for Scotland as a “Northern Light” with progressive social policies and a thriving economy, while London pushed their position. Prime Minister David Cameron told Scottish voters this past week: “Let's stick together...There's no going back from this. No re-run. If Scotland votes 'yes' the UK will split and we will go our separate ways forever.”

Until last week, the 'No' campaign was winning in the polls. But the latest YouGov poll shows that the vote will be on a knife's edge, with the 'Yes' vote getting 51 percent for the first time in the campaign. It is certainly proving to be an issue that the Scottish public is keen to vote on, with 97 percent of eligible voters enrolled, the highest ever, and indicating a higher voter turnout than for the British general election in 2010 (65 percent), the Scottish Parliamentary elections in 2011 (45 percent) or the voter turnout for the European elections in the UK in May (36 percent).

Such high political engagement by the Scots reflects the seriousness the possibility of independence is being taken. As the quote from Cameron shows, this is a major decision that cannot be easily reversed, if at all.

The For's and Against's

London argues that Scotland will stand to lose significantly by not being in the union, primarily losing out economically but also on the global stage. This is what London has focused on its “Better Together” campaign, stating that Scotland would not be able to retain the Pound Sterling as a currency if there is independence, that financial institutions and capital would flee the capital Edinburgh for London, and implying that the new country would not be economically viable.

The 'Yes' campaigners of course argue otherwise, that Scotland would be a viable country with a highly educated population of 5.3 million people – England has 59 million – and a USD$211 billion economy which includes a sizeable financial sector, cutting-edge technology and research, oil revenues from the North Sea, tourism and whisky (USD$7 bn).

It is not just economics that has raised questions and been a cause for argument. Foreign policy and military defence have been major points of discussion, particularly as such decisions are made in London and not Edinburgh. While the Scottish parliament acquired more local powers since 1999, it is London making crucial decisions that is a driving force for the Yes voters.

Of the 650 members of parliament (MPs) currently in the Westminster Parliament, 59 represent Scottish seats. With the Conservative (Tory) party in power, Scots feels even more sidelined as the Tory party is popular in England but not at all in Scotland (just one seat). This is accompanied by nationalistic sentiment and the troubled, bloody history of England and Scotland for hundreds of years that ended in the union of 1707. In short, there is the view that Scotland is dominated by its more populous Southern neighbour and does not have control over its own affairs. However, such a sentiment is shared by yes and no voters alike. Nationalists are voting no, and the vote should not be considered as a purely knee-jerk nationalist one.

What may happen if there is independence is in many ways uncertain, particularly economically, and as polls suggest, around half of Scots are not willing to make that gamble. People are weighing up whether more local and immediate power making decisions will improve their standard of living or not, and if independence is needed for that to happen.

The outcomes

If Scotland votes 'No Thanks,' then London will be forced to address many of the issues raised during the referendum, notably to give up more powers and for Britain to become more decentralised. London has already implied greater devolution for Scotland following a No vote, such as giving the Scottish Parliament more power over taxation, spending and welfare.

London will also have to face the spectre of the independence movement not going away, and if Westminster does not follow through with its pledges, this may give further impetus for a successful Yes vote in the future.

If Scotland gets independence, there will be 18 months of negotiations between Edinburgh and London to discuss the logistics of separation. Key topics will be North Sea oil revenues, the pound, divisions of national assets, and military defence. The Queen however will remain as head of state, unless a vote is later called for.

The aforementioned will be difficult topics to hammer out as Scotland comes to grips with being a sovereign state. Other issues are just as thorny, particularly foreign affairs, which Scotland would be running by itself for the first time. Whether Scotland can remain a part of the European Union is a major issue, as no EU country has split apart and then sought to re-enter as a separate member state. Scotland is committed to the EU, but that is not a decision for Edinburgh to decide upon, and becoming a member will be key for the country's economy if there is independence.

The SNP is also opposed to nuclear weapons and has called for the Trident nuclear submarines based in Scotland – the location of Britain's nuclear fleet - to be removed. While the SNP voted in 2012 to support the North Atlantic Treaty Organization (NATO) - with the precondition that Trident would be removed following independence - it has not been a popular decision within the party, while membership of the body of 28 European and North American nations could be in doubt as nuclear weapons are a key means of NATO's overall military deterrence policy.

Global impact?

The EU will be eyeing the results of the elections carefully. The body is not keen on admitting more members, or for the union to break up into smaller states. A yes vote could galvanise the Catalonians' drive for independence in Spain, along with other separatists movements such as the island of Corsica from France, and the Basque from France and Spain. There are also murmurings in some countries about the advantages of breaking up, such as more economically rich regions like Northern Italy not wanting to fund the poorer South.

Indeed, questions are being raised as to whether a yes vote in Scotland could unleash the end of the multi-ethnic state, repeating the post-colonial period when numerous countries gained independence and the 1990s following the break-up of the Soviet Union and its satellite states, leading for instance to the creation of the Czech and Slovak republics and the Balkan states. For while the world is more interconnected than ever via financial globalisation, there are more nation states than ever, with some 194 countries, the most recent being South Sudan as of 2011.

Such further devolution is not overly probable, but a concern nonetheless, and it is not just in Europe that states are fearing devolution. The breakup of a European state, particularly a former global power like Britain, is viewed with perhaps more concern elsewhere in the world, especially in states with minorities and separatist groups that are battling central powers.

The concern, like in the EU, is that there will be a call for a referendum by separatists, especially if an independent Scotland proves to be successful, with the current economic fears not realised or overcome. It would show breaking off from a bigger country is possible and achievable in the 21^st century, which could be a precedent for others to follow.

Scotland's case is different from others however, and comparisons, from the economic to the historical, hard to draw with other aspiring separatists. A major factor is that Scotland has not been under any military occupation for hundreds of years. That in fact has enabled the vote to happen, as there was no need to resort to armed struggle to achieve independence, as Ireland did from 1919-1921. London however was aware that a Yes vote in Scotland is not a certainty, which cannot be discounted as a factor in letting the vote go ahead, but the vote is going ahead in what is expected to be an open and transparent manner.

Ultimately, a No vote will be welcomed in London and Brussels, as well as in many other capitals around the world. Such a result is not likely to dent separatists aspirations, but would take some wind out of their sails. A Yes vote will have much broader ramifications for the United Kingdom, the EU and further afield. Either way, the outcome of this election will be worth following.

Photo by Typhanie Cochrane