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<P><SPAN lang=en-gb><FONT face="Times New Roman" size=2>Jean-Pierre C.
SAAD</FONT></SPAN> <BR><SPAN lang=en-gb><B><FONT face="Times New Roman"
color=#008000>Lehman Brothers</FONT></B></SPAN> <BR><SPAN lang=en-gb><FONT
face="Times New Roman" size=2>Corporate Finance, M&A</FONT></SPAN> <BR><SPAN
lang=en-gb><FONT face="Times New Roman" size=2>Communication & Media
Group</FONT></SPAN> <BR><SPAN lang=en-gb><FONT face="Times New Roman" size=2>+44
207 102 4883</FONT></SPAN> </P>
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<DIV class=OutlookMessageHeader lang=en-us dir=ltr align=left><FONT face=Tahoma
size=2>-----Original Message-----<BR><B>From:</B> rabih.bleik@bnpparibas.com
[mailto:rabih.bleik@bnpparibas.com] <BR><B>Sent:</B> Friday, March 04, 2005 4:13
PM<BR><B>To:</B> joseph.najjar@csfb.com<BR><B>Cc:</B> TSehnaoui@colonyinc.com;
Chedraoui, Tony; marc.sabella@csfb.com; abdulnour@gmail.com;
nadim.audi@csfb.com; Nasr, Bechara L; pierre.abousakr@csfb.com; marc@sacy.net;
roland.nabhan@db.com; alain.khalil@kcl.ac.uk; azarnicolas@hotmail.com;
bruno.nehme@jpmorgan.com; El-Adm, Cedric; chabebs@yahoogroupes.fr;
eazzam@creditlibanais.com.lb; elias.mouawad@csfb.com;
GChammas@byblosbank.com.lb; Saad, Jean-Pierre; kerim.assouad@accenture.com;
louis_aboucharaf@hotmail.com; Nabhan.ElHaddad@morganstanley.com;
nagi.kamar@uk.bnpparibas.com; nicolas.skaff@db.com;
nicolas.razzouk@citigroup.com; ozeir_frederic@bah.com;
rodolphe.manasterski@csfb.com; Rodrigue.ANTOUN@axa-im.com;
Samer.FEGHALI@axa-im.com; el Khazen, Sharif; vitch@cyberia.net.lb;
zkhatib@investcorp.com; Raoul.Rahme@TFS-LN.CO.UK; Aziz Francis;
elodie.blanc@csfb.com<BR><B>Subject:</B> We are on the front page of The
Economist<BR><BR></FONT></DIV><BR><FONT face=sans-serif size=2>Check the picture
+ the article of this week's Economist. I don't like it when America takes the
credit for what happened in Lebanon (the media there is heading this way, I have
read many articles which talk about "Iraq first, now Lebanon") because democracy
is not totally new to Lebanon and it is certainly not the USA which has brought
us democracy...... bass still, it's nice to be on the front page!</FONT>
<BR><FONT face=sans-serif size=2> </FONT> <BR><BR><BR><FONT face=Verdana
size=2><B>Two years after the invasion of Iraq, the Arab world is beginning to
show tantalising signs of change</B></FONT>
<P><FONT face=Verdana size=2>SINCE the American invasion of Iraq in March 2003,
many of those who vehemently opposed it have mocked America's neo-conservatives
for having believed that the Iraqis would greet their foreign liberators with
flowers and gratitude. Now it is the turn of the neo-cons to mock. A lot of
people in the anti-war camp predicted that the war would cause upheavals across
the Middle East, fanning hatred of the West and tipping friendly regimes into
the hands of Islamist extremists.</FONT>
<P><FONT face=Verdana size=2>It hasn't worked out that way. On the eve of the
war's second anniversary, the Middle East does indeed seem to be in the grip of
some sort of change. But, right now, much of the change seems to be pushing in a
welcome direction, towards a new peace chance in Palestine and the spread of
democratic ideas around the Arab world. </FONT>
<P><FONT face=Verdana size=2>Arabs everywhere were affected by the spectacle in
January of Iraqis defying terrorists to cast their vote and elect a new
government, and of Palestinians managing to hold a free election even while
under Israeli occupation. The past week has brought even more transfixing
scenes, as Lebanese thronged the streets of Beirut with their flags in an
unprecedented show of “people's power”, forcing the country's pro-Syrian
government to resign. At the same time, Hosni Mubarak, Egypt's president for the
past 24 years, has astonished his countrymen by calling for constitutional
changes to allow rival candidates to vie for his position for the first time.
</FONT>
<P><FONT face=Verdana size=2>To the instigators of the Iraq war, all this is
manna from heaven. Having failed to find weapons of mass destruction in Iraq
George Bush and Tony Blair have been forced to emphasise instead the gift of
freedom their toppling of Saddam Hussein delivered to its people. This “gift”
was hardly free: chaos and murder continue to stalk Iraq. This week alone, at
least 120 people were killed in a single suicide bombing in Hilla. And yet the
Iraqis do still seem impressed by the novelty of being able to vote a government
out of power. </FONT>
<P><FONT face=Verdana size=2>In Bratislava a fortnight ago, Mr Bush drew a link
between Iraq's vote, Czechoslovakia's “velvet revolution” of 1989, Georgia's
“rose revolution” at the end of 2003, and Ukraine's recent “orange revolution”.
He would say that. But a growing number of Arab voices are chiming in,
too.</FONT>
<P><FONT face=Verdana size=2>In a widely noticed interview, Walid Jumblatt, the
leader of Lebanon's Druze, told the <I>Washington Post </I>that Iraq's election
was the Arab equivalent of the fall of the Berlin wall. Hisham Kassem, a former
publisher of the <I>Cairo Times</I>, called the elections the “start of a ripple
effect”. Khaled al-Meena, the editor of Saudi Arabia's <I>Arab News</I>, says
that if elections can be held under foreign occupation in Iraq and Palestine, it
should be much easier to hold them in Arab states said to be “free”. </FONT>
<P><FONT face=Verdana size=2>How far-reaching is this new spirit? The Arab world
is large and diverse, so there is always a risk of connecting the dots in a way
that produces a distorted picture. One oddity is that Iraq, Palestine and
Lebanon—all three of the prime exhibits being used to make the case for
democracy—happen to be under foreign occupation, by America, Israel and Syria
respectively. Each is in many ways a special case.</FONT>
<P><BR><FONT face=Verdana size=3><B>A cedar revolution?</B></FONT>
<P><FONT face=Verdana size=2>The foreign occupation of Lebanon began in 1976,
when Syria's dictator, Hafez Assad, sent his army to intervene in Lebanon's
brutal three-cornered civil war between Maronite Christians, Muslims and
Palestinians. The mass protests that forced Lebanon's pro-Syrian government in
Lebanon to resign this week would probably not have happened but for a powerful
shock: last month's murder of Rafik Hariri, the country's former prime minister
and most popular politician. This was the catalyst for a chain reaction. For the
Lebanese, what some are calling a “cedar revolution” and others a “peaceful
<I>intifada</I>” carries the promise of an end not just to Syrian occupation but
also to a corrupt spoils system that has long sapped the country's talent and
morale. </FONT>
<P><FONT face=Verdana size=2>Broad-based popular movements such as this are
unlikely to emerge soon in other countries. Lebanon's experience is in many ways
unique. Famously fractious, the Lebanese are well educated and politically
sophisticated. Their central government is weak, meaning it lacks the
instruments of control enjoyed by other Arab states. It cannot co-opt enemies
with oil money, because it has none. It cannot suppress protests effectively,
because it lacks even a trained force of riot police. And it cannot silence
dissent, because Lebanon's vibrant press has remained in private hands. The
enthusiastic, non-stop coverage of the Beirut <I>intifada </I>on opposition TV
channels emboldened tens of thousands of ordinary citizens to ignore government
bans, and take to the streets.</FONT>
<P><FONT face=Verdana size=2>Just now, something else distinguishes the
Lebanese: they have a focus for their anger. Mr Hariri had come to embody the
country's post-war reconstruction. His assassination united Lebanon's multiple
factions in outrage. A beleaguered minority movement, led by Christian and Druze
politicians who once fought each other, was reinforced by members of Mr Hariri's
own Sunni Muslims, as well as thousands of others whose indignation transcended
the old sectarian loyalties.</FONT>
<P><FONT face=Verdana size=2>Lebanon's anger has a cause as well as a martyred
hero: freedom from domination by Syria, whose regime many Lebanese instinctively
blame for the crime. Over the years, Syria's occupation helped to smother the
flames of civil war and bolster Lebanon's resistance to Israel's occupation of
the south. But the war is long over, the Israelis have gone and the Syrians have
overstayed their welcome. They are blamed now for imposing some of the ills that
afflict other Arab countries, such as grotesque corruption, intimidation of
political opponents, and the subversion of the courts. When the Lebanese demand
the return of national sovereignty, it is as much a call to restore local
freedoms as for Syria's troops to leave.</FONT>
<P><BR><FONT face=Verdana size=3><B>Democrats in Palestine</B></FONT>
<P><FONT face=Verdana size=2>In Palestine, too, the advance of democracy may
have been helped by the weakness of the government. The Palestinian Authority
(PA), created by the 1993 Oslo accords to run the occupied territories until a
final deal on statehood was reached, is missing many of a sovereign state's
usual attributes. Israel controls natural resources, borders, coast and
airspace, the currency, the collection of customs duties, and, in most areas,
security and internal freedom of movement. Yet Palestine's political system is
vibrant and pluralistic.</FONT>
<P><FONT face=Verdana size=2>Ironic, but no accident: Israel's occupation is
directly responsible. The two <I>intifada</I>s bred a powerful grassroots
movement, subverting the Middle East's usual authoritarian tendency. Yasser
Arafat's periodic attempts to placate Israel by cracking down with his brutal
security services alienated the population, as did graft among his officials. In
polls done for January's presidential election by the Palestinian Centre for
Policy and Survey Research, 26% of voters rated corruption and lack of reform as
the most serious problem facing Palestinians, only slightly behind the
occupation (31%) and poverty (33%). </FONT>
<P><FONT face=Verdana size=2>Arafat's death has triggered a quiet cascade of
mini-revolutions. January's presidential election delivered a predictably solid
victory to Mahmoud Abbas (Abu Mazen), his designated successor in the ruling
Fatah party, but also a strong showing to Mustafa Barghouti, an independent
without any of the benefits of a party structure, previous political jobs or
slyly-used state funds.</FONT>
<P><FONT face=Verdana size=2>In the early rounds of the municipal elections,
Hamas, the main Islamist party, did unexpectedly well. This July it can expect
to win a hefty minority in the Palestinian Legislative Council (PLC), whose
current members smell pretty ripe to ordinary Palestinians after a decade in
their seats.</FONT>
<P><FONT face=Verdana size=2>Hamas is popular for its armed efforts in the
second <I>intifada</I>, which most Palestinians believe forced Israel's planned
withdrawal from Gaza, and for its broad network of local social services,
trumping those of the PA. It also did well because many would-be Fatah
candidates grew so sick of the old leadership's habit of overriding internal
primaries and imposing its own people that they ran independently, thus
splitting the vote for the party. But these habits are changing: a frightened
Fatah is beginning to heed its younger members' calls for reform.</FONT>
<P><FONT face=Verdana size=2>And there was another upset last month when the
Palestinian prime minister, Ahmed Qurei (Abu Alaa), tried to appoint a cabinet
packed with Arafat loyalists. Shrewdly, rather than press Mr Qurei to make
changes, Mr Abbas sat back and let him get into a showdown with PLC members who
wanted their turn. The end result: a “technocrat” government, made up of
politically inexperienced but professional people, and few Arafat cronies or PLC
hacks in sight. How well it will govern remains to be seen, but Palestinians
love it: shortly after the government was sworn in, a Ramallah street vendor was
heard hawking “technocrat bread”.</FONT>
<P><FONT face=Verdana size=2>Reform of the PA has been on the agenda since well
before Mr Abbas. Salam Fayyad, the Authority's determined finance minister, has
spent nearly three years cleaning up the books, and says its revenue collection
has gone up from $45m to $75m a month, even as the economy has withered under
the <I>intifada</I>. Mr Abbas, mindful of Fatah's plight and the fact that his
own poll rating was close to zero before he became the party's candidate, is
carrying on with those plans.</FONT>
<P><FONT face=Verdana size=2>The PA outlined them at a meeting this week in
London with donors and Middle Eastern governments. Pension reform will help slim
down the civil service, which until recently was a sponge for unemployment, by
encouraging desk-jockeys to retire. There will be clear procedures for
appointing judges and a shake-up in the court system. The dozen-or-so security
services (not even PA officials agree on the exact number), which functioned as
private fiefs, will be slimmed down, smartened up and brought under central
control. There will be tweaks to fiscal management and business law, and a raft
of other changes. In return donors upped their pledges of support to $1.2
billion for 2005, and Palestine broke a new record for aid money per head of
population.</FONT>
<P><BR><FONT face=Verdana size=3><B>Please may we have independence
too?</B></FONT>
<P><FONT face=Verdana size=2>Palestinians plainly welcome reform for its own
sake. Above all they want the occupation to end. Yet Israel insists—and for now
the Americans seem to agree—that the Palestinians must put their domestic house
in order before they will be allowed to negotiate the final status of their
putative independent state. As in Lebanon, therefore, the grassroots appetite
for bottom-up democracy and the impulse for independence combine into a potent
force.</FONT>
<P><FONT face=Verdana size=2>That is no longer true of many Arab countries,
where the kings and “national liberation” parties that took power after the
colonial period have clung ruthlessly to office ever since. Yet in the past year
or so, even governments of that sort have been making some concessions to
democracy. In some cases this has been done for domestic reasons, in others as a
response to pressure from the Americans. Morocco's politics have matured lately
into a lively multi-party system, albeit under the supervision of an almost
absolute monarch. Another semi-constitutional monarchy, Jordan, plans to devolve
central powers to elected regional bodies. Yemen, though still tribally
fractious and backward, boasts a rowdy parliament and press.</FONT>
<P><FONT face=Verdana size=2>Even the absolute monarchs of the Gulf have opened
up to varying degrees of citizen participation. Qatar's emir, the first Arab
ruler to abolish his own ministry of information, actually congratulated the
Lebanese for toppling their government. Kuwait, which has long had a noisy
parliament, is on the verge of enfranchising women, now that Islamists back the
idea. In Bahrain, Oman and Qatar, women already vote. And Saudi Arabia is in the
midst of electioneering as polling for town councils continues across the
kingdom.</FONT>
<P><BR><FONT face=Verdana size=3><B>Change, and the illusion of
change</B></FONT>
<P><FONT face=Verdana size=2>Needless to say, much of this top-down reform has
been hesitant and shallow. In none of these cases has the real balance of power
been threatened with change. Essential attributes of an open society, such as
full scrutiny of state spending, an unfettered press, truly independent courts
and accountable police and security forces remain unachieved. The changes often
look less like Mr Bush's forward strategy of freedom than like a rearguard
strategy of regime survival.</FONT>
<P><FONT face=Verdana size=2>Mr Mubarak's initiative, for example, concedes none
of his pharaonic powers, including the right to be re-elected in perpetuity.
According to the draft forwarded to Egypt's rubber-stamp parliament,
presidential candidates would have to be proposed by legal parties. The hitch is
that Mr Mubarak's own party controls the legalising process. It may not sanction
its most formidable opponent, the Muslim Brotherhood. After 50 years of virtual
one-party rule, the political stage has been almost swept clean of potential
contenders, aside from the 76-year-old Mr Mubarak and, perhaps, his 42-year-old
son Gamal. Besides, Egyptians are so inured to electoral fraud and manipulation
that it may prove hard to persuade them of the utility of voting.</FONT>
<P><FONT face=Verdana size=2>The arrest in January of a prominent young
opposition parliamentarian, Ayman Nour, underscored the sanitised nature of
Egypt's politics. Mr Nour's secular, liberal al-Ghad (Tomorrow) party had only
recently been legalised. Unlike tamer opposition politicians who had agreed to
put off calls for change until after Mr Mubarak's re-election, Mr Nour had been
demanding immediate constitutional reform. For his pains he was accused of
forgery, had his parliamentary immunity lifted, and was clapped in jail. He
remains locked up, but responded to Mr Mubarak's initiative by calling off a
hunger strike.</FONT>
<P><FONT face=Verdana size=2>The experience of Algeria and Tunisia, which
already permit competition for the presidency, is not encouraging. Tunisia's
ruler of the past 17 years, Zeineddine Ben Ali, has twice crushed challengers,
but these lightweight rivals were carefully vetted, and forced to play on a
steeply tilted field. Algeria's Abdelaziz Bouteflika handily won a fairer race
last year, but with the full support of state media and other government
institutions.</FONT>
<P><FONT face=Verdana size=2>Arabs complain that their rulers' gestures towards
reform come more in response to outside pressures than to their own aspirations.
Mr Mubarak's proposal would not have been made but for the supposedly friendly
nagging of Mr Bush and Condoleezza Rice, America's new secretary of state.Yet
pressure for reform is also building from within. Hollow or not, each grudging
reform has whetted the public's appetite for further change. </FONT>
<P><FONT face=Verdana size=2>In the past, popular protests often took the form
of riots over price rises or localised protests at police brutality. Now “people
power” is increasingly being expressed in organised and peaceful movements by
civil-society groups. Bahrain's ruler, for example, brought himself immense
popularity three years ago by ending martial rule, inviting exiled dissidents
home, and running free elections for half the seats in the national legislature.
Many Bahrainis, particularly among the disenfranchised Shia who make up
two-thirds of the island kingdom's native population, are now demanding more.
</FONT>
<P><FONT face=Verdana size=2>Jordan's King Abdullah, likewise, faces a wave of
unrest from trade unions angered by new rules that ban syndicates from political
activity. In Egypt, Mr Mubarak's election initiative was greeted not with
gratitude, but with demands for wider freedoms and better guarantees that polls
will really be clean. A small but vociferous reform movement has gained momentum
in Cairo, drawing strength from the coverage of protests by satellite TV
channels that are beyond state control, and a proliferation of groups promoting
specific issues, such as ending torture. </FONT>
<P><BR><FONT face=Verdana size=3><B>Goodbye Baathism</B></FONT>
<P><FONT face=Verdana size=2>Even in Syria the feeling that change is inevitable
has become palpable. Hafez Assad's son Bashir has proved a weak leader, isolated
both by the war in Iraq and his behaviour in Lebanon. Many other Arabs still
share the Syrian regime's sense of being under siege, its deep mistrust of the
West, and its loathing for Israel. Yet they are also aware that the armed
<I>intifada </I>in Palestine and the Iraqi insurgency have lost their sheen.
They know that state socialism is a dud, and—after Saddam Hussein's fall—that
dictatorship is ultimately disastrous. Growing numbers are willing to say that
Islam is threatened more by its own demons than by the West's armies.</FONT>
<P><FONT face=Verdana size=2>An Arab democratic opening will be long and
tortuous. The regimes that block it are strong, cunning and ruthless. The
rhetoric of “resistance”—Islamist, Arab nationalist, anti-American,
anti-globalisation, or whatever—retains a powerful grip. Many Arabs still
support groups such as al-Qaeda. A huge amount still depends on the outcome in
Iraq: a descent into chaos or the failure of the political process there could
crush democratic stirrings throughout the region. For all these reasons, it is
probably too early for the Americans to crow about an Arab year of revolutions.
All the same, the distance between George Bush's talk of freedom and Arab
aspirations, which only recently seemed to yawn so wide, may at last be starting
to close.</FONT> <CODE><FONT size=3><BR><BR>This message and any attachments
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