Chief Lebanese industrialist: local industrial sector under strain

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Taanayel's processing factory in the Bekaa Valley, Lebanon. Al-Akhbar/Haitham Moussawi

Published Tuesday, November 18, 2014

As if the Lebanese industrial sector needed another blow to add to the deteriorating economic situation, political paralysis, and decline in economic activity in the country, corruption has struck local industry – already in dire need of support– adding insult to injury.

According to the head of the Association of Lebanese Industrialists, Dr. Fadi Gemayel, the Lebanese economy is contracting severely. Over the past three years, the country entered a situation akin to a recession, which led to a decline in economic activity, and is apparent in the decrease of Lebanese industrial exports.

Gemayel spoke with Al-Akhbar recently to discuss this point, among other issues besetting the industrial sector in Lebanon.

The following is an edited transcript of that interview.

Al-Akhbar: What is the volume of foreign investments and is there a flight of such capital?

Fadi Gemayel: The number of foreign investments today is not very significant. This is due to intense competition over foreign capital among advanced and developing countries on one hand, and foreign factories leaving Lebanon to join more stable and safer markets on the other. Of course this is detrimental to the local industry. The best evidence is the flight of important factories [for major brands] such as Chiclets, Cadbury, and Procter & Gamble, among others.

Al-Akhbar: How do you explain the step taken by such factories to leave Lebanon to look for less expensive foreign production facilities?

FG: The presence of such large factories used to be a strong indicator of the industrial sector's ability to transfer technology, and contributed to higher income levels and the creation of more job opportunities in Lebanon. This would have strengthened the production base and improved administrative knowledge and competitive advantages in the marketing and exporting fields.

However, in light of rising debt indicators and the rise of costs associated with foreign lending, the only financing sources available to Lebanon would be to attract additional foreign direct investments, on one hand, and to stimulate and regulate domestic investment, on the other. So foreign investments must be of exceptional importance in Lebanese economic policies in times of a financial crisis.

Al-Akhbar: How do you perceive the existing competition between Lebanese and foreign labor in the local market, and how is it impacting Lebanese workers?

FG: Lebanese factories serve the local economy. [Our] priorities should be to provide opportunities, give jobs to the Lebanese labor force, and avoid dealing with foreign labor in some specific sectors, but make use of them in suitable sectors. Competition between Lebanese and Syrian workers is apparent in many factories and crafts. These issues should be dealt with first and foremost since they relate to the livelihood of Lebanese citizens.

Al-Akhbar: Did the repercussions of the Syrian crisis cause other problems in Lebanese economic sectors?

FG: There is an additional problem, which is the relocation of several factories from Syria to Lebanon. This has led to intense competition and the deterioration of some Lebanese factories, which exerts pressure on the local industrial sector.

Al-Akhbar: Concerning exports to foreign markets through land borders, has it become an additional problem facing the Lebanese industry due to the Syrian crisis?

FG: We read the news of some Lebanese trucks being stuck at the Jordanian border [with Syria]. However, we think this is a temporary problem that could be overcome soon. But it does need a solution and action from officials. Land exports are facing a difficult situation, and suitable solutions are needed without delay.

According to the figures issued by the Ministry of Industry, Lebanese factories are in a state of decline. The results confirm that the basic economic file is not being seriously addressed, due to the complete absence of a clear industrial policy and a stable vision regarding economic growth. It should be noted that the volume of exports declined in 2014. According the Industrial Information Department, total industrial exports from Lebanon in the first five months of 2014 reached $1.303 billion, in comparison with $1.495 billion in the same period in 2013 and $1.571 billion in the same period in 2012. This is clear evidence of the steady decline in this sector.

Al-Akhbar: What does the Association propose for tackling export impediments?

FG: Solving the current difficulties regarding exports would help overcome this problem. The sectors are running and productivity exists. What is missing is support for these sectors. Thus, we should work on finding alternative industries in the competitive market or develop domestic industries to comply with competition, whether in the region or abroad.

For example, export of electrical machinery and appliances was first this month, valued by the Industry Ministry at $67.7 million. This was followed by industrial food products, chemicals and plastics, regular metals and derivatives, then paper, cardboard, and their derivatives.

Al-Akhbar: What role could Lebanese expatriates play in supporting local industry and how could such potential be exploited?

FG: Lebanese expats are a safety valve for Lebanon’s industrial sectors. Their productive contribution improves bank holdings, which are mostly converted into short-term deposits. In turn, this energizes both industrial and other investments to create more job opportunities and achieve economic growth. What is meant by the importance of expats is the purchasing power, which is part of the economic process in internal and external markets.

Al-Akhbar: What does the Industrialists Association think of the recent debate in the country on food security. How will these new policies impact local production?

FG: Of course, we support the safety of food products; this is for everyone's benefit. Maintaining product quality is essential to improving the competitiveness of Lebanese products and goods. However, the issue should be addressed in scientific and legal frameworks, especially in these difficult circumstances witnessed by the national economy.

The industrial sector cannot handle such shocks. All these crises are enough. We do not need additional problems and a group cannot bear the responsibility of the mistakes and transgressions of a few people. The media's role today should not be to distort the picture. This approach hurts everyone and not just one sector. We insist and stress that food safety is a priority for us. However, personal disputes and spite can only create confusion.

(Al-Akhbar)

This article is an edited translation from the Arabic Edition.

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