Italy hopes to expand strategically

In conversation with Italy’s ambassador to Lebanon, Massimo Marotti

Greg Demarque

For the Italian government, supporting Lebanese manufacturing has long been seen as a key to economic stability and growth. In the last year, Italy financed a feasibility study for the creation of new industrial zones and agreed to fund new infrastructure upgrades supporting the sector. Executive visited the embassy to find out more.

E   With Lebanon electing a new president, how do you view 2017 in terms of the country’s economic prospects?

In the next year there might be, with a new government, an indication on economic policies that would show the international community which direction the country wants to go. The private sector will require some assistance and international partnership to seize new opportunities. In view also of regional evolution, there again will be a larger market for Lebanese exports. Hopefully with peace in Syria there will be conditions for the economy of Lebanon to grow. But the most important factor would be the indication from the government of where the country’s resources will go – renewing infrastructures, incentives for the private sector and for small and medium-sized companies. Depending on the priorities that the government will define, Lebanon’s international partners will better direct their foreign assistance programs to the country.

E   Has the Italian government identified projects or priorities moving forward?

Based on what Italian cooperation has done so far, we have had some positive returns. For example, on urban development, we started several years ago with a feasibility study and subsequently invested $10 million on a program to develop initiatives in five urban areas. The World Bank, based on our assessment, added $60 million more, contributing to the creation of new companies and jobs. That was a dual-donor, multi-year program which contributed to creating new opportunities, developing Lebanese enterprises and improving quality of life. Similarly, programs to protect cultural heritage became a factor in improving tourism.

In 2017, we envisage support for the industrial sector, implementing programs more or less the same way. We are aware that the Ministry of Industry intends to create new industrial parks to facilitate local and foreign investment. Italy financed a UNIDO (United Nations Industrial Development Organization) feasibility study for the creation of three industrial parks and [on November 17, 2016] we signed an agreement with the government of Lebanon, assigning part of an $80 million soft loan to realize the initial infrastructure in these industrial zones. Of course, the project needs more donors to be implemented, and we hope others will join us, similar to what happened in previous programs. We will also consider expanding our assistance programs in order to finance key infrastructure serving the industrial area in Tripoli. There will probably be other donors involved, as it is critical to support a larger manufacturing role for Lebanese enterprises.

Depending on the priorities that the government will define, Lebanon’s international partners will better direct their foreign assistance programs to the country

E   Italy has a larger role in and connection to Lebanon perhaps than other countries in terms of trade and history.

Our cooperation system with Lebanon is a comprehensive one. For Italy, assistance to Lebanon is strategic, which is why it encompasses: security, including our 10-year long participation in UNIFIL and the program of assistance to the Lebanese Armed Forces; cultural heritage; and aid programs to build infrastructure, develop small and medium-sized companies, enhance social programs and improve the environment. We are also trying to expand the lifespan of valuable projects once their first phase is implemented, such as the study on the Orontes River Basin, by trying to attract other donors. That’s why it is key for us to work side by side with the government. Another example is the 1 million euro renovation program of the National Museum’s basement. Italy financed the work, adding valuable expertise that contributed to [expanding] the museum, which will be a worldwide landmark in archaeology and a new point of attraction for tourism that can help generate income. For the next year, we are considering ideas to support small and medium-sized companies, if and when the Lebanese government gives an indication they want to move in that direction.

E   In mentioning an economic vision, hoping that Lebanon comes up with one when it forms a new government, do you think the investments Italy is making are maximized and reaching its targeted beneficiaries?

We saw the recently launched central bank programs as one of the signs that the private sector, [with several] newly born companies, is very active. Lebanon has all the means to promote innovation and adapt the production of goods and services to the evolving market, relying on very skilled individuals present in the workforce and on a very active private sector able to extend their foreign business partnerships. What the private sector sometimes calls for, as we’ve heard, is better services that can reduce production costs. Industrial parks are one solution that might help the private sector. Others, of course, are a regular supply of energy, water management and new infrastructure. Italy, the EU and other European donors will keep on supporting the efforts of the government in that direction.

E    Can you say a little bit about the intensity of trade in 2016 between Lebanese and Italian imports and how bilateral relations are developing?

We have increased our exports to Lebanon, while imports remained stagnant. In order to sell more to Italy, Lebanon has to work with European institutions. We are assisting Lebanon in the processes to bring the quality of certain export products to standards that can facilitate export to the European Union. For example, to export agricultural products, like olive oil, where Lebanon has an advantage, it would be important to target the high control standard required to enter the European food market.

We are assisting Lebanon in the processes to bring the quality of certain export products to standards that can facilitate export to the European Union

E   Was there any increase in the number of Lebanese exports to Italy in 2016, or was it stable?

Estimated figures for 2016 do not show an increase. I think it reflected the general stagnation of the economy. The reduction of exports due to the war in Syria was not compensated by an immediate reorientation of exports to other markets.

E   So for 2017, do you still see more of the same or do you anticipate that there will be more trade intensity in terms of Lebanese exports to Italy?

I don’t see a significant increase. The latest figures show that there was no increase. Reorienting exports will require a bit more time. So unless there are some surprising factors, maybe toward the end of 2017 we might see some better signs for Lebanese exports.

E    From the initiative with the creative cluster (supporting the production of furniture in Tripoli and jewelry in Bourj Hammoud) did you see any measurable results in the last 6 months after helping to open the shop in Gemmayzeh?

We haven’t received any data so far. However, we considered that project [to be] an important capacity building program. It is an opportunity for certain producers to see their businesses in a different way. We do not expect immediate results, but certainly the new approach that has been spreading among the producers will revitalize the sector.

E    Are you not worried that Lebanon might rise up to be a competitor to Italy if we learn everything that Italy – industrial or design wise, in arts and crafts – can teach the Lebanese. Are you breeding your own competitor?

Well, the world is an open competitive market. Certainly there is no interest in keeping a market like Lebanon depressed. We believe that by disseminating capacities we create the conditions to work more and to work together. Elevating the standard of competitors might create new market opportunities for mutual advantage and better terms for new business partnerships. By helping to improve the standards or the production capacity of competitors of a different size, it would be possible to generate partnerships that can work for the benefit of both.

Jeremy Arbid

Jeremy is Executive's in house energy and public policy analyst.

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