It was one more of those grand schemes of Rafik Hariri’s era, designed to resurrect Lebanon’s glory days. Like Solidere and the construction of an Arab highway to Damascus, a new Beirut International Airport (BIA), was going to welcome visitors to the commercial and cultural capital of the Middle East. Today, Solidere is struggling, plans for an Arab highway are on hold, and the BIA has turned into a major headache. The new $400-million facility, touted to be one of the world’s most modern airports, is slated for completion this month. But that’s two years behind schedule, and already the facility has three strikes against it.
Strike one. Hoctief-Consolidated Contractors Company, the German-Lebanese joint-venture hired in 1994 to build the new airport, is locked in an arbitration dispute with the Council of Development and Reconstruction at the International Court of Arbitration in Paris. The conflict centers on $200 million in cost overruns that the company says arose from delays in construction and alterations made in the design of the facility. The arbitration case has been ongoing for two years in a relatively low-key manner. That is, until last month, when the government was accused of intervening in the process by preventing Joseph Takla, Lebanon’s representative, from attending a hearing. Takla eventually resigned and a replacement has yet to be appointed. Meanwhile, a number of local lawyers have suggested that the case be settled in Beirut, an option Hoctief rejects. “It was to take place in Paris during the initial arbitration. Both sides agreed,” said a spokesman for Hoctief.
Strike two. Mohammed Abdul Mohsen Al-Khorafi & Sons, the company building the $24 million airport car park, claims to have suffered a 50% reduction in revenues because the police have allowed illegal parking along the sidewalk in front of the airport. Khorafi won the 15-year build operate and transfer contract in 1997.
Phase one was completed in 1999 with 800 parking spaces. The second phase will increase the number of spaces to 2350 and is scheduled for completion by next year. Complaints to the Lebanese authorities haven’t yielded any results, says Khorafi. Fayssal Mikdashi, director general of civil aviation at the ministry of transport, claims that during peak times the police can do little to stop the infractions because there are too many cars. There have also been complaints that the rates are too high. “If rates were a bit lower, nobody would park outside,” he says. Users are charged LL4,500 for the first hour and LL6,000 for two hours.
Strike three. Just who will run a new 6000 m² duty-free zone when it opens this month, is still in question. Phoenicia Aer Rianta Company (PAC), a Lebanese-Irish joint venture, won a 15-year concession to operate the facility in 1996 on a $38 million bid, $20 million of which has already been paid. Last year, prime minister Salim Hoss, referring to a decision by the government’s committee for consultation and litigation, suddenly declared that the contract wasn’t legal. He said that a concession could be granted for four years only. The statement prompted protests from PAC, which still claims that it was not formally notified of the decision. Since then Najib Mikati, minister of transport, and Hoss have said that the government was reviewing the contract. But its status remains vague. Mikdashi says the contract is still valid, “unless we hear otherwise.”
But the government, if it wants to honor the deal, will have to make legal what was not. That will require approval from parliament. The ministry of transport prepared a draft law that would do just that, but it’s not clear whether it will be presented to parliament.
What do these problems have in common, other than the airport? Each involves a foreign company that has invested substantial amounts of money and is in conflict with the government. “It would do good to explain why all these projects have been going through this, and clarify the situation,” says Nassib Ghobril, an analyst at Lebanon Invest. “The reasons have not been clear. You can see why it would make foreign companies second-guess doing business with the government.” In other words, three strikes and the only one who might be out is foreign investors.
