Talk to local manufacturers and you won’t hear a lot of talk about demand cycles and product innovation, successful brand building and the occupation of new niches in international markets. Instead you are more likely to get an ear full about issues such as excessive location costs and energy prices, the overbearing bureaucracy, unpredictable and unstudied alterations of customs tariffs, insufficient loan facilities and expensive credit. It’s not that these complaints aren’t well founded. The obstacles and troubles are real enough. But there seems to be a danger that the concerns and worries could turn into industrialist mantras of doom and self-destructive laments. This would not help a manufacturing entity that already has its share of existential questions. The Lebanese public and the representatives of the various communities and political interests in the country should have no reason to doubt, or as occasionally has happened, even refute that this is a country with room for industrial production.
Of course, Lebanon is a country where industry is possible. Of course, its industry has its success stories, existing or potential niches and areas where it has an edge. Otherwise, the country’s 7,000 or so “real” industrial entities and its 15,000 to 20,000 additional micro and cottage enterprises would not exist.
The history of modern industry in Lebanon – and one does not want to reminisce here about the production of purple dye in the Tyre of antiquity – spans a century and carries less weight than the country’s famed story in trade. But for a country of small spaces and restricted in natural resources, Lebanon has earned considerable industrial laurels in those 100 years.
In the establishment of industrial enterprises, it was in many instances a pioneer in the Middle East, from bringing in the region’s first machine for the conversion of plastics, to being ahead of many countries in the development of its cement industry. A special chapter in the annals of Lebanese industry is the way in which many manufacturing companies survived the grueling years of conflict. And although industrial activity in numerous other Middle Eastern countries has increased tremendously in the past quarter of a century that presented manufacturers – and all businesses – here with so many difficulties, Lebanon today still ranks very high in a comparative Middle Eastern context. “Regionally, Lebanon appears to be the most versatile economy,” stated a new research survey prepared this January by a German economist and AUB professor, Marcus Marktanner. It ranks first in the ESCWA region in seven out of 14 product categories, for which the UNCTAD/WTO International Trade Centre in Geneva provides indices on Revealed Comparative Advantage (RCA). The RCA index measures how the share of a sector in national exports – e.g. chemicals or processed food – compares with the share of this sector in world exports. A high ranking indicates that a country has a specialization in the sector. However, as Marktanner observed: “Unfortunately, this does not mean that Lebanon is a top performer globally.” Only in one category, miscellaneous manufacturing, is Lebanon ranked fourth in the world for RCA, he noted. “In addition, Lebanon as a small country can barely function as a locomotive for the region.”
From this economist’s perspective, one of several big-picture obstacles to trade development in ESCWA countries is “great income inequality, translating into a vicious cycle of a small base of manufacturing industries, little job creation, and little domestic investment.”
In the case of Lebanon, this income inequality is certainly an impediment to development, further exacerbated by an overvaluation of the Lebanese lira that has throttled the competitiveness of local manufacturers. According to Marktanner, income inequality is linked to the concentration of capital in the hands of a few, and currency overvaluation tends to make a few rich and keep many poor. Also, an inability to push for the depreciation of an overvalued currency is often linked to the lack of a strong manufacturing lobby.
Would that be where the cat bites its tail or the snake gets the rabbit? There is always a way forward, says the optimist. Lebanon’s debt-laden macro-economic situation is bound to undergo a drastic change, opening the window for a new start – either the soft way or the hard way. Even if the landing of the economy would result in a feared crash somewhere far from the money pots of Paris, industrial manufacturers in Lebanon, who have survived tremendous storms, have a future. To do their share in determining the course of that future, Lebanese industrialists may want to pay heed to the axiom that economies can only flourish if wealth is distributed widely and average incomes keep growing. They may also want to rethink communication strategies where the public and employees, and even many an industrialist are starved from learning about their very own companies’ performance, profitability and productivity.
For the past few years, public declarations of industrialist concerns have either lost themselves in repetitive complaints, or wallowed in unspecific promises of imminent grandeur. Boring. People want to hear new stories. The audience just loves a good and transparent success story. They can be stories of survival, learning by error, or demonstrable success. But they have to be specific, and for real.