Holy waters

Lebanon’s Christians are opposing the expansion of Beirut Port — for unclear reasons

by Jeremy Arbid

The Beirut Port is thriving, the Port Authority’s director Hassan Kraytem, tells Executive from his panoramic office overlooking the shipyard. Its success — the port transferred nearly $55 million of its profits to the treasury in 2014 according to data from the Finance Ministry — is largely due to its growth into a transshipment hub and an increase in container traffic. But a plan to expand the port to increase this capacity has resulted in labor strikes and political controversy.

Whereas today the fourth basin can only handle ships carrying general cargo — commodities such as grain and flour, cars and other goods that are not easily containerized — the plan is to fill the basin and create a multipurpose terminal to handle both general cargo and containers. Filling the port’s fourth basin is the point of contention. Truck drivers shuttling goods from the port to destinations in Lebanon and beyond had called for work on the expansion project to stop, arguing that jobs would be lost, with Bkirki — the seat of the Maronite Catholic Patriarchate — and the Lebanese Forces, Kataeb, Free Patriotic Movement (FPM) and Marada Movement supporting their cause. It is yet unclear why the Church has gotten involved. Minister of Education Elias Bou Saab, a FPM party official, told The Daily Star in February that in the absence of a president the Church was the best representative of Christians. Local media reports suggested the Council of Ministers would meet in late April to debate the issue but as of yet no compromise has been reached. The Church did not respond to a request for comment.

The Port Authority, meanwhile, argues that the expansion is, in Kraytem’s words, “purely economical — a project that is in the interest of the port and of Lebanon as a whole.” Until the two sides sort out their differences, the expansion is on hold with ongoing discussions that could result in alterations to the original plan.

Reaching capacity

A colorful mix of containers sit stacked on top of one another in Beirut port’s container terminal. Completed in 2000, operation of the terminal commenced only a few years later under subcontracted management by the Beirut Container Terminal Consortium (BCTC). The original capacity of the terminal allowed processing of up to the equivalent of 745,000 twenty foot containers (TEU) per year. Capacity quickly peaked according to statistics available on the BCTC website and by 2010 the terminal was bustling, handling nearly 1,000,000 TEU annually.

[pullquote]“If we don’t implement that expansion we believe that in 2018 the port will reach saturation for general cargo and containers”[/pullquote]

Thus began a first phase in expanding the terminal’s capacity to process up to 1,200,000 TEUs per year and for quicker turn around in servicing ships. Today, Kraytem says the container terminal is again quickly approaching capacity levels — BCTC says TEUs last year totaled 1,211,033 — and in only a few years will create a bottleneck in the unloading and loading of containers onto vessels, thereby slowing shipment times and placing the port’s competitiveness vis-à-vis regional ports in jeopardy. For this reason, Kraytem says expansion is necessary. “If we don’t implement that expansion we believe that in 2018 the port will reach saturation for general cargo and containers.”

The project will build a new quay that can accommodate the largest vessels that come to the Beirut Port, Kraytem explains, with the area behind the new quay to be filled, creating a backyard for storing and stacking all of the cargo and containers. “In a couple of years’ time, these people’s livelihood that they’re trying to defend will be affected — the port will be saturated and cargo will start either moving to other ports or getting more expensive for the Lebanese consumer.”

A new multipurpose terminal, Kraytem says, will be on a similar work schedule as the container terminal — 24 hours per day, seven days per week, 365 days per year — managed by BCTC, where work is carried out round the clock by their employees. The port has its own employees and the truckers are independent contractors. Jordan Srour, an expert in port operations management at the Lebanese American University, says Lebanese labor law is much more flexible than that of, for example, the United States, where the International Longshore and Warehouse Union would not allow the extent of the hours that workers in Lebanon accommodate. Yet the quay in question services ships for only eight hours a day; it is not clear to Executive whether the truckers’ union plays a role in limiting working hours on this quay, and the union did not respond to Executive’s requests for comment.

Feeling congested

The port is now linked directly to 60 destinations — mostly in Europe, Africa and Asia — and traders have a wide array of possibilities to export to or import from. It is market forces, says Srour, that make the container a very appealing method of shipping, “It’s absolutely just economic dynamics — what people want to purchase and what people want to import and export.”

Global port connectivity has been a boon for Lebanese traders, says Kraytem, because companies like Mediterranean Shipping Company or CMA CGM Group with their large vessels compete to take volumes to and from Beirut, so the consumers are benefiting from that competition. “Should that stop,” Kraytem adds, “you will see an increase in cost for shipping to and from Beirut. We will have [less] variety in the choice of lines and destinations, and much longer transit periods.”

[pullquote]“We always have to keep some buffer, [but] we don’t have a place to put one single container, at the current moment”[/pullquote]

The Beirut port is handling its current cargo and containers — Kraytem estimates TEU capacity to be 1.4 million — but excess capacity is now only enough to satisfy short fluctuations in increases to volume. A March decision by the Ministry of Finance’s Customs Department to inspect all cargo and every single container has pushed congestion at the port to its limit. “We always have to keep some buffer, [but] we don’t have a place to put one single container at the current moment,” Kraytem points out. Keeping a buffer for containers as temporary storage space at the port is crucial, he says, enabling the container terminal to continue unloading and loading ships quickly.

The growth of general cargo — i.e. non-containerized goods — at Beirut Port has remained steady, rising only slightly from 1.8 million tons in 2005 to around 2 million today. However, growth in container volume, Kraytem says, has risen dramatically in the same period, “We have gone from [processing] daily 324, on average per day in 2005, to almost 800 containers per day. 800 going out and 800 containers coming back empty.” Were expansion at the port to happen, that growth would continue, with profits transferred annually to the treasury also expected to rise, Kraytem concludes.

The main issue at hand for Kraytem is that growth in global shipping has been in container transport because of its efficiency, and Beirut Port needs to keep up. In ports throughout the world, containers have become the standard, easily transferred from ship to truck to rail. Because of this standardization containers are the most attractive way to send goods and products — for example, flat screen televisions, jewelry or clothing — generating customs revenue for the government. General cargo, meanwhile, typically involves goods that are subsidized by the government and are therefore less attractive in terms of the revenue generated.

The World Trade Organization forecasts the global goods trade will grow by 3.3 percent this year and 4 percent in 2016. Intra-Mediterranean container volume trade is expected to rise from 14.9 million to 15.6 million in 2015 and 17.1 million TEUs by 2017, according to the Dutch consulting firm Dynamar.

Container volume growth roughly mirrors gross domestic product growth; McKinsey & Company, a global consulting firm, in a 2011 report observed that in Germany and France an “average annual GDP growth of 1 percent was associated with average container port growth of 3 percent.” The report also notes that port growth is dependent on its connections to the hinterland — the Beirut port’s bottlenecked trucking traffic at the entrance has no immediate solution so a valid question raised is how efficiently and quickly an increased volume of containers that port expansion represents could enter and exit the port.

Port expansion, Kraytem concludes, would benefit Lebanon — traders will continue to satisfy the demands of their customers and increased container capacity might encourage greater competition among shipping companies to use Beirut as their preferred transshipment hub, thus driving down shipping costs for importers and exports. The profitability that containers represent also means greater revenue transfers to the government. But the social implications on labor at the port, whether a loss in jobs is likely or not or how livelihoods might be affected, is an ongoing issue that might become clearer once negotiations for the expansion conclude.

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Jeremy Arbid

Jeremy is Executive's former economics and policy editor.

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