Villages in turmoil, devastating damages to urban neighborhoods, and people forced into mass displacement: images you see as you peek over the obliterated half of Lebanon. Yet one month into the intense escalation–and subsequent invasion– following 11 months of cross-border assaults and aerial attacks against populated target areas across Lebanon, representatives of Lebanese industry tell Executive that they are staying the course of production and remain dedicated to location Lebanon.
“You wouldn’t find any company in Lebanon, if not for the illogical decision to stay here,” says Salim Zeenni, the president of the Association of Lebanese Industrialists. According to him, it is not only the latest Israeli aggression but rather the long chain of systemic obstacles and economic crises that forced industrialists to weigh their options of moving factories to other jurisdictions.
Yet against conventional business rationales, the companies that are here have taken their decision for Lebanon. “We took the challenge to stay and continue producing in Lebanon. And again, as long as the port and roads are still open, we are still moving [ahead],” he insists. He further points out that, unlike the destruction seen in 2006, there has been only minor collateral damages to industrial properties during the current conflict.
It cannot be denied, however, that the country’s manufacturing industries struggle severely under the uncertainty of war. Although some industries are working at capacity and one high-tech manufacturer even observes a week-over-week increase in productivity in mid-October, heads of industry on the level of both associations and companies are faced with potentially crippling supply chain disruptions of both imports and exports because of risks of destruction of critical infrastructures such as the Rafic Hariri International Airport (RHIA), Beirut Port, and connecting roads.
Resilience amid conflict
The industry’s export-oriented companies seem to be coping well regardless of the dire situation — a notion highlighted by Fadi Daou, founder and CEO of high-tech infrastructure component manufacturer Multilane Inc.
“We are still operating in the same way as before,” Daou says, asserting the company’s determination to function as it always does despite the war. “We do see a minor slowdown in logistics,” he adds, commenting that logistics departments are having to function with reduced staff.
Zeenni likewise maintains that the industrial sector has not yet struggled with large-scale interruptions in operations. He says that despite the war, the sector is “still holding, still going on,” while many other industries are also adapting to new trends or realities.
Whereas Multilane’s business model of high-tech exports in the global B2B space makes access to aerial transport of goods a key potential disruption point, which according to Daou was partially addressed by increasing imports of raw materials and buildup of stock in the past six months before the escalation, Zeenni emphasizes that companies in sectors such as food production and personal care products are working at full capacity in order to meet local market needs as well as obtaining crucial revenues from exports. “For us, the most important market is not the Lebanese market. The most important is exports. Believe it or not, we barely do any profit out of the Lebanese market,” he notes.
Supply chains at risk and extremely feeble state support
The main risk imposed on the industrial sector is the disruption of the supply chains, the foundation of the sector. Both Daou and Zeenni express the importance of the supply channels, the airport, and ports to the survival of the industrial sector—their closure would cause an acute disruption to the country’s imports and exports, “The biggest worry is a stoppage of the supply line and [potential] closure of the airport. If these routes remain open, we will still be able to provide jobs,” Daou says.
Zeenni acknowledges that industries relying on products or raw materials from afflicted areas such as the South and Bekaa—mainly the agricultural and agro-industrial sectors that have been dealing with losses and destruction, are unlikely to recover anytime soon. Zeenni mentions that these companies are trying to adapt by sourcing raw materials from other regions, or in some cases relocating production to safer areas. According to him, critical inputs of concern to industries include, on top of raw materials, access to energy and the flow of packaging materials.
Both industrialists also flag the need for redressing legal weaknesses and implementation problems in the collection and reimbursement of importation duties for materials that enter exported products. “What is needed from a long-term point of view to seize the opportunity and have impact on economy of Lebanon, is adoption of laws that make it viable for [high-tech] companies to come and manufacture such products in Lebanon,” says Daou.
Admonishing delays in handling of repayment of import duties and the trend of tax increases that push increasing numbers of economically active people into informal – or, in his description, “illegal” – behavior, Zeenni says: “Concerning taxes, the industrial sector has been the milking cow of the whole governmental institutions. We are working legally, so we do pay [our taxes]. This is against any understanding of any economic situation.” He notes, however, that current efforts are being made in collaboration with ministries for enacting programs aimed at modernization and renewal of industrial machine parks and for attracting investments into new industries.
Employee safety and productivity
In addition to the concerns regarding the supply chain, the safety of the workforce is a big priority in a time of war. At Multilane, Daou says he took several measures to mitigate the risk to his employees, especially those living in targeted or risky areas, and those needing to take dangerous roads to reach the workplace. “Employee safety is a very big concern. We’ve provided housing to certain employees so they can stay close by and avoid dangerous commutes,” he explains, adding that the company also incorporated a work-from-home policy.
Nonetheless, these efforts are still not enough to maintain employee productivity at the same rate—especially for people who are product developers and need lab access to do their jobs efficiently. “Productivity drops by 50 per cent when they work from home,” Daou says, “while the production team continues working to full capacity”. This flagrant contrast underlines the varying effects of war across different segments of the workforce.
Moreover, one of the reasons behind this drop in productivity is the mental strain that the employees are facing. “The morale of the team is the biggest challenge. People are on edge; every time there’s a loud sound, they jump to the windows,” Daou says. He resorts to encouraging his employees by sharing stories of resilience, hoping to inspire and bring back motivation.
Global implications and market pressures
When asked if the ongoing war will affect international demand for their products due to fears that Lebanese companies might become unable to honor contracts and meet delivery targets, Daou concedes the existence of such concerns in his global market. “We are spending a lot of time dealing with this specific issue,” he says. To hedge this risk, he is building contingency plans. “We have updated our business continuation plan (BCP) and are exploring partnerships in other countries like China, Turkey, and the Gulf.”
As for their long-term plans for growth, most were stunted. Daou notes that their business could have expanded by 20% in 2024 had the regional situation been stable. This depicts a macro-image of the Lebanese industrial market’s suffering, where they lose growth potential because of socio-political instability in the region in which they function.
Zeenni’s response toward this issue is the same, while also noting the rise of transportation costs that can impair viability of long-term contracts. Moreover, Zeenni points out the struggle to change prices and relays their efforts to “hold prices constrained” to maintain their presence in the market.
Hope for the future: post-war opportunities and long-term vision
Both Daou and Zeenni see hope for Lebanon’s future, especially its economy. Daou sees Lebanon becoming a hub for high-tech manufacturing, inspired by the current AI and semiconductors surge—all intended to happen after the war ends. “Lebanon stands a very good chance for some of the global high-tech manufacturers to build in the Middle East once the bombs stop,” he said. He sees a lower unemployment rate and better utilization of Lebanon’s competent and qualified workforce.
Part of Daou’s long-term vision is investing in Lebanon’s youth and human capital: “Our mission is to provide jobs to our young people so they stay in Lebanon,” he says, adding his intention, after returning to Lebanon in 2006, to be a part of the tech sector’s growth and the creation of high-value job opportunities for the Lebanese youth. Using Multilane’s academy, Doau’s company ensures the advancement of young talent, keeping them updated on tech trends and integration into the sectors while merging theory and practical technical work.
Daou is committed to keeping his company on the rise, along with personal morale, regardless of all new strikes in the industry. “At least in this week [the third week of attacks], the productivity index has improved significantly compared to last week,” he said proudly.
Zeenni says that he believes in Lebanon’s potential since it has risen again and again after each war and crisis throughout the years. In addition, he believes that Lebanon will always remain attractive to investors. “Just give us peace of mind, and you will be amazed what will happen,” Zeenni remarks. Easier said than done, but a sentiment that certainly reflects the forced adaptability and hardiness of Lebanon’s industries despite major repeated adversities.
