Export dynamics

Food industry is looking for new markets

Greg Demarque | Executive

2015 has been a tumultuous year for Lebanon’s food industrialists. The Ministry of Public Health’s food safety campaign greatly impacted Lebanese consumables in foreign markets, while the closure of traditional land routes raised the cost of exports. Despite these changes, however, the sub-sector has seen an uptick in investment and potential new markets and trade shows promise an important opportunity to locate new buyers for Lebanon’s food products. Executive sat down with Mounir Bissat – president of the Syndicate of Food Industrialists – to find out more.

E   Obviously the economy in 2015 has not been very good to industry as a whole because of external factors like the Syrian war and the closure of land transit routes, but how has the food manufacturing sector faired?

This year has been [difficult] on the industry as a whole and in particular on the food industry. While it was a good cause, the food safety campaign started the year with big repercussions. It had an impact on our reputation, especially with regard to some of our traditional export markets. The second blow was the troubles we were facing at the port as a result of new procedures and formalities imposed by the Ministry of Finance regarding customs. Many factories did not have enough raw materials while others lost their inventory of packaging material because of the delays. This all led to losses in productivity as well as financial losses. The third blow was the closure of borders – Syrian and Jordanian – which affected a major [portion] of exports to Arab countries. Fortunately, the resilience and flexibility of the industrialists allowed them to bounce back from these three major strikes and we are, I think, back on track. In October we were at the Anuga trade show and I saw my colleagues trying to revive lost relations with some of their clients because of these [problems].

E   In October 2015, Banque du Liban (BDL), Lebanon’s central bank, issued a circular with the aim of easing the financial difficulties and cash flow issues that companies and factories are currently facing – can food industrialists use the circular to their advantage?

The central bank has been in the process of issuing a new bundle of economic stimulus measures offering new lines of credit for banks, in order to encourage consumption and investment by small and medium enterprises (SMEs). I don’t know if this is what you [are referring] to, but it will definitely help. The central bank launched a similar measure at the beginning of 2014 by injecting around 3 percent of GDP – the package was I think $1.5 billion – to stimulate the economy. With this injection the growth was in the range of 1.5 to 2 percent. Imagine what would have happened if the central bank did not [issue the stimulus].

E   Did the stimulus have specific impacts for the food industrialists?

I do not have exact figures on how many industrialists benefited from the [stimulus], but it’s a package for new loans and new lines of credit so if we didn’t benefit directly we definitely benefited indirectly. When you stimulate the economy and encourage the economic cycle, even if I don’t have the money directly in my pocket, others are part of this circulation so it will impact positively on our interests too.

E   In early November 2015 Investment Development Authority of Lebanon (IDAL) said that the agro-industry this year had received applications for new factories and projects – around $70 million in investment.

Yes, this sector is one of the most prominent industrial sub-sectors in Lebanon. It is attracting many investments because of various internal and external factors. Believe it or not, the slogan “Made in Lebanon” for Lebanese food is an added value to the export market for the food sector. The food industrial sector is one of the few that [sources its] raw materials within Lebanon – most of the industries import most of their raw materials from abroad. The availability of skilled labor [is also a positive] factor that will encourage investors to diversify and invest in the agro-industrial sector.

E   The syndicate is a lobby group and one of the successes has been the exemption of tax for exports…

No, this achievement is because of the Association of Lebanese Industrialists – it [benefits] all industry. If we talk about success stories for the food industry, one is our participation in the most important trade fairs in the world – Anuga, SIAL and Gulfood. The enactment of the new food safety law ratified in the most recent Parliament session [on November 12] was the culmination of more than 10 years’ effort. If this law had existed years before it would have saved us the bad repercussions that the food safety campaign witnessed in 2015.

E   On the idea of lobbying and looking forward to next year, are there any issues of concern to the syndicate?

[On November 17], we made a presentation to US Agency for International Development – one of our strategic partners – and we declared that although it is not yet officially drafted, the work of the syndicate in 2016 will [focus] on three pillars. The first [pillar] is the enhancement of the culture of food safety and of ISO certification, the second is the improvement of market penetration by participating in more trade forums and better exposure and image, and the third is to [focus] our efforts on product development. Any sector, or any factory, [that] does not continuously improve and innovate on its product lines, will slowly die. For a sector that is as dynamic as the food [industrial] sector is throughout the world, and considering that we are an export-oriented sector, and are facing competition (not only locally but regionally) from similar industries that, unlike ours, benefit from government support, [this is especially true]. You can tell that many of our traditional industrial [products] are already available in Jordan, Egypt, Saudi Arabia, Turkey and Greece – and formerly in Syria. You can imagine the kind of competition.

E   The Ministry of Industry says that there has been some impediment to the opening up of the Russian market because of sanctions, and also said that Mercosur – the Latin American sub-regional block – could be a potential new market. Were these trade agreements to materialize, do you see those markets providing big growth opportunities for food industrialists?

Definitely. At the beginning of this month we were with the minister for an official visit regarding the Iraq market. [That] market is a huge consumer market for Lebanese imports. During this visit we explored and discussed a lot of pending issues that are hindering growth – we have good exports to Iraq but we remain ambitious to increase the number. As for the Russian market, the Ministry of Economy and the Ministry of Industry visited Moscow last year. It is potentially a very big market but is not easy to penetrate, and we are still working on some pending issues like the payment facilities and shipment to the market. I think the only breakthrough that happened was in the fresh produce sector. But for the industry, it is delayed. Regarding Mercosur, it is definitely a great market, but we have not yet tackled this. We had a meeting at Anuga in 2015 with the trade show representative for Alimentaria – it is a big [food] trade show in Mexico, but also has a subsidiary show in Barcelona and is attracting many Spanish-speaking countries. We are working, but so far have not received good feedback from our industrialists – we will try to have a good Lebanese pavilion there.

Jeremy Arbid

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