Industrial revolution blues

Lebanese indsutry once again bemoans the lack of government support in its time of need

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Although in many ways, industry was less affected by the month-long conflict with Israel than other sectors, it faces one of the most challenging recovery processes. Speaking with Executive in days leading up to the conference in Sweden, Lebanese industrialists emphasized the need for strong government support in rehabilitating the embattled sector.

Mohammed Zeidan, the Plants Manager at Liban Lait, said that his factory would be unable to raise the $20 million required to rebuild on its own. “Investors already paid once,” he noted. “Why should they pay again?”

As long as the political situation that led to the factory’s destruction remains unstable, few investors are willing to take such major risks. Maliban’s Hassan el Fil echoed Zeidan’s sentiments: the glass factory has “no plans” to rebuild unless it can obtain outside help and assistance.

However, this does not mean industrialists are idly standing by. In cooperation with Association of Lebanese Industrialists (ALI), factory owners are preparing comprehensive damage reports to submit to the Lebanese government. Liban Lait is also formulating its assessment with the possibility of bringing a lawsuit against the Israeli government in mind. Zeidan is quick to emphasize, moreover, that contingency plans are in place to keep his products on the market: Liban Lait is still producing milk every day, and plans to convert the least-damaged sections of the factory within the next three months to increase production.

Strong sector solidarity

ALI has taken a leading role in postwar recovery, serving as a liaison between industry and the government and an advocate to the industrial sector. According to ALI vice president Waji Bisri, ALI’s main project has been making contacts between badly-hit factories and functional ones in the same sector. “The major problem every industrialist faces is that if he loses his factory, he risks losing his market. The best way for us to assist is to find a way for him to produce in another factory under his own label until he can return.” Bisri lauds the strong level of solidarity that emerged within Lebanese industry in the wake of the conflict; through links made by ALI, a number of factories are offering production space to competitors whose facilities were damaged or destroyed. In addition, along with the Ministry of Industry and Trade and the Lebanese Chambers of Commerce, ALI established a center in Beirut to support members of the commercial and industrial sectors through every step of the assessment process, providing forms, personally assessing damages, and assisting in the preparation and delivery of compensation claims.

The reports are expected to figure prominently into ALI’s appeal for aid from the Lebanese and foreign governments. Bisri believes there is a high level of willingness to support industry, but that claims must be presented as transparently, accurately and quickly as possible. Not all of their efforts, however, have been fully successful – despite heavy lobbying to include private sector or ministerial representation of industry at the conference in Sweden, neither was ultimately present in Stockholm on August 31.

Minister of Industry and Trade Pierre Gemayel seemed unfazed by his exclusion from the conference: “It’s not personal – I would have said the same things as the Prime Minister about the industrial sector,” assured Gemayel. “I know the Prime Minister and my colleagues described the problems and difficulties we are facing well.”

Bad representation

ALI President Fadi Abboud, however, was less confident. Although he applauded the conference overall and repeatedly emphasized support and respect for Seniora and his team, Abboud was concerned with how the recovery needs of industry were expressed.

“It’s not really representation that matters,” he notes. “What matters is what was written in the report.” The report on Lebanon’s early recovery presented by the government in Stockholm only addressed agro-industrial needs, and according to Abboud, did a poor job of it. “Whoever wrote that section did not have a clue about industry. It’s very frustrating.” Abboud notes that many of the few industrial sectors specifically highlighted in the report have almost no presence in Lebanon, such as tomato paste manufacturing and meat processing. Furthermore, although the section concerned agro-industry, the action plan was wholly related to the agricultural side of recovery, despite the fact that it sustained less serious damage.

Abboud believes that these were not merely errors, but symptoms of a larger problem within the Lebanese government.

“There are traces of animosity towards industry – some “economic philosophers” still see industry as a burden: they want the Lebanese economy to focus on hotels, bordellos and casinos. These people say that we can buy cheaper tissue from Jordan or Saudi Arabia – so why do we need industry in Lebanon? When you speak of how this leads to unemployment, they say, “Let them emigrate.” But we cannot keep exporting our youth to develop other countries.

“We feel these “philosophers” are the enemies of Lebanon. They don’t know how to produce a strong country or economy.”

Gemayel seemed less concerned by the issue. When asked to comment on claims that some government economists undervalued his sector, the minister replied, “I hope everyone understands the importance of industry. But if they don’t, it’s my job to convince them to the contrary.”

Nonetheless, industry is not backing down. Abboud believes that if the blockade is lifted soon, the industrial sector may still be able to reach the $2 billion export target it set for 2006. Despite heavy losses, the sector was less badly hit than many, and Abboud sees a great willingness – especially in the Arab world – to support Lebanon through buying Lebanese products, even at higher prices.

Two opposing camps

Despite the disappointments of Sweden, Abboud vows to keep fighting to make the voice of industry heard at the long-term recovery conference expected later this year. He hopes that in the future, the government will listen to the opinion of industrialists, rather than relying on “people who don’t value industry.”

“There are two camps right now in the government: the first sees industry as a national treasure; the second – the product of the WTO and company – sees us as a burden. We are working hard to make sure the first camp is listened to. No government can take more unemployment: we are their only hope.”

Gemayel is also counting on the next conference to bring some relief to his embattled sector. He has developed a three-point plan, which he hopes the rest of the government will support. The first step involves assessing direct damages and helping to rebuild; the second relates to various interim solutions – managing production through other factories, and providing tax relief; the third and most crucial phase will propose temporarily changing relevant legislation to give industry more flexibility and freedom during the recovery process. Although the plan is already under way, its full implementation will depend on the cooperation of the government as a whole. Gemayel is hopeful that support will be forthcoming.

For industrialists themselves, however, the political situation alone can ultimately restore confidence. “We hope that this is the last time,” says Bisri. “One question is always facing us from investors: “We’re ready to rebuild… but is it over?””

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