Neemat Frem is the president of the Association of Lebanese Industrialists and chief executive officer at INDEVCO Group. He spoke to Executive about a forthcoming industrial park, optimism for 2014 and why he has given up on the government.
What advice would you have for Lebanese industrialists that are struggling at the moment?
To help themselves first of all — not to expect anything from anybody. We have learned the hard way with the situation today — when we see the public sector in complete paralysis, when we see one organization after another collapsing and going into a coma. I can describe the phenomena we are living in as a multiple organ failure in the public administration. Being in such an environment the industrialists have decided to count on themselves, and start special initiatives between each other to see how they can help each other.
What kind of initiatives?
First of all we have started to put direct business-to-business contacts between industrialists in Lebanon and importers in England and Greece. We are taking from the portfolio in Lebanon [the goods and services] which we think are exportable and [which have] reached a level of manufacturing excellence that will allow them to be exported easily. We are opening these routes to markets.
Also, two years ago we started working very hard to build an industrial park with the highest international standards. [Initially it was] with the public sector and the government but again we found out that we can’t count on anybody — this is why now we have resorted to our own initiatives to form a private company. Instead of having developments for real estate or touristic resorts, we are going to build an industrial resort. We are moving quickly in that direction and hopefully in the coming three to four months we are going to launch an industrial park.
Could you give me more details on the size and location?
At this stage I prefer not to talk about it before it is completed. We can just say that it will be about 500,000 [square] meters, we will leave the land to industrialists, prices will be very affordable and we will build the right infrastructure for industry.
Are you expecting any tax breaks?
Again, I go back to my former answer [about not expecting anything from the government].
How much more expensive is exporting goods than it was three years ago?
Land exports are getting really exorbitant because of insurance. This is why today sea exports are what is supporting our exports. We didn’t experience major growth in expenses first of all because the sea lines have worked very hard to be competitive and because we have a slight increase [in exports] to our primary destinations in Saudi and the UAE. Iraq as a destination and Jordan as a destination are two countries that are landlocked — we have witnessed a major [negative] surge, but they do not constitute the bulk of our exports. The only countries where we are suffering a net loss in competitiveness are Jordan and Iraq.
The Central Bank’s Evolution of opinions shows industrialists are less pessimistic this year than last. Are you sensing a new optimism?
[Industrialists] discounted last year. There is a window of opportunity today in a sense that we didn’t have a major collapse. Last year everybody said it was a matter of weeks or months before we had a major political collapse in Lebanon or major civil unrest or conflict. Because this did not happen it has given a lot of hope that we might be able to pass the situation with less damage than expected. On the economic front the private sector was able to somehow mitigate a lot of the problems and has tried to take advantage of what is happening in Syria somehow.
So industry has been able to survive the crisis?
Not only survive; develop and thrive. We have proven this time that the industrial sector in Lebanon is the shock-absorbing sector of the economy. When you have a major crisis this sector is more resilient than others. Can you believe that we are growing? Our industrial export is growing, our output is growing, our investment is growing. This is all coming from the fact that the Syrian industrial expansion was really competing heavily with the industrial sector in Lebanon due to competitiveness and their ability to operate illegally in Lebanon and having a lot of tax breaks because of that.
In effect you have lost some competition?