Vrej Sabounjian took the reins at the Ministry of Industry in June, taking his experience from the business boardroom to the political cabinet. It has been a bumpy ride for industrialists in 2011 and demands for government leadership and support are high. Executive sat with the minister to find out how he has dealt with his first months in office.
E You told Executive back in July that you were confident that this government was pro industry, yet there was not a single mention of industry in the draft budget. What positive actions or proposals by the cabinet have shown support for industry?
I think we can say anything we have presented so far has not met any objection at all. That’s sign enough for me that I have enough support from this government to push ahead with our industrial programs and we are going to sign a lot of bilateral agreements with other countries; it’s coming. We are going to make agreements with Sudan and Armenia and other countries and these agreements will help industry in Lebanon.
E The negotiations for these agreements are already underway?
Two are already ready… they will be signed very soon.
E With these agreements there will presumably be a decrease in trade barriers. Is this a trend you see developing?
The barriers to trade have already come down as we have moved into a global economy for some time. But the bilateral agreements help facilitate the relations between the two countries and their business people [with] measures such as visa agreements, more flights, accreditations and tax deals so there is no double taxation.
E Is Lebanon still en route for accession to the World Trade Organization?
E Is that prudent in the troubled and uncertain global economic environment we are currently in?
Prudence is always good but I think we have also to understand we are living in an environment where all borders are opening and trade should be easy and accessible to all parties. But it has also to be fair in the sense that there are some countries which are bigger and stronger and others smaller and weaker, so we have to note those details in the agreements.
E Can you provide details of the draft proposals you submitted to the minister of finance in relation to the tax exemption on exports?
The answer is very simple: if you manufacture a product in Lebanon and you export it you will be eligible to get a 50 percent tax credit on your profits, [depending] of course on whether the law passes the cabinet. Our tax rate is 15 percent so on your exports you would only pay 7.5 percent.
E Is there a time limit on this or would it be indefinite?
No. It would be indefinite.
E And how confident are you that this is going to get passed in the cabinet?
I’m pretty confident and I’m also relying on the support of our prime minister [Najib Mikati] and the minister of economy [Nicolas Nahas]. He’s my good friend and we have discussed this issue, and I am also sure the minister of finance [Mohamad Safadi] will not object.
E Have the committees tasked with creating the nation’s industrial zones been created, as was promised in the ministerial statement?
We are almost finished. There are still some little details, and in a few weeks it will be ready.
E The plan will be ready or the creation of the committee will be ready?
Both. On the plan we are doing some modifications and the committee is already under study.
E There is going to be a committee, or there is a committee?
There is going to be. There is not now. We are forming a committee. We will have a banker, an accountant, an engineer, an auditor and these kinds of people who can bring the maximum contribution for this project.
E In the draft budget there was no mention of this project. How do you envisage it being financed?
There are a few ideas which I don’t want to elaborate on now, but I would like to give a chance for the committee to come up with some ideas. We have ideas at the ministry and I have my ideas and I would like the committee to add on those ideas and bring their own.
E Is the industrial sector able to absorb the blow of the proposed minimum wage increase?
I don’t think the industrial sector is waiting on the increase in minimum wage. I think all business people have already done the necessary adjustments related to inflation.
E But there are employees in the industrial sector whose pay would be affected by the proposals…
There are certainly people working close to the minimum wage, and that’s why it is the government’s responsibility to look at it, which we did in a responsible way. The increases are acceptable but I don’t want to elaborate on the percentages because there are differing views.
E So in theory you support an increase in the minimum wage but not explicitly these figures?
I supported the increase in the minimum wage but I would also say I am not with the idea of increasing wages [other than] the minimum wage. It is the government’s duty to help minimum-wage workers but it should not get involved in any other kind of wages. However, this is my personal opinion and I will support my government whatever its decision is.
E When you came into office you told Executive you were going to get an additional 25 percent added to your budget. Have you?
There is a problem in all of the ministries concerning their budgets. It’s a fact that we have a problem with the budget. So I guess we will still try to help the ministry of finance but at the same time we have to find a way to help our ministry because we really need the increase in budget.
E But as of yet you have not received the 25 percent you were hoping for?
Not yet, no. The budget has been put to the cabinet and each minister is looking at it and is going to go back with his comments.
E And yours will be?
I will stick to my plan. I will definitely ask for my 25 percent.
E How have the events across the border in Syria impacted Lebanese industrialists?
I’m sure some sectors or companies that had large business with Syria will have been impacted, but if that is the case then I advise them to take this opportunity to find new markets. They should not consider this as a setback but as an opportunity to find other markets.
E With regards to the proposed electricity law, does it go far enough in addressing Lebanon’s energy infrastructure crisis and can industrialists be assured that there is the political will and ability for it to be delivered?
I think Lebanon has stability now. I think you could say we are one of the most stable countries in the Middle East.
E You’d hope so!
[Laughs] As for electricity, we have passed this law and, yes, we will have a much better electricity situation a year and a half from now.
E You have encouraged industrialists to establish their businesses in the north, south and Bekaa, outside of the industrial heartlands. What incentives exist for them to do so?
If you move to the north or south the land is much cheaper and you can find lots of minimum-wage workers in those areas. You have more space…
E Does the government have a role to play in the regionalization of industry or is it something that has to happen naturally?
It has to happen naturally. It is natural to expand.
E How will the industrial sector have to adapt over the coming years if it is going to remain internationally competitive?
Governments don’t make companies competitive. I advise every chief executive officer or president or owner to have a good vision and be flexible. Times now benefit those who are flexible. Drop things that are not profitable, keep your ego away and be objective. I encourage Lebanese business people to be open-minded with regards to merging, which is still not much in the culture of the Arab world.
E How would you sum up your first several months in office?
I am working hard but I will leave the assessment to others. I am working hard to finish my ideas. I am trying to finalize licenses and encourage people to come and do whatever they need from the ministry as soon as possible. We’re finishing their requests in a very short period of time… One more thing: we are planning to bring to the schools and the colleges [a program] which will give the students a chance to know more about industry in the country. I want the Lebanese to have trust in their industries and to have faith in a productive Lebanon and not just commerce. Look at some of the countries in Europe that depended too much on services and tourism. Shouldn’t we learn from that?