Transport leaders aspire to transform vital sector
The formal economic sector of transportation and logistics in Lebanon presents itself to the observer with two vividly contrasting faces. One face of Lebanese transport is the sad face of a sorely under-achieving economic sector hindered by high prevalence of informality and poor regulations. At the same time, the sector presents a hopeful and smiling face, with the character of a fascinatingly simple, easy to access, very low-tech mobility behavior app, that could quickly be accelerated into a vital engine of national economic enablement and growth.
Fundamentally, however, the baseline of all modes of transport in the country are overdue for change. It is not for no reason that the last 20 years have seen multiple civil society organizations advocate for better and safer streets (examples 1996-founded YASA and 2006-founded Kunhadi) and that international funders and donors repeatedly offered assisting in urban transport plans and bus programs (despite such schemes, also repeatedly, being aborted), or that the Executive economic road map for a better Lebanon already years ago compiled 16 (today still mostly outstanding) expert recommendations for strategizing transport. Even the country’s lawmakers over a decade ago saw reason to adopt a new national (and in some regions partially adhered to) traffic law.
Although no runways at Rafik Hariri International Airport and no major bridges or roadways were destroyed in the recent severe episode of Israeli military aggressions, it cannot surprise that transport and logistics enterprises suffered massively during the war, as the managing directors of two leading companies in the sector, express shipper Aramex and ground transport operator Ahdab Commuting and Trading Company (ACTC), tell Executive.
But true to the adage that an opportunity is hidden even in the worst crisis, Assaad Sebaaly, general manager of Aramex Lebanon, and Aoni Ahdab, general manager of ACTC, are optimistic. Being both members of the Lebanese Private Sector Network (LPSN) but active in distinct areas of mobility,they share the view that the current inflection point at the (hopefully definitive) tail-end of the war of 2024 accentuates the sector’s innovation potential for a profitable and equitable transformation.
“I have presented two budgets for 2025 to our board, a good and a worst-case scenario. I am fully confident that we will be able to go to the normal scenario and move with our budget as we used to do,” says Sebaaly.
“I have always been a realist but as Assaad says, this is the first time that we actually feel that something is changing,” chimes in Ahdab. He qualifies the positive scenario as simply the only one that can be worked towards because the sole other, non-positive alternative would signify complete disintegration of the nation’s fabric, something that is counterintuitive and in contradiction to the historic record of Lebanon’s ability to withstand recurring winds of ill fortune.
Accounting for high and unrecoverable economic losses
Given how the strategies of the recent Israeli intrusions were focused on deeply destroying narrow targets, the broad area of transport was among the sectors in the Lebanese economy that were impacted economically but not hit as horribly by physical war damages in the September to November 2024 period.
This notably was in contrast to the 2006 conflict between Israel and Hezbollah where Beirut airport and essential road infrastructure were targeted from the first day of IDF air attacks under the devastatingly prevalent (and still threatening) “bomb Lebanon into the stone age” Israeli mentalities.
Both sides of the sector, interurban and intra-urban passenger transport on one hand and express shipping and package deliveries of commercial goods on the other hand, have been greatly harmed by direct economic losses and foregone revenues.
Damages from destruction of transportation infrastructure and facilities, “were not too heavy but the impact was extremely heavy,” says Sebaaly. New bottlenecks in air freight due to the sudden pausing of Beirut services by 16 of 17 airlines made MEA stand out as the one operator that withstood the pressure.
At the same time, however, this thrust into a monopolistic situation translated into shocks of higher air freight cost and lower capacity – two very dangerous poisons for an express shipper and freight forwarder competing with tight margins in the globally integrated realm of running supply chains. This meant that from one day to the next “we had a serious problem as to availability of space for shipping necessary items to traders in Lebanon; the consumers were suffering, [and] we were suffering,” Sebaaly adds.
On the domestic side of Aramex’ business, which according to him generates the Lebanon operation’s main economic sustenance, the economic shock could be quantified in percentage-wise contraction of the high-growth, business line of e-commerce deliveries. “We were growing 20 to 25 percent year over year. If I compare August 2024 to August 2023, we had growth of 25 percent. If I compare September 2024 to August 2024, I had a drop of 70 percent,” Sebaaly says. And although the end-of-year holiday season is the high time of giving, and nowadays e-commerce, it will not suffice for balancing the months of being victimized. “I have more than half a million dollars in losses in two months. There is no way you can recover them as the losses are huge,” he adds.
At ACTC, the impact on business according to Ahdab was not as easy to quantify but assuredly heavy. Economic impacts were largely because of overheads, given that the war hit the company shortly after assumption of new bus operations when there was no expectation of profits yet. “We launched a bus project in July, with a plan to have all new bus lines operational by end of September to mid October 2024. The project entails 93 buses operating across 11 lines ”, Ahdab says, adding that seven of these eleven lines were forcibly delayed by the war.
Moreover, because of the war holding customer attention in its grip and because of ACTC’s almost 70 percent reduced presence of buses on the streets and highways, marketing campaigns had to be postponed. “Our overheads today are the overheads required to run all 90 buses but actual operation is currently about 25 buses,” he adds while declining to provide financial investment details and further expectations related to the bus project’s business plan.
Besides the need to maintain overheads and forced delay in implementing key components in ACTC business plan, the already operating lines were confronted with sudden spikes in traffic and expensive road congestions due to displacement of people onto roads that were already difficult to navigate for larger vehicles.
Assembly and delivery of food aid packages under contracts with aid organizations and UN agencies is another ACTC activity where war-induced security protocols and increased costs of transport to villages in areas under threat were felt as doubling or tripling of each dollar consumed by transportation. Ahdab notes that the cost for a typical aid package could under the conflict impact balloon from $50 to about $75 due to a combination of increases in cost in imported foods, some price gouging by dealers in locally sourced commodity foods, and cost increases in shipping and delivery.
Economics of transport:
A people-driven and chronically dichotomous sector
Successful couriers are practically invisible individuals. They ideally make both their scheduled and sudden appointments on time and are in and out of an assigned client site with electronically signed delivery and pickup statements while the manager in charge calmly sips her coffee.
Yet these background actors or better stagehands of economic performance are the people that remain most essential even in the day of digitizing transport and futuristic delivery modes. However, since the age-old activity of transporting things to market and people to destinations started to grow into vast and sophisticated industries of logistics and transport in the early 20th century (the world’s number one logistics provider was founded in 1907, other giants of today have joined the global flock in the sixties and seventies), this all-encompassing services sector’s human agents are not always – but all too often – faced with humble career and development options, and/or lack of financial and professional appreciation.
This truth was thrown into sharp relief a few years ago, at time of the global coronavirus surge and panic. Frontline workers, including bus drivers and delivery drivers, were suddenly noticed, by politicians from New Zealand to Bavaria, as “heroes.” In Lebanon, the impact of Covid 19 on transport and logistics was strong enough to kick e-commerce, a forward looking but in local culture hitherto much rejected segment of trade, into high-growth mode.
The Covid 19 impact on frontline work did not come with the effect that those customer-facing and essential employees were no longer overworked and under-payed. But at least Big Tech companies, management and human resource consulting companies and tech startups began rolling out specialized apps and programs for the strengthening of frontline workers’ – some call them deskless workers under a cognitively negative definition of what they do not sit at – workplace integration, role, recognition and rewards.
Just as the individual people in transport are essential but often unnoticed cogs in the economic machine, successful logistics providers are companies that often quietly solve transportation issues before they become costly business disruptions. On the passenger transit side of the sector, successful modes and operators of public transport attract little attention in smooth day-to-day provision of vital mobility services, making headlines only at time of fee increases, operational disruptions, or strikes.
Logistics costs by some estimates make up around 13 percent of a country’s economy on average but can vary between 8 and 25 percent, indicating that the necessary element of logistics produces jobs and incomes for direct stakeholders and is foundational to economic growth.
Inversely, in absence of constant efficiency monitoring and improvements, the economic activity of transportation creates huge and wasteful economic losses and blinding environmental costs. Insufficiency and breakdown of transport, whether because of absent modes and missed development or because of wasteful and excessive expansion, can ruin a commercial civilization.
This notwithstanding, the logistics and transport sector is often badly underestimated in its importance for the functioning of the globalized and increasingly digitized economies of nations. In Lebanon, the transport and logistics industry was described by the Central Administration of Statistics as contributing less than three percent to national GDP in 2019, with data for the sector apparently not reported since.
Hidden dimensions of transport
From a more macro-oriented perspective, no estimates on the dimension of economic losses in transportation have been offered in reports such as the World Bank’s mid-November preliminary damage and loss assessment paper. This DaLA report, however, notes that supply chain disruptions contributed to the 12-month economic loss estimates in “commerce”, which are $1.67 billion (22 percent of estimated losses across the entire economy) in the period from Oct 8, 2023 to Oct 27, 2024.
Both interviewees tell Executive that they have no knowledge of any recent assessment of the contribution brought by transportation and logistics to the national GDP tally. Dating from a near-mythical past six years ago, when the per capita GDP was widely cited as above $9,650 in nominal terms, a fact sheet on the investment promotion site IDAL attributes 2.9 percent GDP share to “transport”. This is a very low value for a normal, functioning economy and might in the Lebanese case be correlated to vague sector definitions and imperfect data acquisition from market actors.
Yet another crucial market determinant appears to be the prevalence of informality in this economic activity. It is at best guesswork how heavily the detriments of inefficiency, informality, illegality, or even criminal activity – Sebaaly points to the existence of fraudulent competitors who after a short period of operations abscond with revenues from delivery work they had won by underbidding legitimate operators with cut-throat prices – constrain the economic contribution of transport to the formal economy and hinder adoption of cleaner and more efficient modes of transport.
In a very quick calculation of informality impact on Aramex top line revenue, Sebaaly says, “I am losing 3.6 million dollars per year due to informality.” This is on basis of 200,000 delivered packages per month (according to him accounting for almost half of the Lebanese express shipment market) for which the company was forced by illicit competition to undercharge $1.5/package. Versus a fair price of $4.5 in the Lebanese market, selling at $3 “is a complete loss to us,” he sighs.
Uncertain but bright future
In spite of entrenched systemic barriers that have been accentuated by the recent war but also have other roots, the two interviewees speak emphatically about the value that their sector has added and can further add to the Lebanese economy.
According to Sebaaly, the importance of logistics operations and specifically regional player Aramex was highlighted by the pre-war crises of the past five years. During the combination crisis of anemic banking and coronavirus pandemic, it was express shippers who delivered essential medications to hospitals, secured the circulation of goods between stores and consumers, and facilitated access to money for small and medium enterprises, he reckons.
“The whole economy was up and running due to us,” he says, and warns, “if we, all the logistics companies, were to go on strike now and stopped importing and distributing, you would have no economy.” Growth of express shipping in the years that followed upon the Covid 19 panic, was exceptional. Specifically, e-commerce deliveries were kick-started by the pandemic lockdowns in Lebanon, he notes, with immense benefits to the digitized economy.
During the years from 2019 – universally known in the Lebanese economy as one-of-a-kind disaster experience – Aramex “grew from 180 employees five years ago to 330 employees today. We used to deliver 30,000 packages per month and now we deliver 200,000 packages per month,” Sebaaly boasts with the professional pride and natural marketer bite of an advanced-through-the -ranks executive, which actually is a sort of hallmark of globally successful courier enterprises.
The increase in logistics activity was sector-wide, he points out: “From 2019 until August 2024, the [shipment] numbers all over the market have doubled, or more. What is today 420,000 to 440,000 package deliveries [in the Lebanese market] each month, used a few years ago to be 150,000,” he adds.
For Ahdab, whose contribution to the innovator ranks in Lebanese transport apparently testifies to the DNA of a 21st century tech entrepreneur, the path forward will have to be defined by technology and rule of law. In the latter respect, this begins with the basics of legal compliance such as making sure that drivers have licenses but no criminal record and their vehicles operate legally. Emphasizing the virtues of LAF veterans in disciplined operational environments, he evidently sees ACTC’s future in the best possible hues. All the while he also concedes that profit is not expected in the first stage of the venture but says revenue is increasing steadily.
According to him ACTC won its public bus line contract inclusive of being given a diesel-powered and somewhat aged vehicle fleet but has gone beyond what is required under their operator contract with the Lebanese state in terms of investing in technology for the monitoring, passenger safety, and traceability of the buses. “What we are trying to do is offer a modernized version of the model that you find when you travel to any city in Europe or developed country,” Ahdab says.
In the long term, he aims for 70 percent of profits to come from ticket sales and 30 percent from selling non-digital advertising space on and in the vehicles. The work force is to grow with time from nearly 80 today to 350 employees when all bus lines are in full operation. The buses are supposed to as soon as possible run on clearly defined lines with designated bus stops, tracked by an app that shows commuters in real time where their bus is, and a bouquet of numerous ticketing options. Ahdab expresses confidence that “once all of this is implemented, people will start relying on the bus and this will start increasing footfall on the bus.”
Well over a century of urban rapid transit systems in Europe shows that getting buses right and making individual mobility addicts switch to sharing is not an easy endeavor and behavior change. Improving urban productivity and the environment by reducing commuter logjams and turning SUV lovers into bus seat huggers is nonetheless a no brainer. According to international public transport strategists, five elements form the matrix of usefulness and popular acceptance of urban transit systems: affordability, ease of access, frequency, reliability, and safety.
The interplay of factors is crucial and, one believes, personal. Affordability, while important, was not the sole decisive factor in satisfaction of urbanites with public transport in 83 cities, including national capitals, across Europe and Turkey in a EU commissioned and recently published “Survey on the Quality of Life in European Cities, 2023”.
Urban mobility was a major point of inquiry in the survey, which, perhaps instructively, showed that the world’s (by several surveys) supposedly most livable urban locale is also the European capital with the highest rate of satisfaction with public transport (Vienna, 91 percent), although the study’s highest rate of daily public transport users (70 percent) is found in Prague, which ranks fourth in the urban transport satisfaction list but in some urbanity tables is a mid-ranked European capital for liveability.
Satisfaction and use rate seen in other Mediterranean cities such as Nicosia (44 percent satisfaction rate but only 16 percent daily use rate), or perhaps the EU survey’s spatial extremes Istanbul (16 million inhabitants) and La Valletta (6,000) might be more realistic examples of satisfactory public transport for Beirut urbanites. In any case, “as the perception of public transport being ‘safe’, ‘easy to get on’, ‘reliable’ and ‘frequent’ increases, overall satisfaction rises significantly”, noted a Euronews Next analysis of the EU urban living study.
For Lebanon – once Beiruti and Tripolitan naysayers are proven wrong by the new bus lines’ consistent operation and clean rides – Ahdab says, “we will ideally be able to trade buses in and shift gradually to either fully electrical or at least hybrid buses, in order to have less consumption and more green public transport. This is the next big step for me.”
From Sebaaly’s perspective on the logistics path to the near future, rule of law is just as crucial as for Ahdab, and has also to be flanked by permitting the deployment of new technologies that have not yet been accepted for corporate use. However, tech innovation and deployment for Sebaaly have to go hand in hand with clear application of laws securing market justice. “Drone deliveries are very important for us to scale up and will make things much cheaper and easier for consumers. At the same time, I cannot keep competing with companies that use Syrian drivers who are not registered, not paying taxes, and not paying NSSF, while I find myself having huge overheads and making huge tax payments to the government,” he insists. “It is paramount to regulate the market and every company that is working in his or my business,” he repeats.
As to the current difference between open war and absence of such, he saw the numbers change instantaneously after the ceasefire. “It is very simple to see the number of packages that [Aramex Lebanon] delivers every day. Two days ago [on Nov 26], it was one number, yesterday it was a different number, and today another one. And the increase was more than 40 or 50 percent,” he tells Executive in our interview about 63 hours into the official ceasefire period. “If we feel that stability over the next 60 days or the coming period is for real, then yes, I have a lot of projects and investments that we are working on and I can be sure that the business is going to grow,” he enthuses.
No fear, nor viable room for ambiguity
The world may or may not be nearing the end of the era of the automobile and fossil fuel dependency. But what, absent of a geo-civilizational demise, is not in sight – is an end to the epoch of consumer choice and mobility. It to the contrary is likely to expand further not only in the coming five years. In plain terms, the epoch that relies on transport and logistics will by all historic trendlines continue to accumulate performance data on an upwards trajectory, under the incredibly resilient “more” paradigms of human wants and satisfaction of desires.
The trade and logistics enablers of “more” are people, economic logic, proven technology, tech innovation, and regulations / policies. Economic logic is closely correlated with financing and overheads of logistics. Regulations open or close windows to improved supply chain efficiency. New technology leads to both the path of creative destruction where old leaders are challenged by innovators, and the avenue to higher competitiveness.
Traffic needs to digitize. From the smallest taxi artist to the largest fleet managers, operators need to accept safer and cleaner technologies; all individual traffic participants need to embrace responsible conduct and help implement change to the long unanswered realities of a country with a low-grade public transport system, undisciplined and counterproductive traffic standards and behaviors.
While all of these and more mobility insights are of great consequence for the next phase of economic democracy in this country, it probably cannot be helped even with strong long-term planning and strenuous mid-term efforts that Lebanon will continue for quite some time to suffer countless mobility bottlenecks due to geography and road conditions. But what can be changed – and would be ludicrous not to change asap – is that Lebanon is a realm with very narrow social mobility spheres and behaviorally impaired physical mobility space whose population is drowning in its infatuation with showy, loud, wasteful and inefficient vehicles that are either environmental hazards, or irresponsibly operated, or dangerously ill-maintained, or all of the above.
Lastly, the fortune of the whole region remains shrouded in uncertainty and neither the damage count nor the political consequences and staying power of new economic democratization are clear. However, it is undeniable that, just as the future economy of Lebanon is currently being filtered by the latest war, it will be further and more deeply redefined by the region’s sure-to-arrive fundamental changes. By current perspectives, transport could become one of the sectors that emerge better from this brutal inflection period.
