There was a big ruckus in Selaata a few weeks ago when
local Greenpeace representatives protested against the
Lebanese Chemical Co. The environmental group accuses
the phosphate fertilizer plant of polluting coastal waters with high
levels of toxic waste. The chemical company vehemently denies
the allegation, saying its discarded waste is below internationally
recognized hazardous levels – a claim validated by the assessment
report of a French company they hired. Greenpeace brushed
aside the findings as biased. The ministry of environment publicly
admitted that the factory is polluting and claims to be monitoring
the situation. It’s easy to dismiss the whole irksome episode as typical
antics of extremist groups. But other issues come to play and
industrialists pay heed because it pertains to their lifeline: exports.
The tendency worldwide is to integrate environmental policies
into free trade agreements. Lebanon’s so-called environmental
regulations aren’t strictly enforced, and subsequently
environmental standards aren’t
imposed on incoming goods. But any
Lebanese manufacturer who wants to
export must meet the standards of the
importing country. “Regardless of what
is happening in our own domestic regulatory
system – our export markets are
imposing regulations on us,” says economist
Albert Nasr. “So we have to comply
whether ~e like it or not.”
The bottom line is that access to foreign
markets is at stake. Pressure is already being felt
– Egypt regularly holds back agricultural produce
from Lebanon to test for pesticide residues.
Lebanese apples have been refused entry for this reason.
Commissioned by the Harvard Institute for International
Development, Nasr and fellow economist Ahmed Jachi recently
did a study on the impact of environmental regulations on trade
and competitiveness.
Big firms that export to the EU and US are aware of the issues,
but small and medium-sized enterprises (SMEs) aren’t- and they
constitute more than 95% of the country’s 22,000 industrial firms.
“They mainly export to the Arab countries, where the requirements
are similar to those of Lebanon,” says Nasr. ”They don’t know what
type of standards they should meet.”
Nasr expects that export regulations will soon demand compliancy
for the manufacturing process as well as the final product.
“If ketchup is made with raw materials that have high levels
of pesticide residues, it’s going to show,” says Nasr. “But the manufacturing
process – how you dispose of your waste – the
Germans aren’t going to know about that.” This is where ISO
14000 certification comes in. It’s an assurance that manufacturing
procedures are of minimal damage to the environment.
While it’s a plus to have, ISO 14000 certification isn’t mandatory
to export to foreign markets. Likewise, eco-labeling isn’t obligatory,
but it is beneficial. “Eco-labeling is impo11ant to consumers,”
says Jachi. Especially as today ‘green consumerism’ is widespread
in Europe. “Based on surveys we know that in Germany over one third
of the population is willing to pay a premium for products that
are manufactured with the environment taken into account.”
Local wine manufacturer Wardy understands this well. It is introducing
organic wines, which are made from grapes that haven’t been
treated with chemicals such as pesticides. Producing organic wines
raises costs by 70% to 90%, which will be reflected in prices. But
because there is a huge market for organic products, particularly in
Europe and the US, Wardy expects exports to increase.
“Unfortunately, compliance is very costly,” says Jachi. The
biggest problem facing local manufacturers is that they
are using machinery and equipment that don’t
comply with new standards.
The findings of the study show that if environmental
regulations are implemented the cost
for industries to carry on will be high. “It can
increase costs by as much as 30%,” says
Jachi. The actual cost would be higher, as
lost competitiveness means lost markets.
However, if manufacturers adapt new technology,
increase their efficiency, create new
markets by producing green products, and
make price adjustments to suit, “then the cost of
compliance will drop to less than 5%,” says Jachi.
”We are trying to tell manufacturers that the costs are
not very high once they’ve prepared for it.” Based on feedback
from the study, financing is the main concern of manufacturers.
Interest rates are high and because of the recession local demand is low.
Manufacturers complying with international standards will also
have easier access to partnerships and financing. Foreign companies
will not enter into partnerships with highly polluting industries.
“It’s not feasible and it’s not within their policies,” says Nasr. For
example, in 1994 the International Finance Corporation granted
Cimenterie Nationale a $20 million loan for its expansion plan under
condition that it comply with World Bank environmental regulations.
But it is not enough to wait for industries lo upgrade out of their own
goodwill. Policies and regulations need to be put in place by the government.
The study suggests offering incentives to industrialists who
implement environmentally friendly processes, and imposing ceilings
and taxes on pollution. ‘The monitoring of pollution ought to be scientific
and up to international standards – otherwise there wouldn’t be
an environmental policy that’s worth its name,” says Nasr.
