To gauge the extent to which Lebanese manufacturing industry, an often overlooked but crucial driver of the economy, is being impacted by the current global coronavirus pandemic in conjunction with the previous difficulties in Lebanon, Executive conducted a phone interview with Fady Gemayel, president of the Association of Lebanese Industrialists.
How is Lebanese industry coping with the restrictions on economic activity that have been placed on the country? How serious is the situation for you and what measures were taken by the sector?
It is indeed a very dramatic situation as [the response to the coronavirus] is affecting all the sectors of the economy. We are all primarily concerned about public health of everybody and of the health of workers in industry and the whole chain. We see that developments are unfolding very dramatically as industry has been requested to limit their operations to those basic sectors of food, pharmaceutical, and necessary consumer products, and what is needed in the production of these products. It is a big challenge even for those firms which can continue to work, because they have to take extra safety measures, be it for their personnel, [or] be it for all stakeholders involved in the distribution.
Does the threat of the COVID-19 pandemic and the measures seeking to contain and limit its spread pose a threat to the survival of industrial enterprises?
There is a challenge going ahead as most [enterprises] are not working and this poses serious problems because it [compounds on] the previous problems that we had. As if we needed that. We are already in a big problem and face many challenges. The way ahead is challenging and we don’t know how long [this crisis] will take. Do we have a social responsibility to our workers, and how can we continue? It is okay if it is for a few days but how will it evolve if it continues? What will happen in general, not only in industry? How will daily workers or those who [rely on daily incomes] be affected? They have no revenue. How will they be able to sustain [their existence and their families]? Furthermore, the disturbance caused by the banking sector adds to the challenges.
Are you requesting fiscal support for industry from the government or asking it to instigate relief measures such as credit support or easing of monetary conditions?
Deferring taxes I think is the minimum that is needed. For sure, the government should be very responsible in the sense of addressing the issues of dues to the public sector. [But also] there is a social issue that needs to be addressed, a liquidity issue that needs to be addressed. How can the government listen [to these needs] and where can they bring funds from? I think it is necessary to solicit any specific aid from donor agencies that are not necessarily politically connoted. Something should be done. There should be a lifeline for industry and for people.
Besides the problems related to staying afloat financially, not being able to keep production running, and seeing demand weaken, companies in many countries face serious disruptions of their supply chains, especially when they are long and cross borders. Do manufacturers in Lebanon face significant problems with their supply chains?
We were already faced with the issue for the sake of getting the proper financing for getting raw materials. Now comes, in addition, the issue of corona. But I must say that we have been in close contact on this issue with the government and the central bank; [we were engaging with them] about the highly needed raw materials for those [manufacturers] that are producing corona-related materials. There will be some urgent measures that will allow the imports of needed raw materials.
How about the supply chain scenario of your own company, to look at an example?
It is in corrugated materials. We supply packaging for companies in food and pharmaceutical, for detergents and such. So far we are able to cater to their needs, mind you that there are also paper companies in Lebanon. The issue [of our supply chains] is not related to corona but to the possibility of transferring funds for purchase of raw materials. This was preceding the corona issue and we are trying to find solutions.
All industrialists have to face up to costs as they have fixed costs that they have to pay whether they are producing or not. This is a serious issue. In fact, the corona crisis is now for us two crises. It is a raw material crisis that is aggravated by the corona [crisis]. It is two in one. This is where we are now.
News of large and previously almost unheard of governmental and central banking support packages are coming from numerous countries around the world. Are you concerned that the companies benefitting from such lavish support will have an added competitive advantage in global markets when compared with Lebanese manufacturers?
We are not here to complain that their situation is relatively better than ours. We are concerned with moving forward and meeting the challenges head on. This is why we are saying that we have to find the ways in which we can have damage control. We need to limit the damage and take advantage of available resources. Industry is one of the drivers of the economy. You can imagine [for example] that we are short of many medical supplies that could have been made in Lebanon and that other countries now would not want to export as they reserve them for themselves as a priority. I hope this is a lesson for everybody for the future.
Now is not the time to complain, though. What we are concerned with is having an emergency mechanism for facing up to the situation and doing all what it takes. For this, the government should revert to the international friends of Lebanon. The International Monetary Fund is a political issue, so let’s avoid that at this point in time. There are other agencies that are keen and that have been willing to help Lebanon. Already three months ago we, as Association of Lebanese Industrialists, approached such institutions. As the banking system was not performing, we were telling them that we needed a lifeline solution. This is what I am talking about.
Do you think that France, for example, is in a position to help Lebanon at this time and specifically Lebanese industry?
I don’t want to narrow the scope to any particular country. France, Europe [collectively], and other countries have always been close to the Lebanese people and would not shy away from their responsibilities in this most difficult moment. Don’t forget that we have three problems in one: We have the issue of the Lebanese, the issue of the refugees, and the issue of the Palestinians. We are assuming [responsibility] for all of them and should not be left alone.
As the industrialists’ association, do you have a vision and determination on how to grapple with all these compounded crises?
I want to assure you that we believe that Lebanese industry is called to play a better role in the economy in the future. We do not want to give up. In Lebanon we have been through challenges in the past and lived up to them. Although this one is unusual—the corona is worldwide unusual—and also the [previous crisis] of the need [to find finance] for getting raw materials was also unseen in the past in Lebanon. During the most vicious days of the war and those times, we never did have to think about inability to get raw materials, as it is now. It is a unique challenge.