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MobilityQ&ASpecial Report

MEA focused on local Lebanese market

by Thomas Schellen July 8, 2019
written by Thomas Schellen

Middle East Airlines (MEA) is one of Lebanon’s indisputable assets in the wide realm of mobility. The flag carrier throughout its 74-year history has reflected the varied economic fortunes, ambitions, and realities of Lebanon. To inquire about MEA’s positioning and strategic outlook today, Executive interviewed Walid Abillama, the airline’s head of commercial strategies and alliances.

E: MEA very recently declared that it was a launch customer of latest single-aisle Airbus version: the A321XLR. This aircraft has a longer range of up to 4,700 nautical miles and 30 percent lower fuel consumption than other planes in the A320/321 family. What is MEA’s strategy behind going for the XLR version? Do you primarily want the fuel efficiency or the larger range?

We want both. Our strategy is based on one clear fact that we have to always remember: MEA is a small airline that is competing at Beirut airport with the biggest airlines in the world. We compete with all these guys, and our natural market is Lebanon, which is a small country. Our strategy is to service most markets to and from Beirut airport that make sense and are sustainable. We either service [these markets] using our own fleet or by using our commercial agreements with carriers that operate into markets where we find common benefits.

The difficulty for us is that the market is decentralized and that we need to set priorities as to which point makes the most sense. We don’t fly to other markets—outside of destinations in Western Europe, the Eastern Mediterranean, the Arabian Gulf, and Western Africa—but we service them through code-sharing agreements, especially in North America (Canada and the USA) where we have commercial agreements either as special pricing agreements or as code shares. What makes it difficult for us to serve destinations other than the ones I listed for you is either a lack of economic feasibility for using our own aircraft or a lack of partner [airline], which usually means the unwillingness of a [potential] partner to cooperate with us.

We are a small airline and [we take] the perspective that it is always wise for the national airline to be dimensioned at the size of the national market, which is a lesson that we learned the hard way. When the civil war ended, the management of the airline came up with a strategy that they should go after the Lebanese diaspora. Between 1990 and 1997 there were many losses because we were concentrating on serving Lebanese outside of Lebanon. This is a high-risk strategy, because people residing in a country are interested in and loyal to the airline of that country. Thus the strategy of servicing the Lebanese diaspora outside of Lebanon was at a risk of the competition being in a better position for serving this community. So we lost money.

E: Didn’t MEA at that time also have a very large headcount in comparison to the number of planes in operation?

Yes.

E: And it was widely perceived as a result of the conflict years when many employees were taken on for political reasons?

True.

E: How much of the loss in the years 1990 to 1997 was based on the strategy of seeking to service the market of Lebanese diaspora customers, and how much was based on the very large headcount?

Approximately one third of the losses were attributed to the irrational network, one third to the irrational fleet, and one third to headcount.

E: You undertook a massive restructuring in the early 2000s, rationalizing networks, aircraft choices, and employee numbers. What is your approach today?

We take risks but we take very calculated risks because we are a small airline, plus we focus the risks that we take on the Lebanese market. Our strategy is to grow—we cannot escape growing—but the challenge is to do it rationally and at the right time.

E: Between renewal and expansion you are looking at quite a large investment in the next three years. Is that perception correct? One of the sales argument for the XLR seemed to be that you can reach destinations that are further afield, with this single-aisle twin-engine jet and don’t have to use the larger dual-aisle machines. Is MEA looking at using the greater range for expansion into destinations like Sao Paulo?

Let’s stick to some facts. The XLP range extends from Beirut to Dakar in West Africa or to Reykjavik and Dublin but it cannot go across the North Atlantic. It can do so from Europe but not from Beirut. It also cannot go to China. [In any case] it is not always good to be a leader. Sometimes it is better to be a follower, and we have learned a lot from low-cost airlines. You can learn from their mistakes and you can learn from their successes. We are very good at observing what other people do and taking the best practices of what they do.

“I don’t think there is a difference between us and a LLC in the way in which we think commercially.”

– Walid Abillama, MEA’s head of commercial strategies and alliances

Opening new routes is about when you do it and how you do it. We have a top ten bucket list of what to do, of points where there is [the] most traffic that is not being serviced by direct flights. We monitor this every month and plan accordingly. Sao Paulo is very far [down] on our list and South America is very far on our list, and so is the Far East. North America is on the top of our list but has political obstacles. The next points in Africa that are hot on our lists are points like Abuja in Nigeria, Kinshasa [in Congo], and [other destinations] that come right after [the existing connections to] Abidjan, Lagos, and [Accra]. I would say the XLR could operate in flights to many new [destinations] in Africa and perhaps in Asia, where the challenge is to find the right partner to China. China is a big question.

E: As you said, the experience of low cost carriers (LCCs) has many lessons to offer, in learning from failures of airlines like Germania or Wow earlier this year and from successes of LLCs in the Middle East market, where Air Arabia and flydubai were founded and became active in the past 10-15 years. This must have had implications for your strategy.

Yes, but I want to note and clarify something. I don’t think there is a difference between us and a LCC in the way in which we think commercially. At the end of the day, they, just as we, pay for fuel, maintenance, they pay their crew, taxes, and airport fees. So they have to make money and since they do not have business class to sell, they have to make their money in the economy segment. Their strength is that they are very flexible from very low to very high [economy class fares]. We are less flexible but we both want to make money. So it all boils down to who is monitoring the market better and gives the market what they want at the right time. We also have other tools like loyalty [schemes] and incentives to travel agents but the flexibility in the pricing we have learned to include.

E: Isn’t there a difference between the fact that the LCCs are at the mercy of the market and shareholder interests whereas MEA is the flag carrier-affiliated, albeit by ownership via Intra and its shareholder BDL, with the state? Is your mandate at MEA to make profit at all costs or is your mandate to serve the Lebanese market and look at your profit always in connection to this role?

No, the primary objective is to make money. But we understand that to make money, you have to [do it a way that fits your purpose]. Do you watch football? In football, everybody wants to win, the objective is to score goals and win. But to win and sustain a good team, you need to play well and play nice. And this is something that you have to believe in. Our objective is to make money, but we have to service the Lebanese market and the needs of Lebanon, in the sense of the needs in terms of tourism and people who reside in Lebanon. We need to do this correctly because this will sustain our money-making objective. But the objective is to make money.

E: But when comparing with purely private sector LCCs, are you not less vulnerable to shareholder decisions that might be driven purely by profit motives?

In 1998, the situation [of MEA finances] was very delicate and I don’t wish to be back in those shoes. Since then, we have built a robust airline with concentration on conservative growth. Our financial position is robust. Our current commercial position in the market is very robust. We have loyalty in the Lebanese market, and we enjoy strong market shares on our routes because of the services that we offer. We offer the right capacity at the right times and go out of our way to operate extra flights—and it is very expensive for us to do that [as it means] to react in the last moment to sudden surges in demand.

“We have built a robust airline with concentration on conservative growth. Our financial position is robust.”

– Walid Abillama, MEA’s head of commercial strategies and alliances

One fact is essential to the airline industry and this fact is that the aircraft size is fixed. This [inflexibility of supply] has implications on the pricing level that very few people understand. If I don’t keep selling until the last minute, my competitor wins. If I am out of seats in the month of August and my competitors will have seats and would sell at the price that they wish to sell at; they will have an easy ride while I have to reject all this demand and will not be able to serve my customers, and I will lose them. The best thing for the consumer is to always have a choice and once the consumers cease to have choice, they lose. So to preserve the choice for the customer, I have to have seats available—and that is what I do.

E: And from the 20-year experience between 1998 and 2017, the trajectory of pricing of the average seat on MEA was downward, and this was better for the consumer, wasn’t it?

Yes.

E: How are MEA experiences concerning increased connections to Europe through LCCs when flights to Western or Eastern Europe are concerned? Do you have any Eastern European destinations on your target list?

European traffic is now segmented into two types of traffic. It is either direct or through Istanbul. Turkish Airlines and Turkish low-cost airlines have cleaned up [the market for connecting to] all the European stops. Lufthansa is now selling either direct to Frankfurt or long-haul: USA and Canada. [It’s] the same thing with Air France. With Aigle Azure and Transavia (which launched Beirut services in 2017: Editor) there are low cost airlines to Paris, and we were not affected because we immediately adapted our pricing model and our commercial model. As long as the market is healthy and as long as growth is there, one has always room to adapt if you know how to apply the correct policies.

Right now, Eastern European destinations are far behind Western European destinations. But we are [present through code-shares]. We are code-sharing with Czech Airlines and are selling a lot of seats on their flights as they operate in this market. Czech Airlines and (Romania’s) Tarom are part of SkyTeam and Lot (Polish Airlines) has started operating (flights to Beirut as of June 2019: Ed), and we are cooperating with them commercially.

E: The impact of aviation on climate is an emotive topic; are protests or calls in Europe for climate change-related taxation of airline fuel a point of concern?

If you are in Sweden and want to visit Lebanon, how can you do it if you don’t fly? It is their right to have clean air, and it is our duty to service the demand with technology that maintains clean air—but demand will always be the driver. If there are tourists in the Netherlands or Germany who want to visit Lebanon, they have to fly. These people can protest, but they will have to answer to the tourists who would like to visit Lebanon before we have to answer to them. We do not build airplanes, we try to find the cleanest ones, but we want to bring tourists to Lebanon.

E: You have been doing this well, and now Lebanon and all of us are in a situation where the airport has to increase its capacity. How is the projected expansion of Beirut airport in the near and longer terms impacting MEA?

It will be for the better. Our product is limited by the infrastructure of Beirut airport. The better the quality of service is at Beirut airport, the better it will reflect on MEA and we support the project.

E: Will you, additionally to scheduled aircraft renewals, expand your fleet and your network with a view to ongoing improvement and later expansion of Beirut Airport or will you say, in terms of target market and strategy, let’s do more of what we are good at and are doing already?

We are expanding our fleet. It looks like we are just replacing aircraft [in 2019 and the coming years], but that is not really true because the A321 will have 150 seats, while the A320 currently has 126 seats.

E: And in the number of aircraft, you are looking at what total fleet size in the next few years?

We currently are at 18, and we may have one or two more aircraft, but even with the equal number of aircraft [when comparing the fleet of the recent past to the future fleet], there is an immediate 20 percent increase in capacity. So [the overall capacity increase] may be in the order of 30 percent if we decide to add one or two additional aircraft.

E: Would the newly ordered XLR jets be on top of that, increasing the fleet by four more jets in years from 2023 that Airbus announced as the year when it would begin deliveries of this model?

The four jets will be part of the fleet increase by two more jets.

E: So the net increase of the fleet is looking to be two jets and the increase in capacity is to be 30 percent.

Yes.

E: What can you say about your profit and performance data in 2018 and 2019 to date?

In 2018, we made less profit than in 2017, because all additional revenue that we made [last year] by carrying more passengers was eaten up by fuel costs. In 2018, we made $50 million more revenue, but fuel cost translated into $60 million increase in cost. In 2019, we are going to inverse this phenomenon, because the fuel cost has dropped and we will be able to enjoy the extra revenue that we are making in terms of profits for 2019 if everything goes as expected in the high season and in the rest of the year—2019 should be financially better than 2018. And this is needed at a time when we are investing in the fleet and taking the risk.

E: How much is the total investment into the fleet that MEA is undertaking today?

I do not have visibility on this, but we are receiving nine new aircraft in 2020 and another nine new aircraft in 2021.

E: A number quoted by Reuters reporting from the Paris Air Show was that the four XLR will cost something like $500 million in list prices—which are usually not the prices that airplane buyers end up paying—but is it correct to think that the total investment into replacement and expansion of the MEA fleet would amount to several billions of dollars?

Correct.

E: In terms of looking forward into the next few years, we have the airport expansion, the fleet renewal and then, on another level, there are implications from the impending arrival of the new Electronic Trading Platform to Lebanon’s capital markets next year, where the message from the governor of the central bank not long ago was that privatization should be pursued on MEA. How do you view this prospect?

I am not in a position to comment on this. But we are a strong brand and the public trusts MEA. We are competing and we are surviving and offer a quality product at rational prices.

E: But when it comes to the financial side of privatization, much emphasis is being placed on corporate governance structures, due diligence, and all financial preparations for taking a company public. I surmise from what you just said that you cannot tell me if MEA has contracted any advisers or investment banks in this direction. Can you tell me, however, why you did not publish annual reports in 2018? I did not find them on your website where I saw the 2016 board of directors report as the most recent entry under financial statements.

(Asks “Aren’t they published?” on phone with staff members: Ed) 2018 is not published yet, but the results that I gave you are correct. There will be around $10 million less profit [for 2018] due to the increase in fuel cost. We had about $50 million increase in revenue but the additional fuel costs [ate away at this].

E: And results for the first five months in 2019?

The trend is opposite in terms of fuel. Now fuel cost has increased due to increased activity, but since the price [of fuel] has decreased, it has helped us to maintain our costs so the extra revenue we made we are seeing as moving to profits.

E: Can you say how much profit for the period is higher when compared to the same period in 2018?

Profit so far for the first five months in 2019 is $6 million, but this is an estimate.

E: Is this similar to how the profit was in the same period of 2017?

Hopefully better.

E: In an earlier interview with an aviation magazine this year, you said that passenger increase was around 6.5 percent?

This is now much higher. Traffic is at the level of 11 percent.

E: This is 11 percent up in the first five months of 2019 when compared to 2018?

Yes.

July 8, 2019 0 comments
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AutomotiveMobilitySpecial Report

Hybrid and electric vehicles in Lebanon

by Nassib Khoury July 8, 2019
written by Nassib Khoury

Lebanon still lags behind when it comes to implementing eco-friendly solutions across the board. In the automotive industry this has meant little progress toward the adoption of electric vehicles, despite some positive movement this past year. In April 2018, the government announced under article 55 that those wishing to purchase a hybrid electric vehicle (HEV) for private use would pay 20 percent customs for a vehicle of any value; those purchasing an HEV for public use pay 10 percent. Fully electric vehicles (EVs) were exempted from customs fees and mecanique fees (the first year) altogether. This was a move in the right direction, but much more needs to be done before electric vehicles will become affordable and practical options for Lebanese. Car importers and users need to have substantial privileges in importing, selling, and buying these cars.

A first recommendation would be to reduce the customs for HEVs to a lower rate than 20 percent to incentivize their purchase. At the moment, for more basic models, there can be little difference between the HEV and combustion engine—sometimes the advantage even goes to the latter. Currently, car buyers pay 20 percent customs duty on vehicles valued up to $13,333; for vehicles above $13,333 they pay 50 percent on each additional dollar; this means that for low-income Lebanese there is no financial advantage to buying a hybrid, given that the cheapest option in the market right now is $18,700, without registration. The batteries are also expensive—the average cost ranges between $7,000 and $8,000—and have to be replaced after the eight-year mark, making this a future cost that EV buyers must factor in.

The second recommendation would be to give a bonus, as European governments do, in the form of cash backs, lower insurance rates, or—in cooperation with fuel stations—the ability to recharge the car for free for a year.

The third—and most difficult to implement—recommendation would be to improve infrastructure in the country to accommodate HEVs and EVs, ensuring there is countrywide access to charging stations. Gasoline is still a smarter bet for the average Lebanese user, given that it costs roughly the same to fill a tank as it does to charge an electric battery, yet the former takes less than five minutes compared to an hour or more for the latter.

Promote it and they will buy

Despite these obstacles, the last three years have seen more efforts from car importers to promote hybrid and electric vehicles. At the e-MotorShow in Beirut this April, car importers showcased a range of electric cars from the most basic to high-end models.

Porsche Panamera 4 E Hybrid

Porsche Center Lebanon has an interesting lineup with two flagships HEVs: the Panamera Hybrid and the Cayenne Hybrid. Both cars have a plug-in hybrid system able to rely solely on the battery for a driving range of over 40 km. That means that any Porsche hybrid user would be able to commute in Beirut with zero emissions, zero consumption, and zero noise. Porsche Center Lebanon is also on the forefront of EV sales in Lebanon, with plans to import and sell the Taycan, a fully electric sedan by the beginning of 2020. The Taycan has a range of 450 km, meaning that any user could travel the length of Lebanon twice on a single battery charge.

Elsewhere in the German car segment, ETS F.A. Kettaneh S.A. has plans to import the Audi E-Tron, a luxury SUV with a range of over 400 km, by the end of 2019 or the beginning of 2020. T. Gargour et Fils, representatives of Daimler-Benz, are already selling plug-in hybrid vehicles like the E 350, the E 53 4M coupé and cabriolet, and seven-seaters like the GLE 450.

GAA & Co., the exclusive importer of Swedish car brands in Lebanon, are importing and selling two high-end Volvo hybrids. The XC90 and the S90 plug-in hybrid represent a serious alternative to German brands in terms of fuel-efficiency and eco-friendliness. In addition, Volvo Lebanon will also showcase a fully electric car in 2020, the Polestar 2.
In the British car lineup, starting this year, Saad & Trad have begun importing the Jaguar I-Pace, an electric SUV with a range of 470 km on a single charge.

The Japanese brand Toyota, represented in Lebanon by distributor BUMC, is a pioneer in HEVs. Toyota was the first manufacturer to mass produce a hybrid vehicle: the Toyota Prius. Today, Lebanese customers can buy the Toyota Prius but also the Rav 4 and Camry, both only available in their hybrid versions. Added to the entry level line in 2019, BUMC now imports the Lexus ES 300h and the RX 450h.

Volvo S90 Plug-In Hybrid

Korean brand, Hyundai, represented by Century Motor Company, was the first to import and showcase an alternative to the Toyota Prius—the Hyundai Ioniq. The Ioniq is an ideal car for taxis and private users, as it is not only fuel-efficient but also well-equipped. Century Motor Company has lately imported the Kona, a fully electric compact SUV with an impressive range of 450 km.

In the French car lineup, Renault country-representative, Bassoul-Hneiné, was the first to import an “affordable” EV, the Renault Twizy, available since 2017. At $18,700 the Twizy is the least expensive EV in Lebanon, but lacks in equipment and is designed for urban driving, with a limited range of 80 km. Following the Twizy, Bassoul-Hneiné imported the fully electric Renault Zoe in 2019, a higher-end vehicle and one of the only hatchback EVs available in Lebanon with a range of 210 km, capable of traveling the Lebanese coastline on a single charge.

Chinese brands sell cheaper than their peers. SIDIA, the representative of BYD in Lebanon, imports and sells the Yuan, a fully electric compact SUV available at a relatively affordable price starting at $34,410 (including VAT). Those Executive spoke to, indicated that Chinese brands were selling more and more in Lebanon; one possible reason for this increase is that these brands give Lebanese drivers the chance to have a well-equipped car at a competitive price. Chinese brands with hybrid and electric products have become game changers. A Yuan from BYD, for example, would cost 20 percent less than an American or a European alternative, like the Chevrolet Bolt EV, (albeit the latter’s range and quality would also be substantially higher).

Starting to take charge

Other car importers in Lebanon will not import electric vehicles, such as Gargour Automotive Company and GABS, which represent FCA and Suzuki respectively. This, however, is not specific to the Lebanese context but part of the strategy of their mother companies, which are not working aggressively on HEVs or EVs. Rymco will not import the Nissan LEAF because it is not yet available for the Middle East market. Similarly, A.N. Boukather will not consider importing hybrid or electric cars in 2019 for many reasons, including: the strategy of the car manufacturers (Mazda, Ford, and Opel), poor infrastructure in Lebanon, and limited incentives for users.

For more accessible options—the majority of the brands listed above do not represent the mass market section of electric vehicles—Hyundai, Toyota, Renault, and Chinese brands like Trumpchi, offer HEVs and EVs ranging between $20,000 and $35,000. This range is still expensive compared to combustion-engine options. To make it more appealing, BUMC and other car importers like Century Motor Company, Porsche Center Lebanon, and GAA & Co give the customer eight to nine years warranty on the battery.

From going nowhere to going somewhere, the private sector in Lebanon is beginning to take charge when it comes to electric vehicles. In the coming years, especially with car manufacturers complying with new emissions and noise pollution regulations worldwide, there will likely be increased imports of HEVs and EVs to Lebanon and the country will have to prepare its infrastructure accordingly. Lebanon has to follow the world in terms of mobility, regardless of its slow adoption.

July 8, 2019 0 comments
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MobilitySpecial Report

Public transport projects in Greater Beirut and beyond

by Nabila Rahhal July 8, 2019
written by Nabila Rahhal

While it is true that exaggeration is somewhat of a national trait, when it comes to congestion getting in or out of Beirut—and driving inside it—it often feels that no hyperbole is enough to describe the sense of despair evoked when inching forward in bumper to bumper traffic breathing in exhaust fumes and listening to the sound of honking horns.

The numbers indicate that the congestion problem in the Greater Beirut Area (GBA) is real. The World Bank estimates that 650,000 vehicles enter the GBA on a daily basis, with 300,000 accessing the city via the northern entrance of the Jounieh-Beirut highway, 200,000 via the southern entrance, and 150,000 via the eastern highway or Hazmieh highway—not counting the vehicles already in Beirut. Getting stuck in this kind of traffic is not only frustrating, it has a negative impact on GDP as well; the World Bank estimates the cost of urban congestion at 5 percent of Lebanon’s GDP.

Because Lebanon does not have reliable public transport, people have little choice but to use their cars, especially when commuting from outside the GBA, according to Ziad Nakat, senior transport specialist at the World Bank. “The available public transport in Lebanon is of low-quality and people are reluctant to use it,” he says. “It is catering for the market of those who really don’t have an alternative, so it’s not fair for the low-income population, and is not providing the middle-income people with an alternative to their cars, so it’s not solving the problem.”

Decreasing congestion by developing more roads is not a viable option, according to Nakat, because of Lebanon’s urban density and its terrain, with the mountains to one side, the sea to another, and a narrow coastal strip in-between. Any road development project would need to either expropriate land or construct tunnels in mountains or highways over the sea, all of which are costly options, Nakat says. This, he argues, leaves developing a reliable public transport as the only option for decreasing congestion. “Greater Beirut has a population of at least 2 million, and in any city with a population of more than 1 million, it is very difficult to reduce congestion without public transport,” Nakat says. In comes the Greater Beirut Public Transport Project (GBPTP).

Bus by numbers

According to Nakat, the GBPTP includes a Bus Rapid Transit (BRT) network—described by the international civil society Institute of Transportation and Development Policy as a “high quality bus based transit system similar to a light rail or metro system”—of around 120 18-meter BRT buses, each with a capacity of 120 sitting and standing passengers, that will run on 40 km of dedicated lanes—lanes sectioned off with barriers to prevent other vehicles from accessing them.

The main BRT line will run in the center of the highway from Beirut to Tabarja, Keserwan, covering a distance of 26.2 km, with a couple of lines on the outskirts of Beirut proper, including Ain el-Mreisseh, Cola roundabout, and Mirna el-Chalouhi avenue, according to Nakat. When the infrastructure does not allow for a dedicated BRT lane, such as when there is a bridge or tunnel, it will join the other vehicles on the road for a short distance, which is something a train or metro cannot do, he explains.

Feeder and regular bus network
Source: World Bank

In order for people to access the BRT, there will be three central “park and ride” spaces, in Tabarja, in Charles Helou station, and in the Mar Mikhael bus station, the latter two of which will be renovated, where passengers can park their cars and take the BRT. There will also be bus stations at every 1 km of the journey from Tabarja to Beirut that passengers will access through a pedestrian bridge equipped with both stairs and elevators; this is a plus for pedestrians who will be able to cross the highway risk-free.
According to Nakat, the BRT itself can bring down the roughly 90-minute journey from Beirut to Tabarja—or vice versa—during rush hour traffic to 40 minutes, reducing total daily commute time by an hour. To connect the BRT with the cities and areas around it, Nakat says the GBPTP includes a network of 20 lines upon which a total of 250 feeder buses will drive among the other vehicles on the road and take passengers closer to their destination. He explains that a dedicated BRT line is not needed for those areas that will be served by the feeder buses as congestion is not a major issue there.

The total cost of the GBPTP is $295 million, $225 million of which are coming in the form of a soft loan from the World Bank, with the remaining $70 million a grant, Nakat says. Future plans, which the World Bank may be interested in being a part of, include a BRT at the southern entrance of Beirut, he adds.

The Council for Development and Reconstruction and the Railways and Public Transport Authority (RPTA) are working with the World Bank on the infrastructural groundwork, but operation and management of the BRT and feeder buses will be by the private sector upon purchase of the buses, Nakat says.

The GBPTP project has been approved by the World Bank’s board of directors and Lebanon’s Council of Ministers and the loan has been signed off but is still pending the approval of Parliament, at the time of this writing; the deadline given by the World Bank was July 5.*

Reality bites

On paper the GBPTP looks like an ideal solution for the GBA’s congestion problem, however, stakeholders are aware that implementing it will not be an easy task. To Ziad Nasr, president and general director of the RPTA, anything can be surmounted through collaboration. “Shared transport is a shared responsibility and so there should be coordination among all stakeholders including the Ministry of Interior and all municipalities in which the buses run through,” he says, explaining that this is the most crucial for the first phase when the infrastructure is being laid down.

Nakat anticipates an increase in congestion while the infrastructure is being developed that will result in backlash from commuters who will suffer even more in traffic before things begin to get better. The BRT will also necessitate that a lane be taken away from private cars, which Nakat again anticipates will be a problem among motorists who are attached to their car as a mode of transport—and there are plenty of those in Lebanon. According to Nakat, private cars account for 85 percent of the trips made in Lebanon.

Still, Nakat believes these discomforts will help in shifting the Lebanese mentality from driving their cars to riding the public transport vehicles, emphasizing that the focus should be on moving people more efficiently and not on moving cars.

Come together

A reality that the GBPTP will have to contend with is the existence of an informal network of public transport buses and minivans in Lebanon. “In the absence of the public sector providing shared transport, the private sector has largely taken over although in a chaotic and unregulated manner, and there are many who now work in the informal public transport sector,” Nasr says. “Therefore, there should be solutions by the government for those who are working in this sector such as integrating them in the new system.”

Nakat sees all stakeholders of public transport, including the informal system operators, as working together to increase public transport usage in Lebanon, and says the majority of bus and minivan operators will be integrated within the GBPTP. He explains that some will be hired to drive the feeder buses while others may tweak their business model and choose to operate in the areas the GBPTP plan does not cover or transport passengers to and from the BRT stations. Others, however, are not as confident and believe that integration will not be smooth. Speaking out of personal experience with the RPTA owned buses, Tammam Nakkash, managing partner at Team International, an engineering and management consultancy, says the informal system negatively impacted their business back in 1995. “The informal sector heavily competed with us even breaking the glass of our bus stops and harassing RPTA drivers and there was no one to stop them,” he says. “The system broke down because there was no mechanism to regulate the others.” Nakkash advises stakeholders in the GBPTP to use the “carrot and stick” approach if they want to integrate the informal sector, working with them but also enforcing regulations when they are violated.

Chadi Farraj, cofounder of the Bus Map Project, an initiative that maps the informal public transport system in Lebanon, believes that integration of the informal system alone is not enough. “They should follow a participatory approach with those in the informal bus system and include them in the conversation to get the majority’s input before they proceed,” he explains. Farraj adds that the World Bank convened focus groups with syndicates of public transport operators but those do not represent the majority of drivers.

Once the GBPTP is approved by Parliament, it should take up to five years to be operational, Nakat says. During that interval, Lebanese commuters to the GBA will unfortunately continue to drown in traffic while dreaming of faster commute alternatives such as the BRT; or dare they even dream of a railway or metro system in the future?

*Parliament approved the GBPTP during a legislative session on June 26.

July 8, 2019 0 comments
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MobilitySpecial Report

Strategies, opportunities, and natural limitations to EV infrastructure in Lebanon

by Thomas Schellen July 5, 2019
written by Thomas Schellen

Based on discussions with the two Lebanese gas station network operators—Medco and IPT—it seems fair to describe the first step of the journey into this particular private-sector infrastructure construction as based on the understanding that electric vehicles will make their appearances in Lebanon sooner or later, and that the country could ill afford to fall behind global developments in electric mobility.

Notwithstanding, however, the faint hope for a sustainable electricity solution among large parts of the Lebanese population, there are clear technical possibilities to solve Lebanon’s electricity infrastructure and road quality problems. It appears paradoxical then that the nation’s electricity supply problems feature heavily in popular perceptions as a barrier against phasing in electric cars. By comparison, the much less mutable geographical size and population distribution of the country combine into an issue that is not much talked about in connection with the viability of e-mobility approaches.

Lebanon is a very small country if one thinks about distances that need to be covered—driving time is a different consideration. From practically any starting point in the country, there is simply no direction in which a person can drive for 250 km straight and still find themselves in Lebanon. Also, Lebanon, by international comparison, has high urbanization, high population density, and relatively short internal distances when compared with any non-small-island nation.

On one hand, this means that establishment of electric driving infrastructures and charging units are not nearly as challenging in Lebanon as they are in thinly populated territories or nations where long stretches of roads lie between settlements—whether one thinks of geographies in Africa and Australia or countries like Norway that face automotive e-infrastructure issues.

To illustrate the point, Lebanon’s gas station network is estimated at about 3,200 units, of which 2,500 are officially registered. In a country where the population density is assumed to be around 600 persons per km² spread across 10, 452 km². European countries with gas station networks in the similar range of 2,500 to 3,000 in total are, for example, Sweden, the Netherlands, and Bulgaria. However, Sweden is 45 times the size of Lebanon by territory, Bulgaria 11 times, and Austria eight times. Population densities in these countries range from just under 30 persons per km² in Sweden, to 64 in Bulgaria, and 101 people in Austria.

Such data suggests that exceedingly few people in Lebanon would have to cover as large a distance as typical Austrians, Bulgarians, and Swedes when they want to visit relatives or business acquaintances across the country, and that the average hamlet dweller in Sweden, Bulgaria, and Austria has to drive much farther than the typical Lebanese to get to the nearest fuel pump.

The move to future mobility will economically be marked by new winners and creative destruction of old realities.

So, in relative terms, Lebanon does not look like a territory that will face particular economic cost barriers when it comes to the establishment of a charging unit network. Recalling the experience with the rollout of mobile telecom infrastructure during the country’s post-conflict restoration of communications in the 1990s reinforces the notion how fast the nationwide mobile networks could be built in regional comparison.

On the other hand, the shortness of distances and high concentration of people in Lebanon also means that economic feasibility of mobility options involving high initial acquisition and comparatively advantageous, or even low operation costs, is not easily achievable. It is, apart from a few people who drive for a living, quite a rare feat for any motorist in this country to cover more than 100 km or 200 km on a given day and reach an average annual count of more than 20,000 km or 30,000 km.

This, in turn, means that vehicles with a trade-off between elevated acquisition cost and low operations cost make little sense in Lebanon, if lifetime cost of a car is the main consideration. Electric vehicles (EVs) of certain power, quality, and comfort, cost more than similar cars with an internal combustion engine, at least in 2019 and probably for some years to come. This means that an average Lebanese with daily driving needs of 25 km to 35 km (9,000 km to 12,500 km per year) will hardly ever save enough money from e-charging (vs. filling up with gasoline) to recover the higher acquisition cost of the e-version of his compact or middle-class car.

Such factors illustrate that overall feasibility of automotive electric mobility is a complex scenario by which barriers and opportunities will differ widely from country to country. Moreover, in the current situation of undeniable mobility needs that clash with old, economically, and environmentally no longer tenable solutions, engineers, tinkerers, and visionaries are crowding the field of radical inventions with solutions that have technical potential.

Contenders that are visible from the cognitively very limited vantage points of media range from cars with integrated solar cells, where a long-range passenger sedan prototype this summer was introduced by a Dutch manufacturer, to hydrogen-powered vehicles using the fuel cell technology that is often mentioned in the discussion and is available internationally in some vehicles on the road. But in all probability there are many not-yet-discussed inventions that are looming just beyond the horizon as solutions in both the in-car and infrastructure technology realms.

As the market constitutes the economy’s cognitive laboratory for discovering the most feasible practical solutions for an economic problem with great social and financial implications, i.e. profit potentials, the move to future mobility will economically be marked by new winners and creative destruction of old realities. State interferences in this market process in form of regulations and sometimes unintended nudges will additionally influence the mobility developments and sometimes distort them, but public interventions are inevitable due to the great importance of mobility for society.

Mobility of self is much more than automobilism

The entirety of automotive mobility and diverse digital mobility is thus being immersed in an ocean of change that is concealing a wide variety of challenges but also is already witnessing all the mobility perks, trimmings, and side shows—from hybrid cruise ships to Formula E car racing—that the world has become addicted to in the 20th century.

Also, it pays to remember that this is not just about cars. Socially and financially profitable digital mobility trends relate to everything with wheels. Biking fans can look—and buy in Beirut—top of the line electric bicycles, which today means digitized two-wheelers with pedals, advanced and often very well-concealed batteries and minimalistic electric motors that support and amplify human pedal power. While pricey for a bicycle, quality specimen are engineered to transform both urban and cross-country pedaling efforts into paradisiac experiences. Moreover, sleek e-bikes of recent manufactures—and Europe is right now brimming with startup producers and avalanches of fascinating new e-bike designs‚ reach serious speeds (some versions do not lose thrust until 45 km/h) without the stigmas of being clumsy, unsightly, or retiree mobility focused transport tools that had once limited the attractiveness of e-bikes to some buyer segments.

In the Lebanese market, retailer Bike Generation says they sold somewhere north of 120 e-bikes over the past five to six years. As Bike Generation co-founder Georges Bouez tells Executive, the market here has rational potentials for use of e-bikes in commuting. He concedes, however, that this potential is still restrained by apprehensions about e-bike prices—which are high in comparison to mass-market conventional bicycles but actually, at $3,000 to $9,000 for an imported machine, are not exorbitant when one takes a look at what some e-bikes go for in European countries—and by misperceptions that a bicycle is exclusively for leisure and not suited for daily transport to work.

Then there is an entire realm with heavy electric mobility disruption potentials in micro-commercial and personal urban transport. This realm extends on one side from e-versions of transport scooters to three-wheeled vehicles used on private properties such as hospital and university grounds. E-mobility in this segment can ease transportation of goods and persons in specific environments, but they appear to be in need of clear allocations on what spaces they can circulate and also better regulations as to which uses require what safety precautions, driver training, and insurance covers.

The same need applies to the adjacent mobility segments of electric kick-scooters and e-versions of conventional scooters, the latter long having acquired a well-deserved reputation of being threats to any organized and rule abiding traffic in Lebanon.

There is an entire realm with heavy electric mobility disruption potentials in micro-commerical and personal urban transport.

Constituting additional options for urban personal mobility around the world’s cities (and arriving with the concomitant news of accidents involving electric kick-scooters), these fast-rolling stand-on mini-vehicles, which are jumping from being mobility toys of preschoolers to choices of grown-up urbanites, could emerge as the layer of one-risk-too-far in local traffic if they are not subjected to adequate regulatory frameworks and actual enforcement of such frameworks. Similarly, an increase in the population of electric scooters in Lebanon might easily become the new menace dimension of obnoxious and no-rules-respected delivery guys that make streets in any Lebanese city become risk accumulation cauldrons.

In short, all these realms of new, up-scaled, and old mobility bring added risks, and although these diversified transport and mobility options tend to bring benefits and perhaps increase urban productivity, the expectation will only have merit if Lebanon’s national and municipal frameworks of informal traffic conduct, formal regulations, and effective and respectful enforcement are seriously enhanced.

Without even embarking on a discussion of what mid-term future scenarios involving e-trucks and e-buses, autonomous delivery fleets, taxis, and goods or passenger drones could mean for Lebanon, the digital mobility scenario that is starting to solidify here is one of a transitional sense—meaning not one of economic determinism or dialectical paradigms. The chick of the new digital mobility is contained in the egg of the country’s existing mobility; namely the, historically unprecedented, progress inducing but also problem-laden 20th century mobility. The emergence of the new will be a challenge, and it will take all the investments of structure and sanity that Lebanon’s state institutions can muster.

July 5, 2019 0 comments
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MobilitySpecial Report

Private sector embarks on creation of EV charging-point infrastructure

by Thomas Schellen July 5, 2019
written by Thomas Schellen

The most eye-catching developments in mobility involve cars. The world is filled with cars; many of us sit in these machines for inordinate lengths of time every day. Surveys done in recent years in the United States found that the average person might spend upward of 17,500 minutes per year at the steering wheel or about the same as seven full work weeks, according to a 2016 study by the American Automobile Association; an academic study in 2007 assessed the average time spent driving by US residents as about one hour and 20 minutes per day, which makes almost 36,000 minutes annually.

Such “average Joe” observations have a zillion weaknesses and are hardly useful when Joseph or Jeanette is stuck in a traffic jam that has no right to exist. But it seems fully reasonable to say that a lifetime in the late 20th and early 21st century is a lifetime with a lot of driving and a lot of time wasted in traffic, as well as other auto-related hassles. If not a driver themselves, pretty much everyone in the world uses or is confronted with cars on a frequent basis, and even the most spiritually focused stylite or eremite in the desert would be hard pressed if she wanted to live with a vow of not setting eyes on passing vehicles.

As our obsession with cars and motorized mobility is shifting to new considerations that stretch from autonomous vehicles and flying taxis to everyday cars that no longer rely exclusively on internal combustion engines, the question of electric vehicles (EVs) and hybrid electric vehicles (HEVs) is capturing the attention of the car-crazy population. This topic of EVs has two parts, however, the first part talking of the latest cars featuring the technology and the second talking about the problems of building an EV charging infrastructure.

Although PEVs and EVs had become surprisingly successful in markets elsewhere, few such vehicles made appearances here.

The question on how to charge EVs rapidly enough and cheaply enough so that electric cars make sense has been at the core of the electric mobility debate since the first hybrids came to market in the late 1990s and specifically since maverick US maker Tesla early in the current decade commercially launched a first pure EV, the Model S, that made every competitor look old. The issue of infrastructure commands so much attention because even if an electric car can be charged fully by plugging it overnight into a power outlet in the owner’s garage, this does not answer half of the what-if questions that even a technical dummy can immediately conjure.

Fundamental questions

What if you need to drive your EV for a longer distance than facilitated by an overnight charge? What if you do not have the luxury of charging for several hours? What if you do not have a garage? What if you do not have electricity at the place where you usually park your car? It is an elementary calculation that electric mobility requires some sort of an infrastructure which, to be really functional, needs to be purpose-built.

After all, a car is a wholly different gadget from your personal smartphone that needs a regular battery charge. Car and phone will both be dead if out of battery, but that is where the similarities diverge. Even the contemporary person with the most stone-age brain gets this, not to mention the highly developed Lebanese brain that has over decades been supercharged in mental ability to incessantly think of electricity supply problems and be ready for them.

In engineering, operational, and economic terms, there are trade-offs between the technology used to augment or substitute a car’s combustion engine with an electric drive. Larger batteries have greater reach but are heavier and cost more, and complex technical solutions have to be deployed to address this triangular challenge whether the car is a pure EV, a plug-in hybrid (PHEV) designed for external electrical charging in combination with in-drive charging through a combustion engine, or a quasi-internal hybrid (HEV) where all the charging comes from the combustion engine that works as a motor/generator in tandem with an auxiliary electric motor. On operational terms, hybrids are happy with supplies of fossil fuels alone while PHEV and EV owners will want to have access to some sort of external electric charge unit. In terms of economy, more tech and more battery power both carry costs that are difficult to offset when a vehicle is used sparingly.

The Lebanese environment

In Lebanon, electricity is a touchy issue that very often engenders people to break out in lengthy and passionate tirades. Also, politicians have been known to vacillate between making ludicrous excuses for electricity problems and untenable promises that do not address when and how affordably problems might be solved. In between citizen complaints and political debates, electricity issues lead minds to erupt in confrontations filled with arguments that seem driven by passion more than by reason.

In this constellation of existing for decades with poor power realities, when global public attention began turning to e-mobility around 2012, the idea of seeing electric cars on Lebanese streets looked for the next five years like a concept that was completely out of this world. Although PEVs and EVs had become surprisingly successful in markets elsewhere and had gained measurable market shares, few such vehicles made appearances in local traffic.

When Executive produced its 2017 special report on the country’s automotive realities, we therefore felt compelled to note that the government until this time had missed out on providing incentives for electric cars—there was a “total absence of a legal framework that would boost the import and sales of hybrid cars or EVs,” as one contributor observed. In response to this state of affairs, Executive called in the October 2017 issue’s leader for “things such as green auto loans, insurance discounts for EVs, recharge stations at hypermarkets, and free EV parking at malls.”

To give credit where credit is due: Since the time of this report, Lebanon’s government, lobbied by members in the country’s automobile importers’ association (Association des Importateurs d’Automobiles au Liban – AIA) introduced incentives for electric car ownership by liberating EVs fully from various duties and by granting reduced customs and fees also for hybrids.

And as this magazine’s editors noticed with surprised glee, in 2018, not only did the first quick-charge units for EVs make their first appearances at Medco gas stations, but also several highly desirable and visible parking spots at three malls in town had turned bright green, with the message that they were reserved to EVs (and offered charging options).

“Having established the seven units, we approached car importers to see about their plans and saw that our move encouraged them to proceed as they had read in many articles that the main issue for bringing EVs to the road is the infrastructure for charging them.”

Nicolas Abou Halka, general manager of Medco’s lubricants and bunkering business unit

Then, in spring 2019, EV import launch events became hot social items on the local calendar, and Beirut saw its first e-Motor show in the middle of April. It was a small-scale show when viewed against an exhausting and e-heavy mobility feast such as the (similarly timed) 2019 Auto Shanghai show with its 1,000 exhibitors and 1,500 presented vehicles (Industry predictions say that China will have about 1.6 to 1.8 million sales of EVs and HEVs in 2019, representing a share of 6.7 percent in the car market.)

Nonetheless, Beirut staged a sort of mini Shangri-La of greener mobility where some 18 different electric cars, from posh SUVs and limousines to compact and subcompact urban hoppers, were on show alongside e-golf carts, e-tuktuks, Chinese-made but locally-branded scooters, as well as sharing-economy scooters (brought in from Canada) and European-made e-bicycles (urban and cross-country models).

Sparked with curiosity about the new impulses for the Lebanese mobility future, Executive researched the latest EV developments among automotive importers and, to better assess the important question of electric charging options and supporting infrastructure for electric driving, contacted gas station operating companies with avowed electrification agendas.

The new chargers

It appeared from Executive’s research that Medco, importer and distributor of oil products and gas station operator in Lebanon, decided some years ago to investigate electric charging units for EVs and PEVs in Lebanon with an eye to enhancing its long-term commercial strategy and also its communication with the market. According to Nicolas Abou Halka, general manager of Medco’s lubricants and bunkering business unit, the group’s board of directors decided earlier in the 2010s to undertake an investigation into the electric charging infrastructure.

Abou Halka says he pursued the task through research and by establishing connections with French companies with expertise in EV charging technologies. Medco then decided to import some specialized charging equipment, and while the material was still en route from Europe, the company was fortuitous to witness the Lebanese government introduce incentives for EV ownership. The equipment was installed by Medco in four Beirut gas stations and in the parking structures of three upscale shopping malls.

For Abou Halka, this sparked interest from the local automotive sector. “Having established the seven units, we approached car importers to see about their plans and saw that our move encouraged them to proceed as they had read in many articles that the main issue for bringing EVs to the road is the infrastructure for charging them,” he tells Executive. “We have offered them this infrastructure, and they have only to bring in the cars and sell them, after which the car users can come to the stations and charge.”

For oil importing company IPT, the entry point into the issue originated with the company’s focus on sustainability. IPT inaugurated a solar-powered EV charging unit in conjunction with what it described as the company’s first fully sustained gas station in late spring 2019, explains Vice Chairman/General Manager Toni Issa, who emphasizes that this sustainability strategy is the root of the economic direction taken by IPT.

“We are not waiting to have the electric cars in order to transform ourselves. We are transforming ourselves into [a] sustainable [group of] companies in various ways and methods,” he says energetically. At the same time, Issa, like Abou Halka, is fundamentally upbeat on the electric play in automotive mobility and importance of the supporting infrastructure in the country. “The use of hybrid and electric vehicles will certainly grow in the coming few years in Lebanon, especially after the incentives given by the Lebanese state that reduce customs duties and excise taxes on imports,” he adds.

Issa says that there is no clear visibility on the scope of the coming EV penetration, naming as reasons external factors such as cost and technical barriers encountered by global manufacturers as well as internal issues in Lebanon such as insufficient awareness of EVs, local cost barriers, and the need to measure the impacts and implications for the national electricity system and for the environment. “The first thing to do is to assess the impact of deploying EVs on the electric grid in terms of capacity and load, and [the related] environmental impact under consideration of the fact that we still rely on fuel oil and diesel oil to produce energy,” he explains.

Despite his confidence in the proposition of electric mobility, and despite his commitment to not rely on pollution-heavy power sources but rather use a renewable energy source, Issa acknowledges that IPT has to invest more into a solar-powered charging unit than is required for a conventional grid-based unit. He concedes further that IPT currently has no clear plan yet as to the commercial rollout of solar EV charging units as the whole project is still under trial and is nowhere near generating profit. “We are sure that the market is growing from what we are witnessing, but we are not sure about at what time the demand will justify the investment that we are doing,” he tells Executive.

For Medco, the experience of working with the adaptation of various charging solutions for EVs in public spaces provided insightful lessons on the current technical and regulatory barriers that companies have to deal with when they embark on provision of fast charges to automobiles.

Different systems (AC and DC), different plug and socket designs and standards used in Europe and the US versus Japan and China (two existing main solutions are known as combo and chademo), different battery sizes and battery technologies, varying on-board power transmission capacities of cars, and different conditions at each gas station in Lebanon, in terms of electricity supply and grid connection, translate for Abou Halka into investment needs that can be upwards of $50,000 for EV charging units in commercial gas station environments. According to him, installation of less versatile and powerful charging units in places where an EV can park longer and infrastructure designed for mall operations are not as expensive or complex.

“Probably unintentionally, the taxation regulation on electric vehicles is greatly favoring the most expensive cars for which very high custom duties are due.”

Abou Halka

As to the company’s strategy for developing its charging network, the manager says that Medco is preparing to equip several stations on major Lebanese traffic arteries outside of core Beirut with a new and more powerful generation of charge units. The company will deploy these ultra-charge units in 2019, Abou Halka promises. “We will be starting to put these into operations in the second half of this year,” he says. “We will double the number of [charge] units, so that hopefully by end 2019 there will be 15 units spread all over the country, [with the new ones located] along the main axes to the north, south, and east.”

He also points to yet untapped potentials that electric mobility could provide in the Lebanese market, specifically to operators of taxis and commercial vehicles, such as buses and trucks. While he vigorously supports the engagement of the government in incentivizing EV and HEV ownerships, and also sees the need for greater public involvement in the specific infrastructure development of charging stations, he also notes some side effects. “Probably unintentionally, the taxation regulation on electric vehicles is greatly favoring the most expensive cars for which very high custom duties are due,” he says.

“People who buy a premium car with electric configuration will be compensated by the waiver of the customs duties and so what one might see from next year are many more luxurious cars that are electric cars than small EVs.” (Economists like to describe such public sector interferences as the provision of perverse incentives.

Not discounting the fact that provision of commercial charging units is not looking be economical for several years—neither on the level of gas stations nor on the level of charging stations at shopping malls—Abou Halka concludes that a company wanting to be active in the automotive field in the long term will have to take courageous decisions and embark on a journey by starting somewhere and learning by doing. He says, “In the medium term, within the next five years, I think there is a potential for an expansion of the electric car population in Lebanon, provided that the problem of batteries and the high cost of batteries will be solved.”

July 5, 2019 0 comments
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Number 12 bus
MobilitySpecial Report

Lebanon’s informal public transport system

by Nabila Rahhal July 5, 2019
written by Nabila Rahhal

Public transport is part of Lebanon’s mobility heritage, as is evident by our popular culture. In the song entitled “Ala Hadir el-Bosta,” the late Joseph Sakr sings of his love Alia’s pretty eyes while on a shared bus from Hammana to Tannourine, humorously describing the passengers who were with him—the song was composed by Ziad el-Rahbani in 1978 for his play “Bil Nisbe La Bukra Shu?” Marcel Khalife also sings about shared transport in “Toot toot ala Beirut,” where a young boy asks his father to take him to Beirut in a service (a Lebanese shared taxi). A popular Lebanese children’s rhyme encourages the bus driver to accelerate to 199 km/h without worrying that this will get him in trouble with the police as the children will have his back.

Songs and rhymes aside, images of the tramway passing through Bliss Street in the 1950s, or of the train running through the coastal plains, are still shared on Lebanon’s nostalgia social media pages and evoked in photography exhibitions of the country’s recent past.

Despite this well-developed history of mobility, a casual observer of Lebanon’s roads today—noting the buses, minivans, and services all stopping to pick up passengers anywhere and anytime they please—would not be faulted for thinking that the country has never experienced organized public transport of any kind. And yet, there is a certain rhythm to the existing madness, as well as emerging plans for the organization of the public transport sector which will eventually—hopefully—revitalize and restore mobility within Lebanon.

A brief history of buses

Ziad Nasr, president and director general of the Railways and Public Transportation Authority (RPTA), explains that with the intensification of the civil war in Lebanon, public transport infrastructure was eventually destroyed. The post civil war government’s immediate priorities were to rebuild the airport and fix the roads to reconnect the country externally and internally, Nasr explains—as such public transport rehabilitation fell through the cracks. Since then, “there were several proposed projects to revive the railway system or rehabilitate public transport, but there was no real political will or a ministerial decree to invest in them and implement them,” Nasr says.

One project that was implemented—but was not very successful—was the RPTA (also known by its French abbreviation OCFTC) owned blue and white buses that were introduced into Beirut in 1995. At the time, a fleet of 200 buses were introduced into Beirut, running on 22 lines, and 806 bus stops were constructed across the city.

“The informal public transport system fills the gap where it is found and answers the need of a certain segment of society.”

Chadi Farraj, co-founder of the Bus Map Project

However, according to Tammam Nakkash, managing partner of Team International, an engineering and management consultancy, who was contracted for this project, they faced a lot of competition from the non-regulated buses and minivans. Nasr believes the lack of consistent funding into their maintenance and into the system itself was another reason the buses were not successful as they would breakdown and there would be no funds to fix them.

“Public transport planning is not simply to have a driver and a bus, but also to have a back office which plays the role of planning and supervision,” Nasr says, adding that only 35 of these buses are still in operation today across nine lines or routes in Beirut and one in the Bekaa.

When nature abhors vacuum

Chadi Farraj, co-founder of the Bus Map Project (see box below), a grassroots initiative that maps public transport in the Greater Beirut Area (GBA), says there are two models of public transport system: formal and informal. The formal system is where vehicles have one operator—a private entity or the government—and run on a fixed schedule with designated bus stops; the kind encountered in most developed cities around the world. The second model is the informal one and is more commonly found in developing cities such as Bangkok, Manila, Amman, and Beirut, where a formal or organized public transport system does not exist.

Bus Map Project

“The informal bus system fills the gap where it is found and answers the need of a certain segment of society [the low-income to lower middle-income segment], so there are many versions of it across the world,” Farraj says. “It operates wherever there is demand, is organic, and makes the best use of what exists. There is no schedule or bus stop in the informal system, and it does not have a unified operator but rather a series of individual operators.”

Nasr acknowledges that with the lack of government provided and regulated public transport, it was only a matter of time before private sector alternatives were developed in a haphazard manner, explaining that this is exactly what is happening with other services meant to be provided by the government like water or electricity—where the private sector is also stepping in given the absence of public sector provision. This lack of regulation has led to a chaotic public transport system that compounds congestion across the country and specifically in the GBA, Nasr says.

Nakkash says the public transport situation in Lebanon can best be described as, “a loosely regulated transport system; loosely in that the existing rules and regulations are not enforced 100 percent, plus the whole regulatory system is deficient.” He explains that in metropolitan areas the size of Beirut there usually is a transport authority body that regulates public transport in the area. While the RPTA could be charged with this role, the fact that they own and operate public transport buses makes it problematic for them to be regulators, in Nakkash’s opinion. “The government should get out from providing the service and play a regulatory role that only the government can play,” he says.

The red plate district

Underlining this chaotic sector is the fact that, in total, there are 23 different syndicates for public transport drivers, alongside six unions.

What compounds the chaotic feel of the informal public transport sector in Lebanon is the system of red registration plates that drivers can obtain from the Traffic and Vehicle Management Authority (TVMA) under the Ministry of Interior (MoI). These registration plates are tradable assets that can be bought and sold, explains Nakkash, and so are a big part of the public transport problem in Lebanon. “Because of this system, organizing the needs for public transport of Beirut or Tripoli or any city based on location is not easily achievable as you cannot control or dictate where the driver operates,” he explains.

As per official data, there are currently 55,236 red plates registered with the TVMA, according to Ali Mohieddine, head of the Syndicate of Public Transport Vehicle Operators, which has over 40,000 registered members. Underlining this chaotic sector is the fact that, in total, there are 23 different syndicates for public transport drivers, alongside six unions. Using numbers from the TVMA, Mohieddine says the plates are divided among public transport vehicles as follows: 33,000 cars, 4,000 vans or minibuses, 2,236 24-seater buses for public transport, and 16,000 freight trucks.

All those to whom Executive spoke, say that the number of public transport vehicles in Lebanon is significantly higher than the number of licensed vehicle plates provided by the TVMA. The last time the TVMA issued new red registration plates was back in 1994; the abundance of red plates seen on the streets today is partly due to the widespread forgery, with duplicate registration plates in circulation. Mohieddine says that based on the syndicate members’ estimations, more than half the public transport vehicles in operation have forged plates or are driving without license plates in remote areas out of the GBA. A 2017 UNDP study estimated that there are 17,000 illegally procured and operated taxis in circulation. Aside from saturating the market, forged plates are dangerous in case of accidents or security issues, as allocating blame becomes impossible, Nakkash explains. Nakkash and Mohieddine both believe that those who are bold enough to use duplicate registration plates are politically-backed.

The MoI issued new designs for the red registration places in 2017, which all registered public transport vehicles should shift over to by the end of 2019. The move was partially intended to curb the number duplicate plates used by unlicensed public transport vehicles as the new design is harder to replicate, according to a statement by Huda Salloum, head of the TVMA. Mohieddine explains that this move is a step in the right direction by the MoI as the new license plates can only be obtained from the TVMA and so only registered cars can make the switch; cars with duplicate or forged plates are unable to secure a new plate, which could explain why a big percentage of public transport vehicles still have the old red plates with only six months to go on the deadline.

Buses for all

Chaos and corruption aside, Lebanon’s informal public transport sector has its own problems. Nasr says that because public transport is provided by profit-driven private operators, areas with the highest demand are over served, whereas more remote areas have little or no access to public transport—those living further away from the GBA have less public transport options. If public transport was provided by the state, says Nasr, then all areas of Lebanon would have to have equal access to it as a public right. Nakkash says that the informal system cannot even be called a system in his opinion, as it does not run on a reliable fixed schedule or frequency.

There is also the public perception that all of these buses and minivans are in bad condition, are badly driven, and are only used by those who absolutely cannot afford a car or cab, although Farraj says this is all exaggerated. “We should break the stigma of riding buses,” he says. “A small percentage of buses are rundown and some lines do feel like they are managed by a cartel, but this is not true across the board.

“When there is a stigma regarding the public system, people will believe anything: If there is only one bus that is broken, the perception is that it is all broken.”

A beautiful mess

For all its faults, the informal public transport system manages to get a nearly impossible job done; it takes people to their destinations, despite the congested roads, in an affordable and efficient manner—a bus ride within Beirut costs LL1,000 ($0.66).

Although the perception is that there is no structure to how the informal system of buses and minivans run, two initiatives—the Bus Map Project and YallaBus—have demonstrated otherwise by mapping out the bus lines in the GBA. Farraj explains that the GBA is divided into lines or bus routes that are identifiable by number. This system was developed in 1995—with the aforementioned white and blue buses—and at the time there were 22 bus lines within the GBA, says Farraj. While no official data exists, Farraj says that more lines have been added since then, as urbanization increased the areas that needed public transport.

Each line has an average of 30 buses or minivans running on it with roughly fixed intervals—around 10 minutes—between each deployment. Within the city, the 12-seater minibuses or vans are proving more successful than the 24-seater buses. As Farraj explains, operators realized that vans go faster in Beirut’s narrow streets and fill up quicker, enabling them to do more trips in less time. Operators also priced them competitively, at LL1,000 per ride anywhere in the GBA.

Therese Keyrouz, cofounder of YallaBus, says that bus lines within the GBA tend to have one main operator or rayess who owns the vehicles in the line and pays the drivers a daily fee for their service. Buses that take passengers to and from the GBA are usually individually owned and drivers/owners decide on the frequency of deployment through a gentleman’s agreement, says Keyrouz. Bus drivers commuting intra-city also communicate with their frequent passengers to eventually develop a timetable that works for all, she explains. (The nature of the informal system makes it very hard to pin down its operators, as they are disparate and mostly unregistered, with no authoritative source to go to for answers.)

While the informal public transport system is clearly far from perfect, a considerable number of people rely on it for their daily commutes.

Then there is the model of privately-owned companies that operate more or less organized public transport generally from and to Beirut. Connexion, which runs between Beirut and Tripoli, is one such example: its buses are air-conditioned, well-maintained, and have Wi-Fi; they also run on fixed schedules and make few stops along the way. Although Connexion has a higher fee than a van (LL5,000 for a one way ride as compared to LL2,000 with a minivan or bus), some do not mind forking it over for some extra measure of comfort.

By the numbers

While the informal public transport system is clearly far from perfect, a considerable number of people rely on it for their daily commutes. Based on her field research, Keyrouz estimates that each bus in operation within the informal bus system carries an average of 200 riders per day.
Some lines have more demand than others. Farraj also conducted field research on line number 5—that runs from Hamra to Ain Saade in Mount Lebanon—and estimated that its 24-seater buses carry 3,500 passengers per day on their average three round trips per day. According to a 2016 study by Petra Samaha and Amr Mohtar, then students at the American University of Beirut, the minivans on line number 4—that runs on a high demand route between Hamra and Hadath—carry 5,600 passengers per day. Louai Halabi, director of Connexion says their 24 buses run on a daily occupancy of 80 percent with each bus making two round trips per day.

While Lebanon’s current informal public transport system is a far cry from the organized and thriving formal system the country enjoyed in the pre-civil war days, it still functions, despite the obstacles and despite its obvious flaws. There are a lot of improvements that could be done to this system, and yet its relative success in transporting passengers efficiently should be noted when planning for the new models of formal public transport systems soon to be introduced to Lebanon (see article page 30).

July 5, 2019 0 comments
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MobilityOverviewSpecial Report

The importance of Lebanon’s macro and micro mobility

by Thomas Schellen July 5, 2019
written by Thomas Schellen

“Nobody ever saw a dog make a fair and deliberate exchange of one bone for another with another dog.”

Adam Smith

Online economic literature has no ready answer to the question of whether Adam Smith had a deep personal bond with a canine, nor if he was an expert on animal behavior by the standards of the time and Scottish dog-keeping society. But one thing is certain: Smith’s interpretation of the distinctly human trait for trade as a “propensity to truck, barter, and exchange one thing for another”—which is directly juxtaposed with his dog reference in his inquiry into the wealth of nations—is an indisputable pointer to the importance of trade in the making of human economy. Some even see trade as the secret that made us human.

Regardless of the idea of what makes one human, one can easily postulate that the impulse to engage in give and take has provided fundamental patterns for people’s interaction and development of diverse forms of capitalist economies—whether in Adam Smith’s human-gain-oriented propensity or in Karl Polanyi’s social-relationships-oriented “reciprocity and redistribution.”

From the vantage point of modern Lebanese identity, however, the real roots of this Lebanese identity construct may have emerged and been shaped at the time of the country’s political formation. Trade is intrinsically linked to the history of the seafaring people in this region since some 32 or 33 centuries ago when the Phoenician era saw Levantine cities rise to world-shaping trade powers. And for about the same length of time—about three millennia—trade organized from the cities on this coast was inextricably entwined with the people’s aptitude for mobility and their adoption of practicable written communication through the Phoenician alphabet.

The narratives of Phoenician trade by ancient Greek and Roman observers strengthen the view that trade is an eternal trait—if there ever is anything human that can be called eternal. Moreover, success in trade, by this very long view, is contingent upon positive linkages to two other fundamental human traits: the desire for mobility and the ability to communicate. This desire to move and discover, entwined with the impulse to pursue actions of give and take, and augmented by the will to narrate, has preceded, transpired into, and historically driven, the development of humanity’s trade and mobility tools from the physical to the organizational.

This means on the practical front that the cargo always came before the container and preceded the vessel. It makes the case that trade existed before the first bank opened its doors and that trade indeed determined the creation of the mercantile corporation. It also puts recent issues into perspective. The story—and dream—of travel started before the rise of cart, train, car, plane, and any Elon Musk rocket project; and the commute to places of greater productivity existed before the metro, before the tram, and way, way, way before the ride hailing app.

In short, trade and travel are inseparable from what contemporary society views as progress. As long as people exist, mobility happens and trade happens. But matching the impulses to engage in trade and mobility with the optimal tools and patterns for each moment in history is the source of the narratives of failures or successes that shape history. This is evidenced from the establishment of the Silk Road over the narrative of the Dutch East India Corporation as the archetypical enterprise, to the double daily congestion that we experience commuting between our homes in Damour, Aley, or Jbeil and Jounieh to our work places in Beirut.

For the present state of Lebanon, the importance of trade and mobility extends from the country’s positioning on the trade routes between Asia and Europe that are emerging as 21st century Belt and Road iterations of the Silk Road—with all implications for the need to develop Lebanese logistics, marine shipping, and port operations—to responsible care and expansion of 20th century aviation patterns between Lebanon and its relevant but diverse travel markets in the Arab world, Africa, and Europe.

These trade issues, some of which have been getting considerable attention by the political circles in the country, will be integral for the success of the Lebanese economy—but just as crucial for the Lebanese economy, and urgently deserving attention, are the myriad aspects of urban mobility and near-term futures in digital transportation. Executive hopes you will enjoy some of our mobility stories and find them useful in working to improve Lebanon’s national and your personal productivity.

July 5, 2019 0 comments
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LeadersMobilityOpinionSpecial Report

Transport is transforming and Lebanon must keep up

by Executive Editors July 5, 2019
written by Executive Editors

When compared to political revolutions, it has never been exactly clear what economic revolutions entail nor how long they take. But it is clear that these economic revolutions combine multiple change and adaptation processes, whether one talks of periods of fundamental economic transformation as “revolutions,” beginning with the first agricultural revolution in the fertile crescent or starts the tally with what is today labeled the first industrial revolution, originating in 18th century Britain and sweeping, virus-like, through Europe in the course of the next 100 years. Economic transformations thus might be called “revolutions” on account of their impact in changing human societies, but not because of their speed or intensity.

Economic transformations thus might be called “revolutions” on account of their impact in changing human societies, but not because of their speed or intensity.

It is also clear that while real changes were gradual, each economic revolution in the past 300 years has spread faster than the previous one. When discussing the first and second industrial revolutions, there is also the debate as to whether these industry transformations were accompanied by epochal developments in trade, transport, communication, and finance—or if transportation and communication revolutions constituted core components that shaped these economic transformations in ways that, without them, the industrial leaps, such as those that occurred in textile or steel manufacture, would have not been revolutions at all.

The intuitive expectation in the early 21st century would be that the currently unfolding digital economy revolution is inseparable from the digital communication revolution, and the digital mobility revolution, which is simultaneously unfolding in the two large realms of moving goods—through trade and transport—and of moving humans and connecting them in superior social and productivity settings.

Diversification and digitization

There are too many innovations taking place in the sphere of the digital mobility revolution to discuss the implications of each of them. To bundle these micro uprisings of tech entrepreneurs and myriad disruption-minded businesses, each of which can contribute to shaping mobility in the short and medium term, let us talk of four transition issues: technical, behavioral, economic, and regulatory mobility.

These four issues entail diversification and digitization of mobility through technical inventions, as well as behavioral implications and new patterns through shared mobility and the sharing economy on the level of individuals, families, and urban communities. They further entail enterprise-level shifts in trade and transport with productivity optimization and corollary creative-destruction impacts on regions, industries, and national economies. They finally comprise challenges to create enabling environments for mobility through prudent regulation and wise political decisions, so as to hopefully enable socially and environmentally responsible progress of digital mobility through economic activity in this crucial segment of the emerging digital society.

A very reasonable assumption, however, is that plenty of the current innovations and changes in mobility and digital life will run into technical dead ends and political roadblocks, encounter behavioral resistance, and be enmeshed with an economic mix of wins and busts. This assumption advises us to moderate our expectations about the digital mobility transition, its rapidity, and its reach. For example, the likelihood of a mobility revolution that creates a platform of “zeros”—zero emissions, zero accidents, and zero ownership—is about as great as the likelihood that a future iteration of the sharing economy will equip mankind with zero exploitation of its weaker participants, zero corruption of the stronger players, and zero conflicts between economic interests.

Even if you are as enthused about the digital mobility future, there is ample reason to expect—by all methods that people have acquired throughout history—only the tiniest of odds that digitization of our mobility would transpire into zero congestion, zero inefficiency, and zero crime in this vast human mobility realm. Thus in their sum, the chances for all afore-quoted ideological expectations of zero-ness to soon come to fruition through digital mobility are, well, zero.

It is nothing short of tragic how in the current status quo, Lebanese mobility is becoming an oxymoron.

On the other hand, an equally unwise approach—which one sadly encounters all too often in Lebanon—lies in harboring notions that the arrival of digital mobility can be mastered with wait-and-see indifference or fake economic complacency in pretending that the current business models work well enough and will never be destroyed. Indifference, careless ignorance, or even a focus on 20th century solutions for as yet undefined digital mobility challenges will not be our advantage, neither in the private nor in the public sector.

Before any other consideration on national mobility, it must be acknowledged that Lebanon is in urgent need of better—and better balanced—approaches to the challenge of transitioning into a digital mobility future than begging international partners to fund investments in hard infrastructures for transportation or even soft infrastructures of public transport. It also deserves to be pointed out—over and over, until construction of a better reality is at least attempted in concerted actions of public and private stakeholders—that it is nothing short of tragic how in the current status quo, Lebanese mobility is becoming an oxymoron.

It is an oxymoron to talk about mobility when the daily commutes of employees and entrepreneurs makes the economy lose incalculable amounts of productivity, and when the time wasted on state-related errands makes citizens lose entire workdays unnecessarily. It is also a contradiction-in-terms to discuss trade and digitization of logistics industries in Lebanon at times when stifled information flows at import gateways and disregard of transport logic continually translate into ballooning logistics costs, and when inefficient road networks in combination with unsafe delivery vehicles and substandard urban infrastructures erode the capacities for ethical and environmentally responsible, or “green,” earnings.

All this is tragic in the classical sense of how this society, by trying to address social and economic challenges through the means from the past of transport and communication, seems to steer itself into squandering an intangible historic asset that may be at least as valuable as the oft-cited assets of Lebanese entrepreneurial spirit and this society’s admirable human capital: a good mobility narrative with cultural and practical implications.

Lebanon has practically no historic identity narrative of the kind that has helped other countries to grow beyond their limits. What Lebanon seems to have much more than “natural borders” and nation-forming stories, however, is a deep history of trade entrepreneurship and maritime agility.

Moving forward

The above narrative could contribute to building a national shared identity that Lebanon lacks, along with a unifying national sense of purpose and social contract narrative with convincing mutual obligations.

The iteration of a new and convincing social contract narrative might well be of what the country is in greatest need. Lebanese society is in want of such a narrative, possibly more than it has need of savings in the financial system and perhaps even more than it needs well-organized institutions, political identification figures, and an effective fight against corruption.
This translates, on account of the search for a better narrative of what Lebanon can be, into an open-ended quest for all patriotically minded people, a quest that can be pursued at practically no economic investment cost and with no consultancy involvement: the construction of a credible narrative that weaves stories of the great historic achievements in trade and mobility by all the clans, tribes, and religious communities living in what today is known as the state of Lebanon, into a narrative of mutual obligations and common purpose for a—socially truly fair and inclusive—shared national identity.

On the practical level, Lebanon’s mobility and correlated trade problem includes not only wasteful processes in customs, under-powered aviation (in terms of infrastructure and operation), congested primary arteries, and dilapidated secondary roads in rural provinces. The problem also extends to politically-poisoned national planning overloaded with unimaginative, competing, and unrealized economic plans, to failures of achieving urban productivity improvements, and shortsighted and opportunistic decision-making on all levels from municipal to transnational infrastructure and trade.

The country needs to solve the fiefdom issues that still infest parochial institutions and obstruct national strategy development, an important example for the problem’s trade dimension being the—conceptually long-expired—temporary authority at the Port of Beirut. The government needs to focus not merely on investment calls and construction of public-private partnership models for road infrastructures but also dedicate more attention to assuaging risks of 20th century infrastructure projects. It needs to improve governance of all transportation, mobility, and communication related public institutions and state-affiliate entities, of which there are plenty, but none that stands out with first-class governance.

Executive thus calls on all stakeholders to depart from parochial thinking, abandon piecemeal approaches to long-standing mobility, trade, and transport problems, and invest in developing a much broader and more committed approach to the complex challenges of digital mobility in the context of Lebanon’s digital transition.

Lebanon today is a prisoner of its recent financial and economic past that stands on top of a 300-foot cliff; to escape from this past the country has no choice but to jump into a macroeconomic ocean of uncertainties that is moreover full of financial undercurrents, microeconomic rocks, and political risk reefs. The only sane thing is to jump, but do so with existential trust and the added confidence of having a perfect mobility program that covers all possible routes for swimming out of the danger.

July 5, 2019 0 comments
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EditorialMobilityOpinionSpecial Report

Groundhog Day

by Yasser Akkaoui July 5, 2019
written by Yasser Akkaoui

Some repetitions have become part of our routine; it is amazing what human beings can learn to accept. We have become used to daily power cuts, as the electricity switches back and forth between state supply and generator, and to water shortages in the summer and waiting for private companies to refill the tanks. We are only reminded of the pain when we pay the overpriced double bill for bad quality services. We pay, complain, accept—then forget.

Beyond this nonchalant bourgeois attitude that chooses to throw money at the problem rather than revolt, there is one issue that is impossible to accept or ignore: the lack of mobility in this country. The congested streets and the absence of public transport impacts our daily routines, our pockets, and our health—and the problem has been growing to paralyzing levels.

Our mobility woes are rooted in our politicians’ disregard for lives and productivity. Citizens are forced to contend with destructive behaviors, poor planning, and the lack of responsibility and accountability lost between a state-owned and laissez-faire economy. We are stuck in limbo, between a state unable to provide for its citizens and an unregulated private sector feeding off the state’s dereliction of its duties.

It all boils down to one thing: our inability to decide what kind of country we want to be. Transport is one of the many state-owned industries that has disintegrated over time, as vested parties bickered on their vision for the state. The trams, trains, and buses we enjoyed in the ‘50s and ‘60s, they dismantled in the ‘70s and ‘80s and have never rebuilt.

We need to ask what is the price we are paying—the cost of being stuck in traffic every day is depriving us of the basic human right to get from point A to point B without losing our time and resources, and putting ourselves in harm’s way for hours on end. Moving 20 km in two hours is not acceptable, putting our lives in the hands of reckless Lebanese drivers each day is not acceptable, not being afforded the healthy option, an alternate mode of transport, is not acceptable.

But, of course, the repetitions persist. It is in the interest of our politicians to keep the transport sector in the shambles it is today, just as it is in their interest to keep the electricity and water sectors as they are. We suffer, while they enjoy the returns of an informal system that only benefits them.*

*Due to a technical error the last six words of this editorial were missing from the print edition of the magazine. Executive apologizes for this mistake.

July 5, 2019 0 comments
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BankingNumbers & Figures

An analysis for 2013-2018

by Dany Baz & Thomas Schellen June 18, 2019
written by Dany Baz & Thomas Schellen

Banks included in Bankdata’s classification for alpha and beta banks with deposits respectively exceeding $2 billion and $0.5 billion are regarded by many international analysts and local banking industry observers to represent the top tiers within the Lebanese banking sector of 59 banks, comprised of 46 commercial banks and their 13 subsidiaries. 

Together, the 16 alpha and 11 beta banks are the dominant banking players in the domestic market and are the only two banking groups with foreign presence. Alpha and beta banks, according to Bankdata’s analysis, also represent 96 percent of loans issued by the banking sector over the past five years. In this period, they injected $10.8 billion into the economy as they grew their loan book from $60 billion in December 2013 to $70 billion at the end of 2018.

Analyzing the provision of loans by these banks within the five-year period under consideration, the highest growth in lending activity was registered in 2014, with an increase of $6.8 billion, or 11.4 percent in year-on-year comparison. Loan growth gradually dropped to $3.8 billion in 2015, and then stalled at $1.5 billion yearly in the following two years, 2016 and 2017; it dipped into a negative growth of -3.8 percent at the end of 2018.

Further analysis highlights that the decrease in total loans was mostly due to the drop in foreign loans over the period. The overall growth registered in 2014 was evenly distributed between domestic and foreign loans, but after an exceptionally strong growth in foreign loans at the start of the period—+22 percent in 2014, followed by a mild increase of 2.9 percent in 2015—this growth fully reversed into negative territory in 2016-2018, in a development presumably related to currency pressures in Egypt and Turkey in the past three years. Consequently, in analysis of the five-year trend of the lending activity by Lebanese banks in foreign markets, as reflected in the banks’ consolidated figures, the end-to-end picture on these loans over the period is quasi -flat, with a growth of merely $126 million.  

In parallel, the domestic loan book continued growing over the period 2013-2017, representing 99 percent of the growth in banking sector lending—and noting that the Lebanese banking sector’s loan book consists of 74 percent of domestic loans.  

Loan developments in Lebanon, owing to the policies of Banque du Liban, Lebanon’s central bank, were isolated to a major extent from foreign exchange pressure that globally affected emerging markets under the Federal Reserve’s move to a tightening of monetary policy at the end of 2015. Other factors and unconventional influences came to bear on the Lebanese lending market in the past three years, as witnessed in the domestic lending developments of Lebanese banks. Notably, negative growth in the amount of foreign currency (FC) denominated loans between 2016 and 2018—after FC loan growth in 2014 and 2015 that was in line with the overall growth of loans in those years—translated into a net increase in the domestic loans in foreign currency portfolio of $5.7 billion. This compares with a net increase of loans denominated in Lebanese lira to $5.1 billion over the analyzed period. 

In a context where dollarization of domestic loans steadily decreased from 75 percent in 2013 to 70 percent in 2017, LL-denominated loans saw double-digit growth annually until end of 2017, but contracted by the equivalent of $1 billion (-5.9 percent) in 2018.  The overall ratio of loans to deposits dropped from an average of 37.7 percent for the 2013-2017 period to 36 percent in 2018. The breakdown by currency shows that the loans to deposits ratio in LL increased from an average of 25 percent in 2013-2017 to 29.3 percent in 2018; the ratio in FC dropped from an average of 43.2 percent over the same period to 37.1 percent in 2018.

Over the past five years, alpha and beta banks in Lebanon have strengthened their provisioning against the impacts of a low-growth economic environment. These banks increased their specific provisions for non-performing loans from $1.5 billion in 2013 to $2.3 billion in 2018, a hike of $766 million. Furthermore, collective provisions were increased by nearly $500 million and reached a peak of $1.1 billion at year-end 2017. Thus banks undertook conscious efforts to shield themselves and the stakeholders in the Lebanese economy from risks that could materialize as loan takers among households and enterprises face downward pressures on their finances. 

Lebanese banking sector
The following infographics refer to alfa and beta banks

Net primary liquidity to deposits by currency
Domestic vs. foreign loans & deposits
Loans & deposits by currency
Loans to deposits ratio by currency
Number of bank branches
Number of bank employees
June 18, 2019 0 comments
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Since its first edition emerged on the newsstands in 1999, Executive Magazine has been dedicated to providing its readers with the most up-to-date local and regional business news. Executive is a monthly business magazine that offers readers in-depth analyses on the Lebanese world of commerce, covering all the major sectors – from banking, finance, and insurance to technology, tourism, hospitality, media, and retail.

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