Economic roadmapFirst draft

Economic roadmap

by Executive Staff
written by Executive Staff

The Lebanese economy is on the verge of a meltdown. In an effort to trigger change, Executive has drafted an Economic Roadmap that will allow nation builders and stakeholders to contribute their ideas and expectations.

By joining our movement to #executechange, you become an owner of the roadmap and will be part of the campaign to get our country back on track.

Follow this link to share your feedback, improvements, and suggestions to the roadmap with your suggested policy targets, main challenges, and measures to be taken to ensure a better future.

 

 

 

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CommentEntrepreneurship

Lebanon’s entrepreneurship ecosystem

by Nicolas Rouhanna
written by Nicolas Rouhanna

Lebanon’s entrepreneurship landscape has “leapfrogged” since August 2013, when Banque du Liban (BDL), Lebanon’s central bank, released Circular 331 that authorized Lebanese banks to invest in new startups in the knowledge economy. This policy has spurred the development of new growth capital funds and the entry of commercial banks into the equity market, unleashing (theoretically) more than half a billion dollars into the Lebanese economy. This sudden abundant supply obviously generated demand and buzz around startup creation, from entrepreneurs lining up with business ideas, to support platforms such as accelerators and business support organizations, and facilitators such as entrepreneurial networks and universities that promote entrepreneurship. Though some of these organizations and resources are at a nascent stage of development, the primary elements of a complete entrepreneurial ecosystem are present, as can be seen in the diagram below.

Many of the above building blocks also come from non-Circular 331 initiatives, contributing even more funds to the ecosystem. (Disclaimer: The diagram is a recent snapshot representing major funding and active support actors—some may have disappeared, and others may have appeared since this diagram was created in 2018).

A few striking observations can be made by reflecting on the below diagram.

First, all are private sector-driven initiatives, with a complete absence of government involvement so far—despite the latter being one of the main pillars in the MIT Regional Entrepreneurship Acceleration Program (REAP) framework. This framework describes the five main interconnected elements for an innovation ecosystem stakeholder model: entrepreneur, risk capital, corporates, universities, and government. Obviously, the role of the government in this context is, at a minimum, to provide basic infrastructure. This includes physical infrastructure like the internet, communications, and electricity, and other support such as an adequate legal framework and a conducive business environment.

Second, there is almost a 10-fold difference in the availability of startup funding in the later downstream stage versus the early upstream stage, where funding is needed more. For a startup to receive substantial funding in Lebanon, it is required to initially thrive on a shoestring budget, in order to reach the later-stage, “jackpot.” An entrepreneur once said: “I feel like I am on a lifeboat in the middle of the sea with no water to drink.”

Third, there is currently more of a landscape than an ecosystem, but the building blocks are being put together slowly but surely. However, an overarching strategy needs to be put in place so that new initiatives complement each other, rather than compete in the same space. One example of overcrowding might be the numerous similar seed accelerator programs that have emerged over the last couple of years—the likes of Speed@BDD, TheNucleus, Flat6Labs, BootCamp by AltCity, SmartEsa, and HultPrize. All of these entities accelerate the creation of startups typically over a three-month period before graduating them at a Demo Day ceremony. However, most of these graduating startups are not yet investor-ready after the three-month period and require further guidance and assistance to develop their project or business model. Thus, the majority of these startups unfortunately disappear, indicating that perhaps more investment is needed in developing post-accelerator programs to fill this funding and equity gap to maximize the chances of increasing “graduated” startups. Such a program would offer them the opportunity to receive subsequent seed funding, keeping them on some kind of “life-support” system.

In other mature ecosystems, downstream VCs, which usually have the big bucks, consider themselves as having a mandate to contribute to the ecosystem in ways that transcend simple monetary investments. For example, Real Ventures, based in Montreal, contributes to their ecosystem in ways that can benefit others as much as they benefit themselves. In addition to their funds under management, they also run the Orbit seed fund, the FounderFuel accelerator, the Notman House co-working space, the Element AI network, Front Row Ventures for students, among other initiatives. This collaborative mindset allows them to lay, or build upon, the foundations of rapidly growing tech hubs in Canada.

Similarly, SOSV is a multi-stage venture capital investor that runs multiple world-class vertical accelerator programs, and provides seed, venture, and growth stage follow-on investment to superstar companies. SOSV has operations based in the US, Europe, and China’s Shenzhen, and runs intensive flexible three-, six-, and eight-month programs. They provide startups with seed capital, a specialized global staff of engineers, designers, scientists to accelerate product development, mentors with deep market and technical expertise, and a state-of-the-art infrastructure of fully outfitted laboratories and maker spaces.

In Lebanon, IM Capital, part of the Berytech group, is a program funded under the USAID MENA Investment Initiative and has had a mandate since 2015 to facilitate access to early-stage funding. As such, it has provided matching capital and equity guarantees for investors and has also contributed in launching several new initiatives (including the Speed@BDD accelerator), managing and building the capacity of four business angel groups (Seeders & LWAF), and creating and running a mentorship platform based on the MIT Venture Mentor Service model (Confideo), and a coaching program based on Stanford Seed methodology—contributing to filling gaps in the developing Lebanese ecosystem. Imagine the ripple effect if the local “big” VCs start engaging in further ecosystem building blocks. They could create more thematic funds and scale-up programs, tap into the diaspora, structure maker spaces into hardware accelerators, and more.

Ecosystems take years to build. We Lebanese are known for our resilience, but our impatience as well. Some fear that Circular 331 money might dry up— fine, we will find other solutions. I am optimistic. We are all here because we decided to apply the famous quote by the late American President John F. Kennedy, perhaps inspired by our own Gibran Khalil Gibran: “Ask not what your country can do for you, ask what you can do for your country.”

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CommentEntrepreneurship

Lebanese startups in need of investments

by Sami Abou Saab
written by Sami Abou Saab

Historically, Lebanon’s economy has in large part depended on services, including tourism, F&B, financial services, education, and design. In addition, Lebanon has a strong agriculture sector that constitutes another pillar of the economy. Still, these services and resources are limited in scale due to the scarce availability of local resources, whether natural or human. As a result, Banque du Liban (BDL), Lebanon’s central bank—in an effort to foster the digital economy—initiated Circular 331 in 2013 to subsidize investments in startups in the knowledge economy, including the fashion industry. The purpose and goal of Circular 331 was not to become the sole way to invest in startups, but to provide a significant amount of money that could fuel an ecosystem with local presence, talent, and the potential to attain worldwide reach and scale.

However, the local infrastructure (legal, internet, taxation, etc.) was not ready and did not incentivize entrepreneurs to start their companies in Lebanon. Still, the prime minister’s office and the government began working on a list of reforms and updates (based on the government’s capabilities and areas of influence) in order to accommodate for this digital age, and to make sure that the money invested by BDL grew and created real long-term value.

Initially, Circular 331 was a bit more flexible than it is today, due to the fact that BDL rightfully trusted the banks with the money and the private sector to do the right job. With a major initiative like this, it is normal that multiple players arise, some of them doing great professional and ethical work, while others not so much. In addition, given that this is a nascent ecosystem, there is a major learning curve that players have to undergo. For instance, Lebanon does not have serial entrepreneurs yet, those who have made major exits and who could become angel investors in the ecosystem. The ecosystem lacks seasoned VCs who are used to take big risks, some of them are satisfied with small returns, and most have no experience working in investment management for startups, usually coming from more conservative investment backgrounds, such as banking or consulting. We also do not have market makers, in the form of industry focused funds with the right expertise on board to bring the right level of strategic support to startups. Even though we do have risk-takers and strong talent, most of the time they have been dissuaded from pursuing their ambitions by the risk-averse mindset in the country—which is based on multiple risk factors that have traumatized people over time and made them turn away from entrepreneurial adventures. That said, this is not unheard of in an emerging economy and in a nascent ecosystem, and I believe that the market has to embrace these conditions, adjust to them, and most importantly, hold the players accountable for their actions when bad practices do take place.

Ultimately, Lebanon in 2018 is creating a startup ecosystem that other countries created 20, 30, or 40 years ago. That means we have to correctly calibrate our expectations, our patience, and the time-frame in which we expect to see major results. To set some expectations: I believe that a positive outcome of Circular 331 would be a $100 million exit seven to 10 years from the issuance date of the circular. It is too early to judge the initiative’s success or failure right now, but some outcomes can already be seen. Circular 331 has managed to attract a lot of talent from the diaspora, create many jobs, and put Lebanon on the international map for startups and innovation. Here are some examples from my personal experience at Speed@BDD.

Accelerating success

I was recruited all the way from the US, where I used to work for Skype. The opportunity to run a startup accelerator in Lebanon, with all the impact such an organization could have, made me come back to Lebanon.

Speed@BDD has accelerated 34 startups over its two and a half years of operation, out of which eight startups were co-founded by a diaspora member and three were international entrepreneurs who looked to Lebanon to be the go-to hub to build their startup.

At Speed@BDD, these 34 accelerated startups created a total of 500 jobs.

Eight out of the 34 startups raised early stage follow-on funding totaling around $3 million in early stage funding, and six of these investments came from non-Circular 331 sources, meaning that angel investors and others got on board, deciding to take the risk with their personal money—a major positive outcome of the Circular 331 investment in Speed@BDD.

Two out of the 34 startups have exited already at a good return, something that is not typically expected until five to seven years after initially investing in a startup.

Speed@BDD startups have won multiple local and regional competitions: One major highlight was the Global Supernova Challenge at GITEX 2018, in which the winner was a Speed@BDD Cycle V startup called Spike. The Spike team won a $100,000 grant, against competition from more than 200 startups from all over the world including much more advanced ecosystems, such as the US, UK, Canada, and Germany, putting Lebanon on the international map in a very concrete and positive way.

Failure is part of the game

The above are just a few examples of the positive outcomes of Circular 331’s support for the startups ecosystem, and they are, of course, limited to my personal experience and to the scope of work we do at Speed@BDD. I can only imagine the positive impact of Circular 331 on the whole country and economy, given the multitude of players out there and the initiative’s support for these startups and entrepreneurs.

Nevertheless, some of the circular’s outcomes might not have been as positive as the ones listed above, and that—again—is normal. Failure is part of the game and should be embraced and encouraged, since it’s the only way to grow the talent pool and to evolve and learn fast. Given that the BDL initiative is leveraging taxpayers’ money (allocated through Circular 331 and the banks’ capital), I believe it’s only normal for the ecosystem, the players, and the regulator to adjust their approach. It’s important that the regulator keeps the initiative going as needed, but it has to be within the right framework and context. BDL should evaluate what has been done so far, as well as what could be done to make the ecosystem even better, and adjust anything that needs adjusting moving forward.

Most funds have now deployed a large percentage of their initial Circular 331 finances, and many of them are at the stage where they are looking to raise more money. It is about time for private money to become more seriously involved in this ecosystem, and with that comes stronger support, more natural incentives, and more accountability. When someone decides to invest their own money, they only do so if they fully believe that this money will get manifold returns, if they are sure they can provide strategic support to the entrepreneurs, and if they can foresee a liquid exit for their investment. These points, on their own, are clear incentives for a stronger drive and more forward-looking thinking. Such motivation will also induce the right kind of behavior—that is, responsibility and accountability.

Today, we are reaching a tipping point. It is the responsibility of everyone involved in the startup ecosystem to start thinking this way and eventually diminish their reliance on the BDL initiative and bring the right type of investments and money on board. The ecosystem has strong momentum, and this is the right time to take it to the next level. I strongly believe that 2019-2020 will be transition years for the whole ecosystem, and this will require that those involved shift their mindset from a complacent reliance on BDL to a more self-sustainable approach, based on private money being introduced more heavily, slowly whittling away at the dependence on the central bank. That, in my opinion, would constitute the ultimate success of Circular 331, and it would be the point where we could say that we built a whole new economy—an economy that extends beyond the local Lebanese and regional MENA markets, to the worldwide economy with Lebanon as its launchpad. We can all be proud of taking part in such a humongous endeavor.

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EntrepreneurshipMedia & tech

Can Lebanon construct a multi-channel digital future for serious journalism?

by Thomas Schellen
written by Thomas Schellen

The tech entrepreneurship landscape in Lebanon is slowly producing more colorful and fragrant blossoms —more prosaically known as startup ventures. Also, the country’s entrepreneurship ecosystem, after some years of incremental progress by trial and error, appears to be heading in a direction where it can deliver on two important asset categorizations and ecosystem requirements: generating more diversity overall; and fostering more concepts with potentials for producing good value-added in the context of the national economy today and its needed digital transition, such as Fintech, Blockchain and AI/Big Data-related startups.

But this is not how the presence and future look for all entrepreneurs who seek to innovate and create Lebanese startups from which the economy could greatly benefit. Specifically, many media startups are looking like ships that have no wind in their sails. Even worse, it seems that serious journalistic projects in this country are embattled by digitization-obstructing tornados in comparison to which the headwinds encountered by Fintech startups feel like a gentle summer breeze.

Banking and media

Stakeholders in the society and economy of Lebanon might feel it is counterintuitive to examine financial and media services in Lebanon today, because the banking industry is the domestic superhero and the media looks rather like Clark Kent after an injection of kryptonite. However, there are elements that the two can be said to have in common: First, both draw their existential energy from the trust that people have in them. Secondly, both were pioneers of quality services, thriving on freedoms and a knack for adaptive innovation that helped Lebanon to gradually develop its competitive edge over other Arab countries after the territories in the Levant emerged from the suzerainty of the Ottoman Empire at the end of World War I.   

On the other hand, important differences between Fintech and media outlooks in Lebanon are the current standing of the banking sector, which by its strength towers head and shoulders above every section of the economy, and publishing industry companies, from venerated newspaper houses in the throes of economic death to some new online ventures that fail to impress either in terms of economic performance or even their fundamental approaches to authenticity and content distribution.   

When thinking of banking and media in Lebanon dialectically and not just digitally, however, both have an opportunity to leverage their inherent potentials for generating trust and delivering genuine quality in the emerging Arab digital environment today, even as the digital development and entrepreneurship trajectories of Fintech startups and serious journalism projects have been very different over the years.

Media actually can be seen as one of the earliest industries that were existentially challenged by proto-digitization when newspaper publishers in developed economies were faced with strikes and labor action in the 1960s and 70s because printers, typographers, photo-engravers, and newsroom staff feared job losses from emerging technologies for anything from newsroom work to the layout and pre-print processing of pages. For the five decades since the heydays of mass media in the middle of the 20th century, media have been battling with various waves of digitization. Notably, while commercial organizations on the advertising side of the media industry were in the avant-garde of digital adoption and exists today on basis of having integrated Ad tech into all its processes, the journalistic media and serious news organizations to this day have yet to succeed in the full transition to business models that include digital pillars in every segment of the content acquisition, refining, customer distribution, and satisfaction journey.      

Developing quite differently, the digitization of finance, as opposed to the earlier computerization of banking from the 1970s, has peaked in a short new economy rush of digital disruption before subsiding again in the 2000s. Local bankers with extensive experience recall how the international banking industry used to talk excessively about their eagerness to try online-only instead of operating just as brick and mortar lenders. But they are equally vocal in pointing out how this eager wave ebbed totally and reversed into a race to solidity and traditional banking virtues on safe grounds of high streets and conventional banking districts. However, the development started progressing at accelerating speed after the world was shaken into new financial alertness by the Great Recession of 2008/9, and today it is simply the future of banking.

Bankers in Lebanon, while usually not appearing to be at the forefront of digital thinking, are not at all oblivious to the changes that the digital transition might impose on them in the next two, five, or ten years. But conventional wisdom in the sector is that the transition will not be as radical and fast as some evangelists of the digital banking future are preaching today, such as British consultant and blogger Chris Skinner who enthused in a recent book that banks with “zero technology vision” will have “zero future” and that only those banks that within the next 10 years can embrace micro-service architectures and open market, digitally focused structures will thrive.

“The predominance of digital banking in the future will happen,” comments BLOM chief economist Ali Bolbol before specifying: “But this is a very long-run process. In the short to medium term, the process will be determined by contingent demand and supply factors.” Such factors reflect digital agility and trust in the non-personal aspects of digital banking in a bank’s client base on the demand side, while the factors on the supply side comprise the respective legal environment and central bank’s aptitude to provide effective regulation of digital finance in a given market, along with the willingness, or resistance, of banks to adopt open technological platforms.

Given the regulatory and cultural bulwarks standing in their way in Lebanon, new Fintech startups in the Lebanese ecosystem, such as Rumman, Juno, and Anachron (see November 2018 issue for profiles) have by no means an easy road to success in front of them, but their markets and methodologies have clear potentials, and their challenges, such as winning approval from the central bank of Lebanon, are also quite precise. The budding Fintech acceptance in Lebanon is furthermore proven by the fact that business propositions of Fintech startups have been able to attract interest from accelerators in the ecosystem.     

On the media side, commercial organizations in Beirut—digital agencies and media planners for example—have been thriving in the local entrepreneurship ecosystem even before the Beirut Digital District came into existence. But to say that in search of serious new entrepreneurs the pickings in the Lebanese ecosystem are slim would be a charming overstatement. Of course, there are new media platforms with enticing slogans and exciting concept ideas, and the good part is that there are increasing numbers of digital startups as well as more digitally mature enterprises that have found access to funding. This is observable internationally, but not locally, or even regionally.

Media startups

For a few examples from 2018, the Tortoise Media “slow news” venture in the United Kingdom–motto: ‘slow down, wise up’–succeeded in attracting more than GBP 539,000 ($677,000) from over 2,500 funders on Kickstarter in a month-long campaign in October/November of 2018. Five-year old Dutch member-funded media concept The Correspondent–motto: ‘unbreaking news’—at time of this writing had reached over $2 million (from nearly 35,000 founding members) of a $2.5 million crowdfunding goal sought by the organization in order to branch out into the United States (the campaign was to terminate on December 14, after Executive went to print). And in the more mature startup sphere, 11-year old Danish-founded platform ISSUU, which relocated its headquarters to Palo Alto, California, claims continuing growth after two successful Series A and B funding rounds in 2007 and 2014 which resulted in over $20 million in total investments.

Compared to such magical media stories, the state of journalism startups in the Lebanese media landscape is hardly impressive. However, one hopeful example is Daraj, the investigative journalism venture by three seasoned Arab-language journalists with experience in print and television. Daraj was established in November 2017, and co-founder Diana Moukalled tells Executive that the platform, which currently claims to publish four to six authentic and independent journalistic stories per day, has seen quarter-on-quarter increases of its audience by double digit percentages.

Speaking to Executive in November 2018, Moukalled says the figures are 230,000 unique visitors per month and 350,000 page views. She explains that the platform has established itself as a partner in global investigative journalism with the International Consortium of Investigative Journalists (the ICIJ of Paradise Papers’ fame). Today Daraj has today–including the three founders–human capital of 11 staff members covering operational needs from accounting to graphic design and social media, plus freelancers based in 21 cities. This, according to Moukalled, translates into a network strength of 80 quality contributors who are published on Daraj with different levels of frequency. 

While the startup had initial funding in form of grants by pro-media and pro-democracy entities in Europe and also managed to channel profits into their venture from a documentary that the founders produced at the time of Daraj’s formation, the first year of operations has been a slower than expected process toward a profit-making venture while maintaining independent views and high journalistic quality standards.

“We created a hybrid model where we launched with funding money until we would reach a point where we are solid enough so that we can move to advertisement [revenue models] and try to generate money through either subscriptions or other resources,” Moukalled explains. The startup explored options of getting investments from venture capital firms in the Arab world, and even outside of the region, but is still forced to operate on a tight monthly budget on basis of funding that, unless new revenue sources are activated, will overall last a few more years.

Meanwhile, the three founders of Daraj juggle exhausting, overlong workdays amidst aggregations of risk from commercial pressures, the imperfect state of digital and cybersecurity infrastructures, the experience of being possible targets for personal slander and online trolls, autocratic governments in some Arab countries that could be offended by serious and honest investigative pieces on the platform, and weak legal protection for journalists in Lebanon.

Promote the positive

Still, Daraj keeps going out of the conviction that serious journalistic ventures in Arab countries cannot continue to denigrate themselves as mouthpieces in service of special interests and moneyed powers. In Moukalled’s words: “We think there is room to do good journalism and have a profitable media platform to preserve editorial independence. When starting Daraj, we thought it is now or never. It is our challenge not to repeat the journalistic mistakes of the past two and a half decades, namely to not become mouthpieces or practice white-washing journalism.”

For Samer Shoueiry, the chief digital officer of Publicis Communications MEA—a unit of Paris-based Groupe Publicis, the third largest communications conglomorate worldwide—it is painful to witness how some time-honored Lebanese media organizations had to close their newspapers and also painful to see how poorly local organizations are faring in the digital space, even as the Lebanese cultural and technological prowess could be favorable for digital communication ventures and quality journalism.

That this is not happening–most startups and platforms in digital journalism are on the level of “experiments” to Shoueiry—is to the detriment of this country. In Shoueiry’s view, a key problem in the reporting, production, and dissemination of journalistic content resides in news organizations’ focus on the negative—something that by impressions at the end of 2018 in coverage of Lebanon is even more pronounced in foreign than in locally produced content.

“Lebanon is at a point where we need to promote the positive. A large threat consists in the fact that the reputation of Lebanon and the Lebanese has shifted from a country and a people that are achievers with their skills and talents, to the image of a people and country that are failing and unable to change, year after year. If you want to create a successful story from a media standpoint that starts from Lebanon, you have to focus on making Lebanon look good in order to make the Lebanese story look good,” Shoueiry exclaims.

Roula Mikhael, executive director of the Lebanon-based NGO Maharat Foundation that is dedicated to press freedom and journalism development, likewise sees the situation of digital media startups and Lebanese media in general as worrying to the point of being shamefully poor. “From recent media studies that we did this year, it seems that there are not many media startups in Lebanon while the existing media outlets are not really rethinking their business models, which have resulted in a crisis of content due to the way in which these outlets were earning money,” she tells Executive on the sidelines of a conference on internet governance.

“In the past, Lebanese media was a leader in Arab journalism, but today we cannot talk about a leading role for Lebanese media. It seems that journalists often want to do something different but they don’t know how to run a media outlet or a news website. You need a new business model,” Mikhael adds. She says that Maharat Foundation in 2017 began offering a media management course for publishers and journalists, and that the foundation hopes to incubate a digital media startup in the coming year.

If they attempt to embark on to developing their digital future, journalists and publishers in Lebanon are confronted by many barriers–from old mindsets and their own bad habits to knowledge barriers and cybersecurity issues —Mikhael confirms, before emphasizing how the pitiful state of media regulation and protection of journalists’ legal standings exacerbates the problems of Lebanese journalism. “The law on the freedom of expression must be revised and we as Maharat Foundation drafted a [proposal for a media] law. It has been with the parliament for eight years,” Mikhael says. She explains that the draft calls for more transparency and protection of journalistic work along with unambiguous definitions for defamation, libel, and similar.

The future is digital

Indeed, one can hardly deny the impression that in Lebanon’s present media landscape, an overwhelming number of journalists are given bits of financial incentives to behave not as the fourth estate, or watchdogs and muckrakers vis-a-vis the ministries, but mainly as note takers, yes people, propagandists, and spin doctors for the member of the political class that they are affiliated to.

The way forward to better Lebanese digital media would quite certainly have a better foundation if a modern legislative infrastructure for journalism and numerous important freedoms can be implemented alongside construction of better financial and technical avenues that would enable tech startups in media and digital journalism ventures to play their important role as guardians of trustworthy information. Trustworthy analysis and information is something that is getting both ever more important in the context of the emerging digitized knowledge economy that is the future of societies worldwide and, at the same time, there are ever increasing waves of fake news and propaganda that can very negatively disrupt entire nations and their economies.

Today it is still a wild dream to see the formation of integrated digital journalism institutions that produce non-zero-sum outcomes across their four core content processing layers of sourcing: high-quality journalistic content; editing, fact-checking, and refining this content into a value-added product; distributing it via platforms that offer good win-win-win monetization for journalists, publishers, and distributors; and achieving true digital customer-centricity.

However, there is no point in sitting around in newsrooms, or cafes and pubs—which journalists all over the world are so fond of frequenting—and wait for a better digital media world. There are steps that media organizations can take, suggests Publicis’ Shoueiry, such as “democratizing the way in which people can subscribe,” by offering multiple options to people for acquisition of media content through SMS, apps, coupons, or even loyalty points from merchants or frequent flyer points from airlines (as demonstrated for example by the partnership between Emirates Airlines and the Wall Street Journal that ran from November 2016 to November 2018).

International content partnerships with emphasis on co-creation of quality stories, dedication to improve the deployment of artificial intelligence and data analytics to achieve top-notch customer centricity, and customization of media content offerings are, according to Shoueiry, other approaches that Lebanese media could pursue. “The power of newspapers and magazines lies in the fact that they have meaningful stories but in a very condensed manner,” he says, adding: “People who might buy a book on the Lebanese economy over the past decade, but do not want to read all of the book or who do not need all the content of this book, could be target customers for buying a custom publication of the exact content they are interested in buying and willing to pay for. You have to really rethink custom content delivery without interruption and give value for money to people who want this content.”

Whatever roads media organizations in Lebanon—startups as well as existing players in online, audiovisual, and print—could pursue on the basis of their strong cultural adaptability and communication skills, there is no doubt that much more digital entrepreneurship in the Arab world is needed for value-added, serious and investigative journalism, and the more Lebanese that enter the startup journalism arena with serious principles, the better. The common headline for the future of banking and journalism, along with everything else, is digital.

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CommentIndustry & Agriculture

All Lebanese must do their part to help revive the agricultural sector

by Ramy Boujawdeh
written by Ramy Boujawdeh

Agriculture in Lebanon needs a revolution, and we should all be part of it. The sector is facing major challenges: Land is less farmed, younger generations are increasingly uninterested in farming, and national support for the sector is limited mainly to international donors’ programs, with little coordination with the Ministry of Agriculture to develop a national strategy. We’ve all heard about the apple crisis, precipitated by the 2015 closure of the land trade route via Syria for product exports to the Gulf. In addition, issues related to poor traceability practices, irrigation challenges—given the country’s contaminated waterways—and inefficient practices in most small and medium farms are ravaging our environment. 

It takes a village to raise a child, and it takes a country to revive a sector. Agriculture is a national matter, and Lebanon can play a role in the food security of the region, given the microclimates it has, as well as its human capital and entrepreneurship mindset. As we see around the globe, agriculture is no longer half science-half art; it is half science and half engineering. Precision agriculture is what will take the sector to new heights.

Lebanon has the human capital to combine science with engineering to save and grow the agriculture sector. What we currently need, as an investment in research and development, is a group of engineers and computer scientists, agricultural engineers, scientists, and business professionals working together under a national strategy to revive the country’s faltering farming industry.

Urgent solutions are required for Lebanon to improve agriculture and feed its growing population. We need to apply sustainable practices, following the water, energy, and food (WEF) nexus; meaning that the three sectors—water security, energy security, and food security—are inextricably linked and that actions in one area more often than not have impacts in one or both of the others. Some of the most crucial reforms required are solutions to optimize the use of water in irrigation, to implement renewable energies to energize the sector, and to employ science to breed crops that are resistant to drought and disease.

Adapt to survive

Innovation in the sector is needed, whether it is implemented using science and technology, or through innovative business models. We also need to look at the entire value chain, from the supply of seeds, to farming, harvesting, and post-harvesting practices. Much of the innovation in developed countries is focused on large-scale farming practices. However, in Lebanon, it would be more feasible to adopt solutions found in many developing South Asian, African, and South American markets, where the challenges are similar to the Lebanese context, in terms of bottlenecks, fragmented value and supply chains, and low educational levels of farmers.

We also need to look at developing a national strategy for innovation in the sector. This plan would involve multidisciplinary academic faculties, researchers, and the private sector working with regional and Mediterranean partners to develop innovative ways to accelerate growth in the sector. Many programs already in place, including PRIMA, an initiative by the EU, partially fund such research initiatives. Agrytech, a program by Berytech funded partially by the Netherlands, is supporting the creation of startups in this field and the creation of an agri-food innovation cluster to strengthen and accelerate the sector.

In addition, Lebanon possesses many microclimates, and is therefore capable of producing different varieties of fruits and vegetables. This advantage should be fully utilized using innovative business models, which could identify specific produce that could be channeled into the export market, particularly during the off season. We have seen the high potential of this approach in avocado production as part of the LIVCD program funded by USAID, the potato export plan supported by the Netherlands, and the production of new varieties of table grapes and stone fruits supported by the EU. These opportunities should be complemented by helping producers adopt the best farming practices to ensure quality, high yield, and efficient production with proper traceability.

The agriculture sector and agri-food innovation in Lebanon have the potential to increase exports from Lebanon to the world. However, this will only be realized through a concerted effort bringing together academia and the public and private sectors. Agriculture is no longer a nostalgic connection to the country’s rural roots—it is an economic driver, an opportunity to innovate, and a crucial sector for the survival and sustainability of future generations.

Let us all take part in this agri-food revolution.

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CommentIndustry & Agriculture

The UNIDO view on Lebanon’s industrial sector

by Cristiano Pasini
written by Cristiano Pasini

History shows that roughly all developed countries, which currently benefit from a high standard of living, have gone through a period of successful industrialization—during which the industrial sector, benefiting from high levels of technological advancement and innovation, was the driving force behind national economic growth.

A close look at Lebanon’s development pattern tells a different story. Local and regional circumstances have favored the services sector at the expense of the productive sectors of the economy. As a result, Lebanon has not fully benefited from the economic development that industrialization can offer. In the last decades, the contribution of the industrial sector to the national GDP was low compared to industrialized countries in East Asia and the Pacific. Based on statistics by the United Nations Industrial Development Organization (UNIDO), the contribution of the industrial sector to the country’s GDP now stands at 8.3 percent.

Weak investment and growth in productive sectors can also contribute to poor job creation, a volatile GDP, and low levels of competitiveness internationally. This view is supported by the World Bank’s Lebanon Economic Monitor published this year, which partly attributed Lebanon’s “defective” growth model to the high reliance on services (real estate, construction, finance, and tourism) characterized by low productivity and a low capacity to generate high-skilled jobs.

UNIDO has been working in Lebanon since 1989, with a strong belief that a healthy and successful industrial sector has the potential to create jobs for men, women, and youth in different areas across Lebanon. A strong industrial sector promotes exports, reduces the trade deficit, and improves economic resilience against shocks and stresses. The industrial sector also supports development outside greater Beirut, thus promoting the sustainable and inclusive economic growth that Lebanon urgently needs.

Industrial zones

UNIDO signed a Country Programme Framework with Lebanese government in 2015. In alignment with the Ministry of Industry’s MoI 2025 vision for the industrial sector, UNIDO’s framework covers the following areas: supporting the development of Industrial parks, improving the competi­tiveness of small- and medium-sized enterprises (SMEs) in the agro-industrial sector, promoting environmental sustainability and energy effi­ciency, and supporting host communities in rural areas affected by the Syrian refugee crisis.

Working in close partnership with the MoI and the international community, many achievements have been realized. Thanks to a grant contribution from Italy, feasibility studies and master plans have been developed for three new sustainable industrial areas. These zones are featured in the government’s Capital Investment Plan and are expected to create approximately 31,000 jobs and impact 200 enterprises across Lebanon. Thus far the zones have attracted financial commitments of 7 million euros ($7.9 million) from the Italian government and 52 million euros ($59.3 million) from the European Investment Bank (EIB) for their construction and development. The European Bank for Reconstruction and Development (EBRD) is also considering a loan of 42 million euros ($47.9 million) for investments in the development of these zones.

Moreover, thanks to the support of Italy, Austria, and Japan, UNIDO is promoting innovation in key value chains in the agro-food and the furniture sectors. Approximately 2,000 people were trained and new equipment or other technical support was supplied to more than 15 cooperatives (900 members), 10 agriculture associations, 80 SMEs, and handicraft initiatives.

Supporting green growth

An important component of UNIDO’s work is environmental sustainability. Through the regional MEDTEST project funded by the European Union and implemented together with the Industrial Research Institute, UNIDO has been working on greening Lebanese industries by supporting them in identifying potential energy savings and providing training to industrialists on cleaner production practices.

UNIDO continues to support the MoI in overcoming challenges that are hindering growth in the industrial sector in Lebanon. Weak infrastructure and the high cost of production make industries less competitive compared to their regional counterparts. High interest rates—resulting  from the monetary policy adopted by Banque du Liban (BDL), Lebanon’s central bank to sustain the fixed exchange rate—has impacted private sector investment. This limits growth in both traditional and emerging industrial sectors. Moreover, the Syrian crisis had an important impact on the industrial sector, mainly through the closure of regional export markets and the added pressures resulting from the increase in the labor force.

Despite the above-mentioned challenges, Lebanon’s industrial sector holds promising prospects. The level of manufacturing value added per capita has more than doubled between 1990 and 2015. By moving from $268 to $703 over this period—in constant US dollars per capita—Lebanon surpassed comparator countries such as Jordan and Georgia. Also since 1990, Lebanon’s ranking on the competitive industrial performance (CIP) index has mildly improved from ranking 97 (out of 148 countries) to 90. A promising indicator is also the share of sophisticated manufactured products (medium and medium-high technology, as per UNIDO definition) in total manufactured exports, which in Lebanon is 40 percent—indicating promising technological capabilities in the sector.

The outcomes of CEDRE—especially the preparation of the government’s plan for supporting the growth of productive sectors—suggest an increasing recognition that achieving inclusive and sustainable long-term economic growth is contingent upon supporting productive sectors. UNIDO welcomes these efforts in the hope that they materialize in policies and investments that will allow the industrial sector to achieve its potential and positively contribute to the long-term growth of the Lebanese economy.

Through its mandate and with the generous support of the donor community, UNIDO will continue playing its part in supporting inclusive and sustainable industrial development in Lebanon.  This is underpinned by joint working and building partnerships with public and private sector partners, in order to ensure the successful implementation of projects and programs, and to positively contribute to the achievement of the UN’s Sustainable Development Goals.

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Industry & AgricultureWine Industry

Wine producers discuss domestic consumption

by Nabila Rahhal
written by Nabila Rahhal

Sipping on a glass of Lebanese wine has value beyond the drinker’s enjoyment. As Edouard Kosremelli, general manager of Château Kefraya, puts it, drinking Lebanese wine supports the economy since thousands  of people are either directly or indirectly employed by the wine sector. Lebanese wine encompasses three industries (agriculture, industry, and hospitality and tourism), and is among the country’s most successful exports, distributed in more than 36 countries, according to the wineries with which Executive spoke.

When sipping on homegrown wine, you are also getting a taste of a long history dating all the way back to the Phoenicians, who were the first civilization to trade wine. Many also believe that Lebanon’s Qana, in the south, is the biblical town where Jesus Christ turned water into wine.

In export markets, Lebanese wine is gaining market share every year and is appreciated for its history and quality. Locally, however, those in the wine industry tell Executive that wine consumption is still relatively low, outlining why this is the case and what they are doing to change it. “Today there is a momentum for Lebanese wines around the world—the world is interested in the ‘old wine’ producing countries such as Turkey, Greece, Georgia, Croatia, and Lebanon,” says Aurélie Khoros, marketing manager at Ixsir.  “There is no reason why this should not be the case in our own country. Lebanon’s winemaking history is one of the oldest in the world, and we should take pride in that. The only way to get there is through joint efforts in educating customers.”

More wine please

Joe Assad Touma, winemaker at Château St. Thomas, places wine consumption in Lebanon at just one bottle per capita. “It should be more because winemaking is part of our ancient culture as is evident from research,” Touma says, adding that the good news is that this number is slowly but surely increasing.

According to Zafer Chaoui, current head of the Union Vinicole du Liban (UVL) and chairman and chief executive officer of Château Ksara, wine consumption among the Lebanese has increased only slightly due to the economic situation in the country. “Unfortunately, as was discussed during a conference at the Chamber of Commerce in mid-November 2018, the purchasing power of the Lebanese has gone down by 20 to 25 percent over the past five years,” Chaoui says. “This is very sad and affects not only the economy but people’s behavior as well. Since drinking wine is a luxury, and not a basic necessity, you would expect consumption to drop in such times. However, the consumption of wine in Lebanon has slightly increased—maybe people want to ease their minds in these stressful times.”

Kosremelli agrees that local consumption of wine is increasing in spite of tough economic times. “The local consumption is definitely increasing despite the economic crisis,” says Kosremelli. “If it were not for the economic environment, it [the increase] would have been more tangible. If you look around you, you see that the young generation is drinking more wine than their parents—you don’t need market research to prove that.”

Winemaker and co-owner at Domaine De Tourelles, Faouzi Issa, also believes that the younger generation, in their quest for authenticity, are driving up wine consumption. “Today ‘back to the roots’ is the motto of most of the young generation of Lebanese, who want to enjoy their country’s local traditions through its food, its villages, and its wine,” Issa says.

Ixsir’s Khoros agrees that wine consumption is on the rise and notes a change in consumption habits. “Wine was, for a long time, synonymous with special occasions or celebrations, but this has changed as it is now also being served more casually in homes and during nights out. Consumers no longer ask for a glass of wine, but most often specify, if not a brand, a style of wine they would like to have, which was not the case a few years back,” she explains.

It takes collective work

This slight increase in domestic wine consumption is the result of years of effort from wine industry stakeholders. However, they all believe there is still a long way to go before wine consumption in Lebanon is on par per capita with the rest of the wine drinking world. “Lebanese wine consumption [per capita] did increase, but today it is still one of the lowest for a wine producing country, hence we still have a long way to go,” Khoros says. “This is an opportunity that the entire sector should jump on, especially since the consumer is more receptive today than a few years back.”

Wine producers agree that the most important factor for increasing wine consumption among Lebanese is to raise awareness through various approaches, one of which is education. “We have to educate consumers,” Chaoui explains. “For example, Château Ksara has the exclusive Wine and Spirits Education Trust course, which is among the most well-known in the world. It is held in Lebanon three to four times a year for a reasonable fee, and people come to learn about wine and how to appreciate it. Although these courses are not limited to Lebanese wines, people who attend this course gain a greater understanding of how good the quality of Lebanese wine is.”

Touma also speaks about the importance of education, explaining that he gives a course on wine as part of the agriculture program at Holy Spirit University of Kaslik. Recently, he has noticed an increase in non-agriculture major students who just want to learn how to taste and serve wine.

Issa believes enotourism—tourism revolving around wine—is key to promoting Lebanese wine among consumers and says this form of tourism is on the rise as more people enjoy visiting and discovering the country’s wineries. He says the number of visitors to Domaine des Tourelles has increased over the past couple of years, and they now get an average of 30 per day.

Khoros also speaks of enotourism and its importance in encouraging wine consumption. “We host around 40,000 visitors yearly and offer guided tours, wine tastings, and the possibility of having lunch at Nicolas Audi à la Maison d’Ixsir,” she says. “Enotourism is an important factor in promoting Lebanese wines, as wine is a culture. When you visit a winery and get to know more about the process and the people behind the wine, it sparks curiosity and educates the consumer.” She added that they are currently working on a rooftop bar on their winery’s premises to be launched in spring 2019.

Having a restaurant or hospitality offering has proven to be a successful tool for attracting enotourism and many of the recently launched wineries either have a restaurant on their premises, plan to develop one within a year, or have opened an outlet in Beirut where one can taste their wine and enjoy some nibbles (an example of which is Vertical 33’stasting room in Gemmayze).

Besides restaurants, seasonal harvest-related activities are also a way to engage consumers with wine in an entertaining way. “We at Château St. Thomas invite all our visitors and clients to our harvest event so they feel involved in the wine making process and thus more attached to Lebanese wine—they feel they are enjoying their own personal wine since they helped in the harvest,” Touma says. “We have this event two weekends per year and welcome around 200 people [each day], which is our maximum capacity, and we have to turn away many others.”

Kosremelli feels that the success of Lebanese wine abroad has a positive impact on local consumption. “Whenever our wine is recognized in an international contest or rated by international critics, it gives us credibility in the eyes of the Lebanese customer,” he says. “Ours is a dynamic industry that has proven to be successful abroad, and the younger generation who travel and study outside of Lebanon can see that Lebanese wines are appreciated internationally, and so they are becoming prouder of their local wine.”

Foreign competition

Events like Vinifest—the annual wine fair organized by Eventions—and various other summer wine festivals also help to promote Lebanese wine, says Chaoui, but what still stands in the way is the Lebanese perception that foreign wine is better than local wine. “This patriotic feeling is missing in Lebanon,” he says. “Probably, with all respect to other industries, wine is the one product which is comparable to international level products. And yet despite this, people feel that if they offer Lebanese wines at a reception, it’s not sophisticated enough. This is something that we need to correct.” Chaoui adds that UVL wants to introduce a campaign to instill pride in local wine production—they are hoping for financial support from the Ministry of Agriculture for this project.

Kosremelli feels that competition from foreign wine is to be expected, since wine consumption is generally increasing. “It’s normal to see increases in the consumption of both local and foreign wine when overall wine consumption is increasing,” he says. “That is because wine lovers like to discover new wines—that’s why we export our wines to other markets, and that’s why we import wine as a country.” However, according to him, the problem lies with the unregulated import of alcohol in Lebanon, which makes for an uneven playing field between the local and foreign wines.

Touma elaborates further, giving the example of how some restaurant owners promote foreign wines over Lebanese ones since they make a larger profit from the imported variety. “A growing number of restaurant owners support Lebanese wine but unfortunately, because imported wine is cheaper, some prefer to sell imported wine over Lebanese wines because then their profit margins are bigger,” he says. “Also, there are a couple of restaurants and wine bars buying wine directly from abroad and selling them here so they can make even more profit from foreign wine. This is negatively affecting Lebanese wines.” These restaurants and bars keep prices down by avoiding purchasing wine through the local exclusive distributor.

Lebanon’s wineries have been lobbying with the Ministry of Economy and Trade to regulate alcohol imports. “We respect that Lebanon has a free economy, and we respect all deals with the European Union,” Chaoui explains. “All that we ask is that the import of wines be more organized, as is the case all over the world. Normally, you are registered as a wine importer and present permission for each individual lot you report—this is the case in the US and the UK while other countries, like China or Russia, are even more complicated. But here anyone can import wine. What we are asking for is a more regulated procedure and stronger control for the customs authorities.”

Clouds over the grapevine

Producing wine in Lebanon is no easy task. Lebanese producers often say that the only Lebanese item in their wine is the grape itself; everything, from the equipment to the bottle and cork, is imported. No company produces the needed materials in Lebanon, which drives the cost of production up. The cost and scarcity of land is another factor which increases production costs. As such, Chaoui explains that Lebanon only produces medium- or high-range wines, since production costs are too high to justify producing low-end wines.

While Lebanon’s wineries have the support of various ministries in promoting their wine in the international market, support to decrease the cost of production is still lacking. “It would help if we are supported by decreased taxes on the imported equipment we need to produce wine, be it the barrels, bottles, or corks,” Touma says. “We also pay an ‘alcohol grape tax’ to the Ministry of Finance of LL200 per kilogram—it’s a tax that has existed for years. The government could support us by either removing this tax or decreasing the amount.” He added that Lebanon’s other wineries are lobbying for this as well.

Lebanon’s winemakers work tirelessly to develop both local and international markets despite the challenges, and wine is one of the fastest growing agro-industry products in Lebanon, one that is building a positive reputation for the country. So the next time you fancy a glass of wine, pick a Lebanese label and enjoy it with pride—and in moderation, of course. 

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Industry & AgricultureOverview

Maintaining growth

by Nabila Rahhal
written by Nabila Rahhal

It was the famous Lebanese poet Gibran Khalil Gibran who said that a nation that does not produce—that does not eat bread from the wheat it harvests or wear the clothes it weaves—is a nation to be pitied. As Cristiano Pasini, representative and director of the United Nations Industrial Development Organization (UNIDO) for Lebanon, Jordan, and Syria, argues in his article for Executive, countries with a high standard of living also have strong productive economies with well-developed industrial sectors. 

Lebanon’s agricultural and industrial sectors are generally weak. However, there may still be hope for these sectors moving forward.

All in the same boat

Mounir Bissat, secretary of foreign affairs and head of the export promotion council at the Association of Lebanese Industrialists (ALI), tells Executive that the industry sector largely suffers from the same challenges as the Lebanese economy as a whole. He says subsidized loans for capital investments were harder to access in 2018 than in previous years, noting a slowdown in lending from commercial banks due to changes in the monetary policy.

The main market for Lebanese exports, the Gulf region, was economically strained in 2018, negatively impacting our industry sector. Meanwhile, the low purchasing power among local consumers—who are increasingly reluctant to spend beyond necessities—took its toll on industry in Lebanon as well.

An unregulated and chaotic market is affecting the industrial sector. Bissat says many factories in Lebanon are not officially registered, which means they do not pay taxes. This, in turn, allows them to sell their products at a lower price than companies that are registered, and do pay taxes, creating unfair competition.

Lebanese products face challenges due to the high cost of production, meaning they are not competitively priced in the local market—where they compete with imported goods—or in export markets. “To survive in an increasingly competitive market, we need to have the government subsidize the cost of energy (for energy-intensive industries) and of shipping, and to support Lebanese products in export markets,” Bissat says. He offers examples of potential government support, such as arranging business-to-business (B2B) visits or subsidizing the cost of attending international exhibitions, which he says are key in the industrial sector.

Some positive news

There were, however, a few positive developments to celebrate in the industrial sector this year, Bissat says. The May 2018 parliamentary elections saw 15 industrialists, or people with industrial backgrounds, enter Parliament. “We feel that we have an unofficial lobby in Parliament, or at least a significant body that understands the sector’s needs and can represent them. We are trying to benefit from this to pass laws that would support the industrial sector,” Bissat says.

ALI, in collaboration with the Ministry of Industry and the Ministry of Economy and Trade, lobbied against 26 imported products that were being dumped in the Lebanese market, Bissat says. (Dumping is the practice of exporting a product at a price lower than that in the exporter’s domestic market. This typically involves substantial export volumes and is problematic for the manufacturers or producers of the same products in the importing nation.) The association asked that Lebanese products be protected from the impact of these imported goods, which include detergents, aluminum, burghul, and wafers, through safeguard measures. Bissat says that the government issued a decision just prior to the May elections, which was then implemented in November 2018, to prevent Turkish wafers and detergents from entering the Lebanese market. This decision was not what the association had lobbied for, Bissat explains. “We are not in favor of prohibiting any imports because we are with a free economy and also because we don’t want our exports to be treated in the same manner. We were pushing for safeguard measures instead,” he says.

The October 15 reopening of the Nassib border crossing, between Syria and Jordan, is expected by some to boost the Lebanese industrial sector by allowing for land exports previously stymied due to the war. But Bissat believes it is too soon to tell if that will be the case. To his knowledge, no industrialists had made use of the route as of mid-November 2018, and so far he has heard of increased customs duties and restrictions imposed by Gulf countries (on which nationalities and vehicle types are able to enter their borders).

In 2018, there was an increase in the number of permits given to industrial entities as compared to 2017. These ranged from small workshops to large factories, and the increase in permits indicates that there is some dynamism in the sector. Kanj Hamadeh, assistant professor of agricultural economics at Lebanese University, says that 40 percent of these permits were given to the agro-industry sector. Hamadeh says agro-industry’s growth is fueled by the low cost of labor and the high demand for food in Lebanon, both of which have been affected by the Syrian refugee crisis. Another factor that contributes positively to the growth of agro-industry is the trend toward eating authentic, healthy, and local food—largely driven by mid- to high-income Lebanese.

Tech time

Bissat fully recognizes that e-commerce is the future, and the association is working toward developing a comprehensive industry B2B platform, despite the challenges. “The platform is not the problem—anyone can develop that for us—the problem is how to promote it in international markets and what the payment method should be, given that we don’t even have PayPal in Lebanon yet,” he says. “We also don’t have an e-signature [mechanism] if I want to virtually sign a pro forma. Basically, we lack the necessary infrastructure for e-commerce, witnessed by the slow internet. But it’s the trend and the future of commerce, and we have to be ready for it or fall behind.”

For the sake of Lebanon, we hope that the industry sector does not fall further behind, and instead maintains its growth as it celebrates its small successes on its way to making “Made in Lebanon” a badge of pride.

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Hospitality & TourismQ&A

Nicholas Chammas talks current Lebanese trade situation and the way out

by Nabila Rahhal
written by Nabila Rahhal

On a rainy day in mid-November 2018, Executive sat with the head of the Lebanese Traders Association, Nicholas Chammas, to hear his thoughts on the retail and trade sector in Lebanon. Given the amount of text messages Lebanese receive on a daily basis from stores announcing the latest promotion or the ever-increasing number of discount signs on storefronts, it was no surprise that Chammas told Executive that the retail sector is not doing well. His solution? The Lebanese should take advantage of those local promotions and shop more in Lebanon.

E   How would you describe 2018 for the retail sector?

It was another horrible year for the economy in general, and the trade sector in particular. Cumulatively, we have been going downward for the seventh year in a row. So it has been a terrible trajectory for the trade sector.

What we are witnessing today is all factors going in the wrong direction. As traders, we have five factors that influence our business. The first one is revenues; our turnover has been declining persistently since 2011. The second factor is trade margins, which have also been steadily eroding [in part] because of the competition from Syrians who have opened their own stores and wholesale operations. Add to this the fact that there is zero pricing power with the traders, whereby you have discounts all year long. Typically, these two factors [revenue and trade margins] should go up annually, but in Lebanon they are decreasing.

On the other hand, you have three factors that typically should go down [in a healthy business environment] but instead are going up. The first factor is the overhead and general operational expenses, such as rent, labor expenses, or utilities—these have been going up due to inflation. Second is the interest rate: Because of the tightening monetary policy in the United States and financial considerations in Lebanon, interest rates have been skyrocketing, and this has impacted our business. The third thing that has been going up is taxes. In 2017, 22 tariffs and taxes increased and have negatively affected our business.

So all in all, 2018 has been the perfect storm for the trade sector.

E  Is this across all sectors of retail?

In general, yes, it is the same scenario across all sectors. Consumables like food and everyday usage items have been affected less seriously than other sectors. Luxury and durables (such as cars and furniture) were heavily affected. Everything that can be postponed has been postponed for two reasons: [First,] the purchasing power is really not there anymore. [Second,] those who have money in the bank have negative expectations about the situation [in Lebanon], so the result is the same in that money is not being spent. Consumption is nose-diving, and this is a disaster for the retail sector, of course, but also for the economy at large.

E   What do you propose as the solution?

Statistics by Global Blue (the private company specialized in restituting VAT in numerous countries) show that in 2017, tourists spent $3.5 billion in Lebanese stores. During the same period, Lebanese tourists spent $5.5 billion abroad. This does not include the money that Lebanese spent abroad at restaurants and for other services, which would drive that figure up to almost $6 billion.

Because of the devaluation of the currency in Turkey, for example, Lebanese are traveling en masse and doing their shopping there because it is cheaper than Lebanon. The Turkish lira had lost a lot of ground as we know, but since mid-August 2017 until now, it has regained 30 percent of its value, thanks to tourists like the Lebanese. But by benefitting from the sales and opportunities there, the Lebanese have undermined the Lebanese economy.

We need a booster for the economy, and this is why we are happy with CEDRE, for example. If it happens, let us say you have investments to the tune of $1.5-2 billion a year, but as we well know, investments are slow to materialize and  impact the economy. Economically speaking, consumption is easier to awaken and faster to react.

What I am saying is that between today and the day CEDRE enters into force, we ought to spend more money in Lebanon. And the good news, as we showed, is that there is money that is being spent, but abroad. 

E   Although we said at the beginning that there is no purchasing power among Lebanese.

I said there are two factors. Part of it is that the purchasing power has definitely declined. The second one is that the purchasing power is being spent abroad. What I am saying is that for national emergency reasons, let’s say for the next two years, every Lebanese citizen should give Lebanon a second chance by collectively spending $1.5 billion in Lebanon instead of spending it elsewhere.

E   What is the incentive? Why would they do that?

It is the case of the chicken and the egg. Whenever the Lebanese spend abroad, they are contributing to making prices more expensive locally. When traders sell larger quantities, there are economies of scale that enter into play, and at the end of the day, they reduce their prices. So the more volume, the more price reductions. We need to find a way to break this curse.

I am addressing this appeal to two parties. First to the Lebanese, telling them that in the coming two years they should spend locally in order to save the Lebanese economy. My second appeal is to the traders’ community to the effect that they should be reducing their prices.

E   More than they are already reduced? We were just previously saying how there are already sales all year round.

They are already, but still, I want them to make a bigger effort because people always complain that it is cheaper [to buy things]elsewhere. We have to make a well-studied effort to have better prices, the best services, and create an atmosphere that is hospitable and conducive to good consumption activity by all Lebanese and foreigners.

E   Practically, how will this be done?

It’s still too early to talk about the practical details. It needs an awareness campaign at the national level, and I intend to undertake that whenever a government is formed. Because this is the only way when you have an amount of money that is available. It is there because it is being spent elsewhere—let’s put it to use in Lebanon, since we are in dire need for this.

E   But consumers are individualistic and tend to think of themselves before the collective good.

This is the whole substance of the campaign. Lebanese are now happy [with bargains abroad] and are benefitting at the individual level, but they are not aware that they are harming themselves at the collective level. We need to raise their awareness through the campaign.

E   Last question, now that the war in Syria seems to be nearing its end, how will that impact the Lebanese trade sector?

It will impact it a lot. Lebanon will be the platform for rebuilding Syria, so it will be a huge opportunity—you are talking at least $200 billion in reconstruction. So Lebanon can participate in many sectors including trade, industry, transport, finance, and so on.

What I care about is surviving the coming two years, because after that you have the reconstruction of Syria and you have the oil and gas. And this is what this plan will do.

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