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French Version

Lebanon's food industry making headway

Sector needs more work to reach export potential

Lebanon perennially posts the worst trade deficit in the Levant region excluding Palestine, due to the huge disparity between annual export revenues - $1.782 billion in 2004 - and import expenditures - $8.885 billion.

Part of the solution to the country's economic woes lies in developing a regionally and internationally competitive export sector based on products for which Lebanon has a comparative advantage-namely commodities that are neither labor nor energy intensive.

The food manufacturing or agro-food sector is one local industry with the potential to produce specialized exports, and though the industry has made great strides in carving itself a niche in the international market, there is still room for improvement.

"The food and beverages industry has grown by 20 percent per annum," Fadi Abboud the president of the Lebanese Association of Industrialists told The Daily Star, "but there is a lack of imagination in the sector. You go to European supermarkets and you see more Mediterranean products than you do on shelves in Lebanon."

Because of high processing costs from expensive fuel, electricity, and labor, Lebanese industrialists cannot rival other MENA states in terms of competitively priced commodities.

The agro-food industry has been one of the first sectors to gear their exports to an area where Lebanon has a clear comparative advantage, by capitalizing on the growing Mediterranean food craze in the West.

Companies such as Al-Rabih have broken into international ethnic-food markets with high-quality products like canned hummous, tahini, mouttabal, chickpeas, olive oil, spices, olives, and pickled vegetables.

According to the economy and trade minister food industrialists target the Lebanese diaspora population in Western Europe and America.

"The growth of Lebanese restaurants in the West have been key to our success because through them we have been able to introduce Lebanese cuisine to a new market," Georges Nasraoui, the president of the Syndicate of Lebanese Food Industries and Al-Rabih explained from his headquarters in Dbayyeh.

Nasraoui estimates that 75 of the 130 companies in his syndicate - approximately 60 percent - export canned Lebanese foodstuffs to Arab and Western countries, and more are in the process of upgrading their manufacturing processes to conform to international regulations, which function as non-technical barriers to trade.

Various public sector and civic groups, including the Lebanese Association of Industrialists, are implementing programs to educate small and medium enterprises (SME's) about export requirements so locally manufactured products become internationally viable exports.

Rita L. Feghali, a representative from QUALEB, an EU-funded program, administered by the Economy Ministry to strengthen quality management capabilities and infrastructure in Lebanon, told The Daily Star that over 50 percent of Lebanese exports are rejected by European markets because of labeling and packaging irregularities. Thirty-five-percent are rejected because of illegal additives, and 5 percent due to salmonella.

In addition to funding an upcoming workshop to prepare 25 industrialists for ISO 22000 certification - the international standard for the food industry that recently replaced ISO 9000 - QUALEB has donated 6-7 million euros worth of technology to the one accredited food safety laboratory in Lebanon.

The reliance of agro-food exporters on foreign laboratories to test their products is another obstacle to a competitive export sector said Fenghali.

"We need to get more laboratories accredited so products don't have to leave Lebanon to be tested," she said, "but the biggest obstacle is the cost of adhering to regulations since upgrading technology is expensive."

Nasraoui called ISO certification irrelevant to an export's viability noting that only about 35 companies in his syndicate are ISO certified, but according to QUALEB ISO certification is helpful since it means that "safety management system is on track."

Another branch of the syndicate's strategy is encouraging agro-food exporters to establish a presence at international trade fairs like Gulf Food, ANUGA in Germany, and SIAL in Paris. Lebanon was represented by 17 companies at this years' ANUGA fair in October, including one of the country's biggest canned-food producers, Cortas, Castania Nuts, and olive oil distributor SRI International.

Despite these measures, Abboud admits that "helping Lebanese industry is not high on the government's agenda."

Some experts says that while food safety training is on the rise, the government needs to encourage SME's to attend seminars and enforce quality standards more stringently.

But Abboud maintains that Lebanese food exports will not achieve high levels of market penetration until they learn to "think European."

"They need to change packaging. Tin cans are so passŽ, people want thinks with a short shelf-life in the West," he says, "if you look at any European supermarket you will see that tin can sections are shrinking."

Mohammad al-Rifai, the owner of the nut manufacturing company Al-Rifai says that the success of a product in international markets is contingent on its image.

"We used to have problems when Lebanese products were put in the ethnic food sections in Western stores," he said. "People weren't buying our nuts when they were on the shelves with Indian and Iranian products."

In 2001 Al-Rifai convinced Scandinavian retailers to display products on the shelves with "similar" European goods, and now the largest share of Al-Rifai's export volumes goes to Scandinavia.

Castania Roasting Company also took European tastes into consideration when they changed their packaging in order to increase their international distribution levels.

However Castania representative Peter Daniel said production costs are hindering the export potential for the entire agro-food sector.

"Costs have to be reduced so we can lower prices and export more," he said.

While food industrialists all recognize the need to bolster the image of Lebanese products, and implement food safety regulations, these reforms require substantial financial investment that offer no promise of return due to high local processing costs.

Abboud summed up Lebanon's industrial dilemma: "I think the main problem is that people are not making enough profit to warrant further investment."

Beirut 27-03-2006
Lysandra Ohrstrom
The Daily Star

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