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French Version

Haddad blames outside factors for rising prices

Decline in dollar, high fuel prices among culprits

Economy and Trade Minister Sami Haddad on Tuesday blamed the high cost of living in Lebanon on the appreciation of the euro, high prices of oil and other external factors.

Speaking to reporters at the Grand Serail, the minister promised to take measures to protect consumers.

Haddad said that the government will subsidize the cost of wheat in the production of bread at $50 per ton, draft a new competition law aiming at preventing large producers from exploiting the market, maintain the price of chicken at LL3,800 per kilo, gradually eliminate export subsidies for local agricultural products and empower the consumer protection union.

According to the Central Statistics Administration, the consumer price index (CPI) has risen by 3.4 percent between September 2006 and 2007. Meanwhile, the index for food items has risen by 10.4 percent in the third quarter of 2007.

In previous interviews with The Daily Star, however, Zuhair Berro, president of Consumer Lebanon, said that the index is much higher, setting it at 60 percent. Haddad explained how external factors lie behind the local increase in prices.

"Record oil prices of $90 per barrel, increase in grain costs particularly wheat, which has risen from $180 to more than $350 per ton, and a depreciating dollar are uncontrollable factors behind the local price hike," he said.

Fadi Abboud, the president of the Industrialist Association said that Lebanon is affected more by global market prices than other countries.

"Lebanon lacks productive powers and relies heavily on external products," Abboud told The Daily Star.

More than 50 percent of Lebanon's imports come from Europe, Haddad added.

Subsidies for wheat have been a topic of heated debate for the past months. Although there are no official statistics on the country's consumption of wheat and bread, Lebanon's wheat imports range from 15,000 tons to 30,000 tons a month.

Because Haddad disagrees with the mills' owners on how much wheat is used for bread production, the true subsidy figure then stands at $50 for a 30,000-ton monthly import or $100 for a 15,000-ton import.

The Economy Ministry believes that 30 percent of wheat imports are used for bread production, while the mill owners set the usage at 90 percent.

The Cabinet, in its last meeting, approved the draft which aims to enhance healthy competition among local producers by disabling extensive oligopolistic powers of strong producers.

"The draft encourages small producers to take part in production without fear of takeover, thereby providing the consumer with an array of competitively priced products," Haddad said.

The new draft, however, fails to address the conflicting stances on exclusive traders. Berro has long believed exclusivity to be a major cause behind the current inflation. He told The Daily Star earlier that traders with exclusive rights are exploiting the current foreign cost increases to boost their profits even higher. Abboud criticized the government for protecting sole agents.

"The government should not be partners with sole agents; [if anything] it should help willing producers to compete them," he added.

He also condemned the government's restriction of importing foreign workers to join the production force.

"Allowing foreign workers in high-skilled jobs such as medicine and law can reduce the costs of obtaining such services for many Lebanese consumers," Abboud explained.

Haddad, however, said the draft can still limit the power of such traders by limiting their market share.

"The draft bans exclusive traders with 40 percent market share, but protects those with, for example, a five percent market share," explained Haddad.

As for the price of chicken, Haddad refused to increase its price, contrary to the demands of local farmers. The price was last altered in 2001 at LL 3,800 per kilo.

Haddad believes a few farmers who sell the chicken in parts have, as a result, set a price of more than LL6, 000 per kilo.

To curb the price hikes of agricultural products, Haddad said this sector will be subject to greater foreign competition. The Export Plus program for agricultural subsidies, will witness a gradual decrease in the subsidy amount, until the contract ends in 2011.

The program has not reached its goals of empowering local farmers and has cost the government millions of dollars in losses, Haddad said. It has added to the disturbing current price level, he said.

"Protecting local farmers means limiting imports that could have competed with local items and created lower price levels," the minister said.

Beirut 31-10-2007
The Daily Star

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