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French Version

Abboud : Industry no longer profitable (Daily Star)

LIA chief warns many are turning their backs on production
Official says restaurants, hotels and even brothels may now be more attractive investment prospects for businesspeople

More and more industrialists could turn their back on production and invest in hotels, restaurants and possibly brothels to escape dwindling profits from Lebanon’s dying industrial sector.

“Instead of thinking how to become more efficient, some industrialists are being cornered to plan for their future not in the industrial sector, but in tourism, nightclubs and brothels,” said Fadi Abboud, president of the Lebanese Industrialists Association. “One industrialist has just invested in a hotel in Hammana and another has bought shares in restaurants.”

Lebanon’s industry is taking a beating because of low economic growth, high production costs and greater focus on financial investments, Abboud said.

Although industrial exports have been steadily growing since the government slashed tariffs on imported raw materials in 2000 and enacted other cost-cutting measures, industrialists are not that impressed.

Abboud said production costs are still high due to state monopolies and named money-losing Electricite du Liban and the former duopoly of mobile phone operators LibanCell and Cellis, as major contributors to the government’s woes.

But the government cut social security costs, increased the amount of subsidized loans for productive sectors and absolved exports from the 10 percent value-added tax, in a bid to help industrialists.

Abboud responded, “yes, we are increasing our exports but not at the rate we should be.” He said production costs for industrialists has increased by some 20 percent since 2000 and are not expected to come down anytime soon.

Industrial exports reached $850 million last year, up by 11.5 percent from a year earlier. This figure pales in comparison to the export figure of a country of similar size ­ Jordan, for example, exports some $2 billion worth of goods annually.

For this year, Abboud expects exports to reach the $1 billion mark, but he would like to see exports grow by 20 percent per year to recoup investments.

“Since 1996, we have invested more than $1 billion in new machinery and equipment,” Abboud said, adding that he would like to see the government help them fight the dumping of cheap mass imports, particularly from South East Asia. “Nearly 90 percent of Lebanese industries do not enjoy any barriers from imports. In fact Lebanon imports 30 million items of second-hand clothing per year at around 5 percent Customs duties.” “Before 2000, we had 16,000 workers in the clothing industry, now we have around 9,000,” Abboud said. He added that Lebanese industry has to re-examine its potential, although it is currently too busy trying to recuperate losses, such as the ones incurred in the Iraqi market.

The former Iraqi government owes Lebanese industrialists and merchants money for contracts worth some $300 million, said Abboud.

These contracts, concluded under the United Nations oil-for-food program, have yet to be paid. “The most important thing is that we are standing firm trying to negotiate all contracts before we release Iraqi government money in the Central Bank,” said Abboud.

The Central Bank of Lebanon has frozen some $500 million deposited by the ousted Iraqi regime of Saddam Hussein, but has not said when it will release it and to whom.

Lebanese industrialists are trying to get back, nonetheless, to the Iraqi market, which was lucrative in the days of Saddam Hussein. “Currently our share of what is happening in Iraq is very small and is nowhere near our share after the (1991) Gulf War,” said Abboud, adding, “this is because we are suffering from very high transport costs to Iraq.”

For now, the association is working with the chambers of commerce, industry and agriculture to set up an export promotion body, made up of private and public sector officials.

Beirut 01-09-2003
Dania Saadi
The Daily Star

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