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French Version


High energy costs cripple Lebanese industry (Daily Star)

Many businesses pay far more than elsewhere in the region
Though the sector employs many people, revenues hardly cover expenses


"Industry is the soul of business and the keystone of prosperity." This famous quote by the 19th century writer Charles Dickens clearly illustrates the importance of industry in any society.

Most countries around the world have invested trillions of dollars to develop their industrial base so they can achieve growth and prosperity.

Economists generally agree that industry is the main pillar of the economy, as it employs more people than other sectors, including agriculture, banking and tourism.

However, this does not apply in Lebanon, due to the high and unreasonable costs of production, which far exceed those in neighboring countries.

While it is true that some industries have flourished in recent years - such as the jewelry sector - most are struggling to survive in a competitive market.

Lebanese banks, for example, have granted just $34 million in loans to the industrial sector in the first six months of 2004. Such a trivial amount is not surprising given that most industrialists are too afraid to borrow money at the current high interest rates.

Industrialists say their sector employs many people but that revenues hardly cover costs.

Apart from the high costs of labor, land and industrial components, Lebanese industrialists have sought in vain to contain exorbitant energy prices, which in some cases equal 30 percent of total expenditures.

Fadi Abboud, who heads the Lebanese Industrialists Association, said energy-intensive industries suffer the most from high energy costs.

One industrialist said he had no figures for the number of factories that count on energy and which closed down last year, but said, "I know some factories had to shut down because they could no longer operate under these circumstances."

He added that some firms also choose to close down quietly, so as not to draw the attention of the Finance Ministry.

To illustrate the bleak conditions facing the industrial sector, the LIA recently issued a study on Lebanese energy costs, comparing them to countries such as Syria, Jordan, Egypt, Saudi Arabia and the United Arab Emirates.

For example, electricity costs 13 cents per kilowatt hour in Lebanon, compared to 3.2 cents in Saudi Arabia, 3.7 cents in Syria, 3 cents in Egypt, 6.4 cents in Jordan, 5 cents in the UAE, 6.5 cents and 6.5 cents in Turkey.

Recent high oil prices due to the U.S.-led invasion of Iraq and terrorist attacks in Saudi Arabia have also contributed to the rise in energy costs in Lebanon.

"Each week we pay a different price for fuel oil and gas because the prices keep changing - and the situation is expected to get worse," said Abboud, adding that industrialists pay $400 for a ton of diesel, though the price does not exceed $194 in most of the region.

"If the government buys electricity from Turkey for 3 cents per kilowatt hour we can buy it for 4 cents from the state. But I wonder why the government cannot come up with solutions to help industries," Abboud said.

Fadi Gemayel, who owns paper recycling and packaging factories, echoes similar views about energy costs.

"Energy is 30 percent of my total costs when it comes to the recycling industry,' said Gemayel, who exports most of his products to Egypt, Jordan and other countries.

He also expressed concern that high energy costs hurt exports. Many industrialists, he said, count on private power generators to help reduce costs, but that these are expensive.

Abboud and Gemayel said that they look forward to working with a new government to find a solution to the problem.

Beirut 13-09-2004
Osama Habib
The Daily Star



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