- 08
- May
- 2024
In terms of exports, the situation is not exactly at its best and sarcastic remarks are already flying around: “Why would one even expect things to go well? Why should this economic sector fair any different when all sectors, and the entire country, are struggling to thrive and overcome the economic crisis?” The answer lies in the fact that, typically, when a country devalues its currency, the classic scenario is a decrease (in dollars) in production costs, resulting in a better competitive edge and consequently a boom in exports. But this surely did not apply to Lebanon…
Exports have consistently fluctuated between $3.2 and $4 billion, according to the customs department and the Ministry of Economy. However, these sources are somewhat questionable, as figures from the importing countries slightly differ. But let's not dwell yet again on the shortcomings of our statistics; we have to make do with what’s available.
In 2023 (based on the latest figures), we barely hit $3 billion. This translates to an export-to-import ratio of 18% (with imports totaling $17.5 billion), showing no sign of improvement compared to recent years or decades. Back in 1974, our export-to-import ratio stood at 40% – a clear indicator that we could be doing much better today, if only...
Furthermore, our export performance is hindered by two sub-sectors in terms of value-added. The first one pertains to "precious stones and metals," with an exported value of $760 million in 2023... not all of which are jewelry, but primarily scraps, worn-out pieces, small gold ingots, and other items sourced from overseas, due to the absence of mines in Lebanon. These materials are subsequently re-exported to Switzerland for certification.
The second problematic sector pertains to non-precious metals, with exports reaching nearly $400 million. However, a significant portion of this figure includes scrap metal collected from bins, dumps, or picked up by roaming vans. This scrap is then exported mainly in Turkey, as is or after undergoing a melting process.
However, the main question remains: Why hasn’t the devaluation of the currency boosted our exports? There are several reasons:
- The Saudi market has remained inaccessible to our products ever since our failed attempt to smuggle Captagon into the country. This is also a significant hurdle for transit to other Gulf countries via land routes.
- Another issue regarding land transportation is that Lebanese trucks face steep taxes when crossing through Syria, thereby undermining the competitiveness of our products. Why are these taxes so high? The simple answer is: Why not? And our pro-Syrian Minister of Agriculture does not seem to perceive this as a big deal. The Hezbollah camp is not exactly the ultimate image of patriotism…
- Industrialists are struggling to develop their equipment due to a lack of credit. The Cedar Oxygen Fund, established a few years ago by our own Central Bank and some investors, is not able to deal with all the industry needs.
- The market share of the products “Made in Lebanon” have been on the rise since 2019, thus replacing imported products. This shift led industrialists to prioritize their domestic market. This trend could have been even more prominent hadn't it been for the disastrous subsidization of (mostly imported) 300 products.
- Securing foreign investments, which is crucial for national growth, has proven to be an uphill battle, especially in our production sectors. In fact, rather than experiencing an influx, we've undergone disinvestments such as Heineken selling Almaza (to an heir of the founding Jabre family), Allianz walking out on insurer SNA, Saudi investors relinquishing the oil company Wardieh Holding, and the list goes on.
- Our banking and financial institutions still breed skepticism among clients and partners worldwide, all thanks to the lackadaisical approach of our leaders – to whom we extend our utmost gratitude. They have been either unable or unwilling to restore credibility to this sector. Consequently, some producers were forced to relocate parts of their operations to sustain and expand their customer base.
- In the past, there was a trend towards developing industrial zones, sometimes promoted by the government, but mostly financed by foreign countries or organizations. Others were meant to arise from private initiatives, and benefit from tax incentives. However, these projects have since fallen by the wayside, remaining largely unrealized, despite their potential to significantly bolster the export sector.
At this point, how do we address this decline in exports? Some, with a quick wit, might reply spontaneously: By fixing this declining state! Nicely said indeed, but this doesn’t help us much moving forward.
Surely, the simplest solution entails addressing each of the above mentioned points (along with several others) appropriately. However, for this to materialize, the so-called decision-makers must first thoroughly grasp the content they've so far managed to unscramble. Then, they must commit to taking the necessary steps, implement them accurately, and finally, carry out the proper strategies.
This seems to require much needed effort and work, and I am highly skeptical about the implementation of all those crucial steps.
nicolas.sbeih@icibeyrouth.com
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