BEIRUT: Lebanon should take measures to protect its aluminum sector, Industry Minister Vreij Sabounjian told The Daily Star, warning that failure to contest cheaper imports would put factories out of business.
“We have a problem with flooding the market that diminishes our ability to compete. Imports have become much less [expensive] than our local production,” Sabounjian said.
The minister blamed high energy subsidies implemented by neighboring countries for the cheaper prices of imported aluminum.
Lebanese industries have to pay energy bills three to four times higher than their regional peers, Sabounjian said, urging the government to support industrialists with energy subsidies.
Sabounjian said that the ministry’s current efforts to help energy-intensive industries cut costs are not enough, adding that a decision to refund VAT on fuel consumed by factories is insufficient.
He noted that it was crucial to extend a temporary 10 to 15 percent tariff on aluminum imports, a measure which is set to expire later this year.
In a statement issued Tuesday, the minister said he wouldn’t stand by “as the aluminum sector suffers the fate of Uniceramic,” a reference to a local ceramics manufacturer that was forced out of business in 2009 after facing tough competition from foreign producers.
Uniceramic, which was once Lebanon’s biggest ceramics producer, declared bankruptcy after incurring over $10 million in losses.
At the time, Industry Minister Pierre Gemayel successfully lobbied for a tariff on ceramics imports.
The Economy Ministry subsequently abolished the tariff, fearing the tax would hamper Lebanon’s efforts to join the World Trade Organization.
When asked if extending the aluminum tariff today would violate the Greater Arab Free Trade Agreement and other trade agreements signed by Lebanon, the minister argued that the taxes would not constitute an infringement and dismissed the possibility of retaliatory measures.
“Neighboring countries have much more extensive natural resources than Lebanon and trade agreements should take that into consideration,” he said.
He added that Lebanon should be able to negotiate exceptions to help some of its struggling industries.
“Lebanon should reserve the right to protect vital industries. Given our small level of production, such tariffs should not have any impact on Lebanon’s trade relations,” he said.
“We need to protect the sector that has investments worth hundreds of millions of [U.S.] dollars and provides thousands of jobs,” the minister argued.
Sabounjian’s warnings were echoed by several aluminum factories contacted by The Daily Star.
“How can you compete with imports that are $500 or even $600 cheaper [per ton] than our produce?” asked a manager at a leading aluminum factory who did not wish to be named.
The employee said imports from Egypt, Saudi Arabia and the United Arab Emirates have dominated a sizable share of the market. The three countries have heavily subsidized energy costs for factories and enjoy a much lower labor cost, the manager said.
When asked if the tariff suggested by Sabounjian would be sufficient, the employee said the measure would be positive, but feared many importers were already illegally evading the tax.
Fahed Darwish, an assistant general manager at Dantzigian S.A.L, echoed Sabounjian: “Local aluminum industries have been facing very tough competition from foreign-manufactured products,” he said.
In addition to soaring energy and labor costs, the sector lacks qualified individuals. “We have a trouble finding skilled workers,” he said, complaining that vocational schools are not meeting the industry’s demand.
“We need to seek economic balance. Protecting the industry is imperative to ... strengthen economic stability. The Lebanese economy cannot keep depending alone on the service and commercial sectors,” Sabounjian said.