BEIRUT: Three months ago, Lebanon’s Industry Ministry was seeking to lure Syrian businessmen who had fled the devastating war in their country to relocate their factories and invest in Lebanon. However, the ministry’s efforts didn’t bear fruit as Syrian industrialists were deterred by high land prices and labor costs associated with investments in Lebanon.
Many of them relocated to the United Arab Emirates and Egypt, according to Lebanese industry officials, who lament that Lebanon not only failed to lure potential investors but its small industrial workshops are suffering from illegal competition by Syrian refugees.
Throughout 2013, a number of Syrian refugees have set up unlicensed small industrial workshops on the outskirts of Beirut, industrialist Mansour Mechaalani told The Daily Star.
“Those workshops don’t pay social security fees or income taxes and can provide services at a much lower price than their Lebanese counterparts,” said Mechaalani, who heads the local association of industrialists in the Mkalles-Dekwaneh region on the eastern outskirts of the capital.
Workshops established by Syrian refugees mainly offer paint, carpentry and furniture renovation services, according to Mechaalani, who said the competition had cut his business activity by 35 percent in 2013 compared to last year.
The ailing economic situation and the deteriorating state finances in the absence of sufficient international aid have left the government without many options to help improve the dire living conditions of the majority of Syrian refugees.
Some refugees, who today account for more than one fourth of Lebanon’s population according to the Social Affairs Ministry, have opened businesses to generate income and house their families.
“Syrians are using the shops rented for a price that ranges between $600 to $800 per month as both a workplace and a residence,” Mechaalani said.
A survey determining the exact number of factories operating illegally on the outskirts of Beirut will be ready very soon, according to Mechaalani, who discussed the issue last week with officials from the Beirut and Mount Lebanon Chambers of Commerce, Industry and Agriculture.
“We will act together to solve this situation. Lebanon welcomes all investments provided that they take place in line with applicable laws. ... However, we will not accept chaos,” head of the Chambers Mohammad Choukeir said.
Earlier this month, the Economy Ministry in cooperation with municipalities launched a nationwide survey of illegal Syrian businesses operating in Lebanon in order to shut them down, a senior source at the ministry told The Daily Star.
Syrian businesses ranging from grocery stores to fast food restaurants and snack stands flourished mainly in the Bekaa Valley and Tripoli regions, with the government turning a blind eye as it failed to meet the basic needs of an increasing number of refugees struggling to find jobs.
Preliminary official statistics released earlier this year pointed out more than 360 shops in central and Western Bekaa, including many that were shut down due to increasing objections from their Lebanese counterparts.
Complaints from business associations including merchants and lately industrialists have increased in intensity since recent reports emerged of a new wave of illegal businesses being established in Beirut and the outskirts of the capital.
Caretaker Industry Minister Vreij Sabounjian told The Daily Star that his ministry wasn’t aware of any illegal factories or workshops operating on the outskirts of Beirut and would immediately take action to crack down on violators if that was the case.
“The ministry will act to shut down any illegal factories not only to put an end to illegal competition but also to protect consumers’ interest from defective products,” he said.
The minister, who held several rounds of discussions over the past few months with Syrian businessmen and industrialists to convince them to invest in Lebanon, said his efforts were still ongoing but added that results had yet to materialize.
Among the proposed steps to encourage wealthy Syrian businessmen to invest in Lebanon is to build factories in the Beirut and Tripoli free-trade zones that offer incentives including tax exemptions, long-term leases and lower utility rates.
Another possibility is forging partnerships between Syrian and Lebanese industrial firms to lower the cost associated with the establishment of new factories, Sabounjian said.
Partnerships between Syrians and Lebanese could also be a solution to the current situation, experts said.
According to Lebanese laws, new businesses should be enlisted in the commercial register and obtain licenses from the municipality and governorate while foreign workers are required to get residency permits from General Security and a work permit from the Labor Ministry.
However, despite escalating complaints, Lebanon’s industrial institutions are doing well compared to their peers in the tourism and service sectors, which were dealt a large blow due to the political and security instability.
Lebanon’s industrial exports in the first nine months of 2013 surged by 10 percent to $2.423 billion compared to the same period of 2012, according to Industry Ministry figures.
Arab countries account for more than 50 percent of total Lebanese industrial exports followed by African, European and Asian countries.
Among the biggest markets for Lebanese-made goods are Iraq, Saudi Arabia and the United Arab Emirates.
While Lebanese industrialists have been forced to ship their goods to Arab countries via maritime routes that cost more than land shipping through Syria, some manufactures have benefited by making up for the reduced output of Syrian industries.
Most of the exports shipped to Syria include machineries, metal products and agro-food products, a manufacturer told The Daily Star.
According to the Syrian Industry Ministry, the sector lost $2.2 billion up to November this year since the outbreak of the conflict more than two year ago. The private industrial sector loss was valued at $1.5 billion, while public industry lost $700 million. Experts estimate the loss is much bigger than reported.
In an attempt to encourage investment in the industrial sector, several Lebanese industrialist have sought deals with municipalities of rural areas to provide cheap land for new factories that will create job opportunities and boosting development.
Some municipalities in the Bekaa Valley have agreed to lease large land plots for long periods at very low rates to encourage investments in factories.
“Our industry sector is doing very well,” Sabounjian said.
“I tell people: This holiday season, buy Lebanese.”