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High shipping costs hinder exports

File - Beirut port is seen on Wednesday, May 14, 2014. (The Daily Star/Mahmoud Kheir)

BEIRUT: The total value of industrial exports dropped by 14.5 percent from $1.188 billion in the first four months of 2013 to $1.016 billion during the same period in 2014, according to a report issued by the Industry Ministry Tuesday. Industrialists told The Daily Star that the decline in exports was mainly due to higher shipping rates and local production costs leading to lower competitiveness of Lebanese exports.

“The export industry is suffering from very high shipping costs and the government is doing nothing at all to try and reduce these prices,” former President of the Association of Lebanese Industrialists Fadi Abboud told The Daily Star.

Abboud added that land shipping costs including insurance fees to Saudi Arabia, one of Lebanon’s main regional export markets have almost doubled over the past few years to around $4,000 mainly due to security problems spanning the export route.

Domestic fees are also adding to the woes of Lebanese exporters, Abboud said.

“It costs around $800 to load a 40-foot container on a ship at Port of Beirut before even shipping it. This makes Lebanon among the most expensive countries in the world when it comes to shipping costs.”

In addition to the high shipping expenses, the high cost of production mainly attributed to the energy bill that industrialists pay is lowering the competitiveness of local products.

“We must remember that the cost of energy in Lebanon is higher by 700 percent to 1,000 percent than in any other country in the region and mainly Gulf countries and Egypt,” he said. “The price per kilowatt in Kuwait, Saudi Arabia and Qatar for instance is somewhere between 2 to 3 cents while in Lebanon it costs between 25 to 30 cents.”

Abboud added that the cost of clearing trucks carrying raw materials to Lebanon by land used to cost around $7 per ton but clearing these products through the port of Beirut today costs no less than $70 per ton. “Lebanese industrialists import most of their raw materials which causes the cost of production to go up.”

Jacques Sarraf, also a leading industrialist in Lebanon, said that the deteriorating security situation on the Lebanese-Syrian border in 2013 led to a drop in industrial exports in 2014 through land routes.

“The orders that we deliver in 2014 are actually orders that were made since 2013 and people back then were very much worried about not receiving their requests due to the problems taking place on the borders,” he said.

“They used to think twice before making any orders.”

Sarraf added that the unstable situation in Iraq has also prompted many businesses there to reduce their imports from Lebanon. “ Iraq is one of the main export markets for Lebanon and the deteriorated political and security situation there affected our industrial exports,” he said.

According to the report issued by the Industry Ministry, industrial exports for the month of April 2014 reached $277.1 million compared to $297.3 million in April 2013, registering a drop of 6.8 percent.

The main destinations for Lebanese industrial exports during April 2014, according to the report, are Arab countries with a value of $158 million equivalent to 57 percent of total Lebanese industrial exports. Arab countries were followed by Asian countries at 14.2 percent while European countries ranked third with 12.7 percent followed by African countries with 11.9 percent.

Iraq represents the fifth-largest recipient of Lebanese products. The ongoing conflict in Iraq is forcing Lebanese industrialists to abandon land shipping through Syria and Jordan that has nearly doubled in cost with some insurance firms even refusing to cover shipments to Baghdad.

Today, land shipping has nearly stopped with Lebanese exporters resorting to maritime shipping.

The cost of maritime shipping has risen by 50 percent, according to Sarraf, who said Lebanese industrialists are shipping goods by sea to Turkey then transporting them to Kurdistan and from there to Baghdad.

Abboud said the government must provide free maritime shipping to Egypt and Lebanese exporters can take it from there by crossing the Red Sea to the Gulf.

He explained that the government can rent a shipping vessel for around half a million dollars per month. “It doesn’t really cost much to rent such a boat and this can really put Lebanese exports back into competition.”

He added that the government must abolish all taxes and fees on exports which will lead to an increase in industrial exports and this will, in turn, reflect positively on the balance of payments.

Machinery and electrical equipments ranked first in the list of industrial exports during April 2014 with a value of $68.6 million followed by food industries with a value of $43.4 million, ordinary metals and their products at $43.3 million, chemical industries at $35.6 million and finally papers and their products at $19.8 million.

 
A version of this article appeared in the print edition of The Daily Star on August 20, 2014, on page 5.

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Summary

The total value of industrial exports dropped by 14.5 percent from $1.188 billion in the first four months of 2013 to $1.016 billion during the same period in 2014, according to a report issued by the Industry Ministry Tuesday. Industrialists told The Daily Star that the decline in exports was mainly due to higher shipping rates and local production costs leading to lower competitiveness of Lebanese exports.

Abboud added that land shipping costs including insurance fees to Saudi Arabia, one of Lebanon's main regional export markets have almost doubled over the past few years to around $4,000 mainly due to security problems spanning the export route.

According to the report issued by the Industry Ministry, industrial exports for the month of April 2014 reached $277.1 million compared to $297.3 million in April 2013, registering a drop of 6.8 percent.

The main destinations for Lebanese industrial exports during April 2014, according to the report, are Arab countries with a value of $158 million equivalent to 57 percent of total Lebanese industrial exports.

Today, land shipping has nearly stopped with Lebanese exporters resorting to maritime shipping.


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