BEIRUT

Lebanon News

War with Israel interrupts rare industrial success story

BEIRUT: The story of the Levant's largest glass company began with the fortuitous meeting of a German textile mogul and a Lebanese businessman at the Aga Khan's chalet in Gstaad, Switzerland on a snowy night nearly 50 years ago. It most likely ended last summer on the sunny afternoon of July 19 when an Israeli air strike destroyed the Maliban Glass factory in the Bekaa, killing two Indian workers and perhaps also the desire of the factory's foreign owners to do business in Lebanon.

Maliban general manager Abdel-Hamid al-Fil decided to extinguish the 1,600-degree-Celsius furnace and send most employees home after the airport runways were hit at the beginning of last summer's war with Israel, he said. On July 15 last year about a dozen workers began the step-by-step, round-the-clock process of closing the furnace down. Four days later, as the last embers lay smoldering in what Fil called the "volcano," five missiles pounded the plant.

Between these opposing bookends, the story of Maliban Glass is about the movement of expatriate capital, Lebanon's doomed industrialization and the failure of one of the nation's most successful exports.

Though many investors have come and gone over the past four decades, few locally manufactured products have managed to gain as big a regional market share as Maliban's glass containers did.

The Indian-born, East Africa-based Madhvani brothers joined a handful of other factories in the Bekaa when the pair purchased an ailing glass company in Taanayel in 1964 at the peak of the country's economic golden age, as the nostalgic narrative goes, when Lebanon was still touted as the Paris of the Middle East.

Unless the Lebanese government compensates the Madhvani Group for the damage done to their $55 million factory, Maliban Glass will be yet another symptom of the mass exodus of foreign capital from the country. The group is midway through the construction of another plant in Egypt - where the business environment is stable, labor and energy are cheap and the state actively woos foreign investors.

With Maliban would go one of Lebanon's few industrial success stories.

Back in the 1960s, Fil convinced the investment group's founder, Muljibhai Madhvani, to take a gamble and invest in Lebanon. Two years after Fil visited Gstaad to discuss some "issues in Syria" related to the Ismaili community, the Aga Khan passed on Fil's business card to Madhvani, who was looking for a European firm to supervise the revamping of a textile factory the group had just purchased in Uganda. Fil introduced Madhvani to the German textile mogul in Baden Baden but refused the 5-percent commission for setting up the deal. Instead, he asked the Indian brothers to invest his $50,000 fee in Lebanon, Fil recalled from the office of his shipping company near the Port of Beirut.

"They said, 'You choose any industry for us to acquire. It doesn't matter which one, because we have all kinds of factories in East Africa: sugar factories, steel factories, glass, rubber, matches, cartons, a brewery, you name it,'" Fil said.

Two years and a couple of bidding wars later - negotiations over a brewery in Batroun and the Soliver plant in Khalde came to naught - Fil found a glass factory in Taanayel that "was in distress," he said.

"They said, 'This is your baby, take it over,'" Fil said.

Fil became managing director of Maliban, his father was named chairman and a board was formed in 1966. The Madhvanis flew in an Indian technician from their Tanzanian factory to supervise the Lebanon plant, and Maliban quickly began exporting to Jordan, Syria and Cyprus, filling a huge gap in the regional glass market.

Maliban used to produce 220,000 tons of glass per day - about 65,000 tons of which supplied the local market - said sales and marketing manager Joseph Abu Rjeili. But the plant has been off line for the past year.

Demand for glass has quickly surpassed supply since Maliban stopped producing bottles for soft drinks, food products and perfume casings, causing prices to rise by $60-80 per ton. Companies from Almaza to Sprite are now importing their bottles from the Madhvani Group's Saudi Arabian plant, but at a much higher cost, as Maliban's former clients have to pay for cargo and shipping costs and customs duties in rising euros.

Local factories from Libby's to Pampa have all taken a financial hit without Maliban's bottles, Rjeili said.

"June, July and August is the season for farmers to sell their products. We have about 25 pickle-makers who have come to us saying 'Please help us,' but from where?" he asked, throwing his arms up in a gesture of powerlessness. "Another big company was forced to pay in advance for a shipment of half-a-million jars, but now they are releasing it container by container and the factory has stopped - they cannot work," he added.

The impact has also been felt at the regional level, Rjeili said, especially in countries like Jordan, where Maliban had an 80-percent market share.

"I was delayed today because a client from Jordan came to see me in Beirut, and said, 'Please, we need bottles,'" he said. As if on cue, Rjeili was interrupted by a call from another desperate customer in need of containers.

The war left more than just a shortage of glass in its wake. Maliban was one of many factories lining the Beirut-Damascus highway's Bekaa leg that was destroyed last summer and has yet to be rebuilt, meaning thousands of isolated Taanayel residents remain unemployed.

The majority of the factory's 300-person workforce resided in the Bekaa, and if the war had not scuttled the Madhvani family's plans, Maliban would have created more jobs in rural North Lebanon. The Madhvani Group had planned to buy a brewery in the early 1990s, but the investment became one of many casualties of Israel's "Grapes of Wrath" operation.

Maliban applied for compensation and is awaiting approval from the government, but Fil said he was in no rush to start construction. "First of all, I don't think they will give compensation now, but even if they did, you are living in Lebanon. Do you think you can you build a factory here now?" he asked. "You don't know what is going to happen tomorrow. When we have a new government, a new president, then we will rebuild."

The official attitude toward foreign investment since last summer has been almost as discouraging as Lebanon's perennial instability, added Fil. He cited Economy Minister Sami Haddad's appearance on Future Television to talk about the state's plans to compensate the Bekaa-based dairy farm Liban Lait. When asked whether the government would pay indemnities to Maliban, he said the "millionaire" Madhvani brothers could afford to rebuild their factory on their own.

Although the minister's statement is undoubtedly true, like countless other foreign and local investors the Madhvani Group has chosen to put its money in a more hospitable climate.

"I brought these people to Lebanon 40 years ago, and now every country wants them to invest. Jordan, Syria and Egypt are all saying, 'Build a factory here.' So if this is the government's attitude toward compensation, we'll go elsewhere," Fil said.

 

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