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LEBANESE BUSINESSES SIFT THROUGH THE RUBBLES
BY REHAB EL-BAKRY
If there’s one thing that characterizes the
Lebanese, it’s resiliency. The tiny country rose like a phoenix
out of the ruins of a 17-year civil war to become one of the most
vibrant and competitive economies in the region. Last year, the
country of 3 million boasted a respectable $1.8 billion in exports,
while Egypt, with 25 times the population and three decades of peace
behind it, had just $8.7 billion in exports.
A month of Israeli bombardment, however, has set Lebanon back years,
if not decades. The Israeli military offensive, which began on July
12 following the kidnapping of two Israeli soldiers during a Hezbollah
attack on a border post, flattened southern Beirut neighborhoods
and left much of the country’s south in ruin. An estimated
1,000 Lebanese, mostly women and children, were killed and over
one million displaced before a tenuous ceasefire on August 14.
Lebanon is now undertaking the tedious and painstaking task of sifting
through its crumbling infrastructure and economy, inventorying the
damage and developing a recovery plan. But it will not be easy.
It’s estimated that the damage to infrastructure alone hovers
around the $10 billion mark. The closure of the airport, whose runways
were bombed early in the campaign, cost the country $25 million
a day and Israel’s sea blockade, still in effect, has eliminated
all sea trade.
As displaced Lebanese begin to return to their homes and put their
lives back to normal, attention has begun to shift to the economic
toll of the war. Many of these Lebanese are discovering that they
no longer have jobs to go back to. While it is possible to estimate
the damage to infrastructure, the extent of the losses to businesses
is anyone’s guess. In addition, tourism and the capital market
may continue to suffer for some time.
Despite that, Egyptian companies doing business in Lebanon point
out that the nature of the Lebanese people – known for their
unrivaled enterprising spirit and determination in the face of adversity
– suggests the country will quickly get back on its feet.
Mohamed Awwad, area manager for Victaulic, an American company working
in mechanical piping, has no doubt about that. “Even when
the bombs were raining down on the country, people were not staying
at home lamenting the situation. In Beirut they were actually working...
Many [companies] had built makeshift bunkers for their team in order
to allow them to work and even sleep in the office as long as it
was safe,” he says. “They may have not been working
on accounts in the country, but they were working on their projects
outside the country. So this goes to show that they want to get
things back to normal.”
Awwad, who works out of Cairo, is in charge of five markets –
Egypt, Kuwait, Iraq and Lebanon, through which he caters to Syria.
Lebanon represents between 25 and 30 percent of his budget for any
given year. Traditionally, his work requires him to travel to Lebanon
once every four to six weeks in order to meet with clients and architectural
design teams working on construction projects in the region. He
was in the process of signing two major contracts when the war broke
out. The future of these deals is now in question. “We were
about to land two massive projects there, the Beirut Tower and the
Platinum Tower – both 35-floor residential towers and hotels.
The deals had been approved and they were about to make an order,
then the war happened,” he says. “Now, we have to wait
and see what will happen with these deals.”
The war also forced his suppliers in Lebanon to flee their office
in southern Beirut, a neighborhood that was heavily bombarded by
the Israeli air force. While he is thankful that none of his colleagues
were killed, he says their office might not have been so lucky.
“The best case scenario right now is that the building is
still standing,” Awwad says cynically. “No one is sure
exactly how long it will be until the market is stable enough for
anyone to venture back.”
Throughout the crisis, Awwad made a point of trying to stay in touch
with his clients simply to ensure that they were safe. He had learned
from the chaotic aftermath of the 2005 assassination of former Lebanese
prime minister Rafik Al-Hariri that Lebanese businesspeople may
disappear during a political crisis, but always reestablish contact
once the political situation has cooled. Since the ceasefire, he
says, he has received a steady stream of phone and fax messages
from his suppliers and clients.
For now, all deals are off. Awwad expects it could take at least
eight months for business to return to normal. He explains that
most of his business is dependent on the construction industry,
but since Lebanon’s malls, hotels and residential projects
are traditionally funded by Gulf businessmen, the country’s
political instability is likely to keep investors away. “Capital
is always first to escape war zones,” he says, adding that
80 percent of deals he was working on in Lebanon froze after the
Hariri assassination as investors put projects on hold or diverted
to safer markets. “For much of the first half of 2006, investments
were flowing back into the country and I was traveling to the country
once every three weeks or so in order to make up for last year.
Now, I don’t know when it will be safe to go back there.”
Mohamed Samir, managing director for Procter & Gamble Egypt
(P&G), is equally uncertain when the Lebanese market will return
to normal. At the start of hostilities, P&G followed standard
protocol for evacuating its expatriate staff and also put a freeze
on all corporate travel to or within Lebanon.
As the situation continued to develop, the company offered its Lebanese
employees the option of evacuating to Egypt. “Initially, we
evacuated employees and their immediate dependents living in their
households,” he says. “We then realized that this was
not enough and decided to evacuate their extended families as well.
Around half of our team and their families took us up on the offer.”
P&G carried the full cost of the evacuation of employees and
their immediate dependents, while the company covered the immediate
cost associated with evacuating their extended families, which is
to be repaid by the employees in installments. According to Samir,
the evacuation was an especially costly operation as traditional
air and sea routes out of the country were closed to travel. Yet
he says the company fully recognizes the value of its staff. “There
are some things that cannot be replaced by money and we believe
that the safety of our team and their families is one of these things
that precedes any cost or loss of money for the company,”
he says. “We always say that as long as we have our employees,
even if we lost everything else, we could rebuild P&G from scratch
in 10 years.”
P&G works on a regional strategy that includes Egypt, the Levant
countries and Saudi Arabia. While the war brought P&G’s
sales in Lebanon to a halt, it had no effect on the company’s
other markets since the majority of its production is in Egypt and
Saudi Arabia. With the company’s Lebanese employees evacuated
to safety, it was business as usual for the rest of the staff.
Well, not exactly usual, admits Samir. He says the Lebanese P&G
team was determined to continue its work at all costs. Working alongside
their colleagues in Cairo, the team began revising market strategies
and targets to meet projections after the war.
While international companies with Lebanese branches or clients
found ways to continue operating and minimize their economic losses
during the war, Lebanese firms with foreign branches faced a much
tougher challenge. Essentially, it was up to the foreign branches
to keep the company afloat while the home branches suffered tremendous
losses during the war.
Casper & Gambini’s, a Lebanese café and restaurant
franchise, was in the midst of an aggressive expansion phase when
the war brought its three outlets in Beirut to a standstill. The
threat of a missile strike is bad for business, and the company’s
Lebanese operations were losing untold sums.
Meanwhile, its expansion plan was suffering collateral damage. Casper
& Gambini’s launched its first Egypt branch in Citystars
mall last April, and was preparing to launch its second branch in
Nile City later this month. Mark Khalife, director of operations
for the Cairo franchise, explains that during the first few months
of launching a franchise, there is a certain degree of support that
is required from the head office. The head office traditionally
supplies its franchisees with training and technical support.
With the war raging on in Lebanon, roles were reversed. “We
were the ones providing support,” says Khalife. “For
example, our branches in Lebanon were all closed but the salaries
of employees were still being paid. So instead of having the salaries
paid with no work being done, we took on some of the Lebanese staff
here in Egypt. We saw it as an opportunity for them to help with
the training of the local staff and chefs.”
With a ceasefire in effect, the Lebanese staff have returned home.
“We are very lucky in the sense that none of our branches
[in Lebanon] have been damaged by the bombs,” says Khalife.
“Now that the war is over, we will recover, but when, that
is something that we can’t predict.”
The fighting may have ended, but for all intents and purposes, Lebanon
is cut off from the rest of the world. “The war is over, but
for now we still can’t import any of our pipes into the country
because there is no way for us to transport them into the country,”
says Awwad. “The ports are still blocked, there are no roads
for us to transport things via land and their airport is still not
at full capacity.”
But Awwad is not waiting. He’s using the time to prepare for
any opening. “We are ready with stocks set aside because the
expediency in response for us can make the difference between landing
a contract or losing it,” he says. “What we do know
is that much of the reconstruction that will take place immediately
will be to roads, homes, schools and hospitals, which are unlikely
to use a premium product like ours, but we are ready.”
He says this year will be a tough one for his company’s Lebanese
accounts, but remains optimistic that things will return to normal
within the coming seven or eight months. “I believe we will
recover our losses towards the end of the year and throughout next
year not because it’s the normal pace for people to recover
from war, but because that is the nature of the Lebanese –
they have the drive to recover.”
P&G is facing similar problems getting access to Lebanon. “We
can’t get anything in or out of the country but things will
get better. They always do. We simply have to play the next few
months by ear and focus on recovering the losses by intensifying
our focus on the other countries in the region to offset the losses,”
he says, reiterating that the company’s real fortunes are
safe. “Loss of money can be recovered; losses within our team
would have been difficult for us to recover from.”
The extent of the destruction in Lebanon challenges any glimmer
of optimism. Yet the country’s remarkable recovery from one
of the region’s most destructive civil wars attests to the
character of the Lebanese people. Given their ambition, perseverence
and enterprising spirit, they may be back on their feet a lot sooner
than most people anticipate.
The war on Lebanon provoked a massive outcry of solidarity
throughout Egypt, prompting ordinary citizens to collect donations
for the Lebanese people and to take to the streets to vent
their anger. That sentiment was also felt in boardrooms, as
some business associations and enterprises tried to do their
bit for the war’s victims.
Some of Egypt’s largest business associations, chambers
of commerce and syndicates have thrown their weight behind
various fundraising initiatives. The Egyptian-Lebanese Businessmen’s
Association, working with the Lebanese community in Cairo
and the government, has orchestrated much of the major fundraising
and collection of donations. Meanwhile, the Doctors’
Syndicate has organized gala dinners whose profits go to the
war victims, while the Pharmacists’ Syndicate has been
collecting donations to cover shipments of much-needed medicine
for hospitals in Lebanon.
The most visible fundraising campaign was the one carried
out by the country’s telephone companies – Mobinil,
Vodafone Egypt and Telecom Egypt. The two mobile networks
set up premium hotline numbers whose profits are sent to Lebanon.
At one hotline callers can listen to legendary Lebanese diva
Fairouz’s song “Bahibik ya Libnan” (I love
you Lebanon) before giving instructions for further donations.
“Egyptians feel very close to Lebanon, and we are all
moved by what is happening,” explains Alex Shalaby,
Mobinil’s CEO. He says the hotline, advertised in major
newspapers, television channels and via SMS, received over
33,000 calls from both networks in its first week.
Telecom Egypt later set up a similar hotline for landlines.
Marcel Amin, a Lebanese citizen who moved to Cairo in 2003
to set up a catering business, M-Foods, has been a key coordinator
of the telephone fundraising campaign. “Our strategy
was to advertise in newspapers and TV channels, especially
music channels, which were all eager to promote the campaign
for free,” he told Business Monthly. “The major
demographic target is youth – we are trying to reach
out to young people who want to do something about what is
happening in Lebanon.”
“I’m so happy Egyptians are so cooperative,”
said Amin, who is preparing to continue the campaign with
a focus on rebuilding Lebanon now that the war is over. “They
feel our massive losses. They are supporting Lebanon in any
way they can.”
Issandr El-Amrani
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