Thursday, April 28, 2005

Adding Value to Lebanon

The discussion about identifying valuable areas of economic growth for Lebanon is a very, well….. valuable one! I started by adding a comment to Raja’s post [Assignment for all Lebanese: think about what you want for Lebanon!] but then decided to write a full entry.

Firas, your first point reminded me of a book I read when I was younger. It's by Jean Giono, a famous French author, and it's called (translating the title literally from French): ‘the man who planted trees’. It's a simple story, about a simple man who wakes up every morning, takes the acorns that he has carefully sorted, walks up to a barren area of the mountain, and plants the acorns. He does this for years, and so he can witness the growth of trees he has planted a few years back. All it takes is some willingness.

Doha, I agree with Raja that retail is not a high-value area to explore for Lebanon, unless we really find goods which are produced in a special way. But there can be high-value opportunities in what seems to be traditional areas, like agriculture. I mean, we import so many kinds of fruits and vegetables (did anyone try to buy a broccoli in Lebanon? They are so expensive, while in the UK they are among the cheapest). Lebanon’s climate allows growing a very wide variety of vegetables. I don’t think broccolis require very special conditions. Of course, there is the cost of going into such ventures, but some agricultural products are quite at the high end of the food chain, such as mushroom, avocados, etc.

It seems there is a consensus that Lebanon’s competitive advantage is situated in the services industry. That is what some of you termed ‘the knowledge economy’ and ‘medical tourism’. Those are definitely areas where Lebanon is ahead of other countries in the region, but time must not be wasted: Dubai is also capitalizing on those areas, and investing in them. Raja, the figures that you posted on the cost of doing business in Lebanon indicate that we have an overall advantage over the region, although we may not be as business-friendly as the OECD yet. Dubai has specifically created a ‘knowledge city’, with all sorts of research and technology resources. As for medical and university staff, they are able to draw qualified people thanks to attractive salary packages and quality of life.

I believe Lebanon has to find its niche goods-and-services areas to be a healthy participant in the global economy. There is no way Lebanon can compete with countries that benefit from economies of scale, with low labour costs. Lebanon therefore has to target certain high-end markets by producing high-end goods and services. This will require aggressively expanding our export markets. And I believe everyone could win from such a situation! For example, I live in London, a very cosmopolitan city. So you would expect to find foods from all over the world. Well, you probably do, but you have to look for them (for example you would have to go to certain neighborhoods where Chinese, Arab or African communities live, or to specific gourmet places). Today for instance, I spotted some ‘jarareng’ in a little Lebanese-run grocery. They were overpriced, but I still bought them, perhaps to remind myself of the smells and flavours of Lebanon. The high price would be explained by the fact that the supply of such goods, unique to Lebanon (if I am not mistaken), is extremely limited in the UK. But were Lebanon to expand its distribution channels, these products would enjoy larger export markets, while still commanding reasonably-high prices, which would in turn help maintain the production of such agricultural goods.

An important point in any growing economy is job creation. The challenge for Lebanon will be to find industries that can generate enough employment opportunities to absorb both skilled and less skilled members of the labour force. As you mentioned Doha, I feel Lebanon at the moment is very much a consumer society, rather than a producer society. There seems to be much more investment in consumption ventures, such as restaurants, entertainment, etc., than in productive ventures. Of course, all of these create a demand for jobs, but a country is better off in the long run when investment goes into “forward-looking” areas, such as R&D.

10 comments:

hummbumm said...

Intellectual property law will have to be bolstered before we can really have a knowledge based economy.

Doha said...

Reem,

Thanks so much for an informative entry. I agree with what you said, especially that Lebanon is pushing for its accession to the WTO and the Greater Arab Free Trade Agreement (GAFTA) and its recent accession to the EU. We need to identify the niche markets you talked about so we could be able to compete and be on the cutting edge.

Maya said...

Thanx for visiting my blog Raja, I also got in touch with thinking man and told him that in a week or so I will start to work on this "Lebanese Association" project. I'll get back in touch then (I have finals all next week so...). For those of you who don't know what we're talking about, please visit my blog for more info. Thanx again for your supportive feedback and enthusiasm. With the power of the www, anything is achievable!
Cheers!
Maya

Doha said...

Correction from previous comment: "its recent accession to the EuroMed Trade agreement." (delete EU)

Raja said...

reem,

your post is very much appreciated! I'm doing an independent study on Bangalore and trying to find out what we can learn from the Indians with regards to IT ecoonomic growth. We all know that the Indians have one of the largest supplies of highly-skilled labor in the world - but that labor force existed before the 90s. So the question remains, what did it take for the Indian government (at the federal, state and local levels) to exploit that advantage after so many decades of ignoring it? Some answers are obvious, and others are not so obvious. Either way, I believe that there are a lot of lessons that can be learnt and applied elsewhere - namely Lebanon.

With regards to your great example about fruits and vegetables, I believe that there is tremendous potential for Lebanon, now that we have access to European markets. Lebanon has all the reasons and even capabilities to be an export-oriented economy. It has the human capital, the international networks (that are severly under-utilized), and the capital (which is also under-utilized).

However, the question remains: how could the average Lebanese businessperson, manufacturer, or agriculturalist know that there is a market for his or her product in one of the many markets in the EU? This is a question that has to be tackled.

Is it through family networks?
Is it through European businesses, who purchase our products and sell them in their markets?
What other ways can we become aware of these potentially lucrative export markets?
Does the government take the initiative and provide the informatoin? the non-profit sector? If so, then how?

Is this a major problem, or am I just focusing on the wrong issue?

reem said...

Raja,

Your emphasis on access to export markets is an important one. Your questions reminded me of a topic I initially wanted to choose as my dissertation topic. (But I had to change for lack of data for Lebanon). It is about immigrant communities and the flows with the country of origin: financial flows, goods and services flows, information flows...namely: networks.You talked about learning from India's IT example. Well, I want to mention Chinese communities abroad. I am sure you're familiar with the Chinatowns in the US. There is also a significant one here in London. It is a place where you can find many chinese products. The plethora of restaurants there must have there channels to get the ingredients from China or Pacific Asia. I read interesting studies that showed the contribution to the Chinese economy of the chinese communities settled worldwide. I wonder whether the Lebanese diaspora maintains ties that are as strong with their homeland. Of course, chinese-americans of the third or fourth generations are less likely to maintain those ties with China, but I believe Lebanese are much quicker to adapt, and have less of a tendency to cluster together and function within a network that extends back to the homeland. What's your take on that?

Doha said...

Reem,

It's interesting to see that the Lebanese in the Diaspora again, when they contribute to the Lebanese economy, usually it is through remittances that are mostly geared towards consumption, as opposed to investment. We can say also that they contribute to Lebanon's tourism industry, but that's dependent on the Lebanese visiting Lebanon.

As for products that the Lebanese abroad could introduce to the host countries they live in, don't you think that it is mostly food products? And if we say food products, then Lebanon can hardly be competitive, as hommos or olive oil are products that could come from other Middle Eastern countries. In fact, the Ministry of Economy and Trade in Lebanon is trying to get some food products in Lebanon to be branded as Lebanese for the purpose of trade. That's a good move...

As for the phenomenon of immigrants clustering around each other, I read lately a paper which pointed out that new immigrants of all countries, like China or Latin America, no longer chose to reside in their ethnic enclaves. On the contrary, more and more immigrants are chosing cities that did not traditionally attract immigrants. And if new immigrants chose to stay in their enclave, they are more and more moving out once they are settled in the host country.

It would be interesting to see how such new a trend would affect the economies of the home countries....

Raja said...

so if family networks don't really cut it, then maybe we should task our government to help us find markets for our products... no? But wait! We're too busy voting for people because they're from our village or sect. We don't give two hoots about making a decent living. Or am I wrong about that?

Don Cox said...

"what did it take for the Indian government (at the federal, state and local levels) to exploit that advantage after so many decades of ignoring it? " I think they just reduced the red tape and controls a bit. The best thing a government can do is get off the backs of businesses, and leave them free to develop.

Anonymous said...

Having economic relations with Israel would most likely benefit Lebanon's economy. It's not so hard to imagine that Israeli businessmen would invest in Lebanon (and vice versa). Despite warnings about terrorism, thousands of Israelis visit the Sinai now, I'm sure that Israelis would be even more enthusiastic about visiting Lebanon. Israelis might become a regular sight at Beirut clubs and the Lebanon mountains for skiing. Perhaps if Israelis could go skiing and hiking in Lebanon they would be more willing to give up the Golan?

Trade with Israel would also be beneficial in that products made in Israel would likely cost less in Lebanon than identical products made in Europe. Israel could also be a market for Lebanese products.

Aside from Israeli tourism, a Lebanon-Israel peace treaty might stimulate tourism from the rest of the world. Cruise ships packed with big spenders could make port calls in Tel Aviv, Haifa, and then up to Beirut. It would be wonderful.

Trade with Jordan and Egypt is still quite small (the Egyptian-Israeli Chamber of Commerce scarcely exists), so perhaps I am being overly optimistic, but you never know. As entrepreneurial societies, Israel and Lebanon have a lot in common.

Itiail