|Private sector digging deep to weather economic fallout from Iraq crisis (Daily Star)|
|Range of measures suggested to help businesses survive
Industrial spokesman says economic and administrative reform, government and bank intervention are required.
The raging war in Iraq has further exacerbated the global economic recession as prices of stocks on the New York Stock Exchange tumbled and giant US and European firms sustained heavy financial losses.
In Lebanon, the picture is not much different, prompting the question “what can the private sector do to weather the fallout of the war in Iraq?”
“It’s simple,” according to the president of the Association of Lebanese Businessmen, Armand Phares.“We must implement economic and administrative reforms at any cost and encourage the private sector to work closely with the government to find a way out of this situation.” He also underlined the need to speed up privatization of state owned assets, such as the telecom and electricity companies.
Phares, also the owner of a pharmaceutical company, is fully aware of the challenges facing Lebanon as the war drags on.“The war came at the worst time for Lebanon. The companies that have been reeling from recession before Iraq’s war broke out will probably sink further now.” Lebanese industrialists feeling the brunt of war have already cited the loss of $400 million worth of contracts with Iraq. Some plants may be forced to close down if we cannot find new markets to sell our products, they said.
But finding new markets for Lebanese goods at these critical times may not be easy, economists say.“Companies dealing with Iraq will find it very difficult to find an alternative. It takes a lot of time and effort to establish contacts with a country like Iraq,” Phares said, adding that the government must try and help the industrialists in any way possible.
Phares proposed the creation of a state body to guarantee local exports, saying “in most countries, governments protect local industries in the event of war or other unforeseen problems.” He described the proposed move as “quite vital during a crisis,” saying “the objective of this body is to explore new markets for Lebanon’s products in different parts of the world.”
Lebanon signed a free trade agreement with Iraq last year, after years of debate by the Cabinet. Lebanese companies participated in Iraqi fairs over the last five years and the government in Baghdad has shown keen interest in Lebanese products. However, the export of Lebanese goods to Iraq remains below expectation, if compared to Syrian and Egyptian products sold in Iraq. Prior to the Iraq-Kuwait war of 1991, Iraq was the number one exporting country.
Phares also said all Lebanese companies operating in Iraq knew very well the risks involved. He added that the government has limited means but this does not mean that it should remain indifferent to the economic situation. Phares suggested the rescheduling of loans to the private sector by banks, which he estimated at more than $6 billion, a move that he said will aid the private sector in overcoming the current situation.
Merchants and businessmen have complained of high interest on bank loans which negatively affects their businesses. The Central Bank has urged commercial banks to cut interest rates on loans, allowing the private sector to seek lines of credit at lower rates, he said.
Interest rates on treasury bills have also been cut by 7 percentage points at the beginning of the year, allowing the government to reduce its debt servicing.
Phares also said soft loans from the “Paris II” donor conference has given an impetus to the Lebanese economy but warned that this measure may wear off soon if not followed by other steps.“We feel terrible about what is going on in Iraq but this should not stop us from fixing our own problems,” Phares said. He added that privatization should proceed according to plan, to reduce the public debt.“We should liberalize our economy and carry out administrative reforms at a strong pace,” Phares said.
But Phares did not show any concern for the monetary situation in the country despite the war: “The Lebanese in general have become immune to all regional conflicts and they quickly adapt to the new crisis,” Phares said.
The Central Bank’s gross foreign currency reserves reached over $10 billion last month, due to the $2.2 billion injected by Saudia Arabia, France, UAE, Kuwait, Malaysia and Oman.“We want the private sector and the government to also work closely to bail out the economy from its current recession.” He expressed hope the international community would step in and end the war in Iraq. Phares also said that both government supporters and opponents are united in their stand toward Iraq.
Beirut,04 07 2003
The Daily Star