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WEEKLY NEWSLETTER
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Lebanon
Index
Lebanese industry expanded rapidly in the late 1960s and early
1970s. By 1974 industry accounted for an estimated 20 percent of
GDP, up from 13 percent in 1968, and industrial exports amounted to
75 percent of total exports. This growth was characterized by a
proliferation of small industries and was fueled by easy credit, a
strong local currency, abundant and cheap supplies of skilled and
unskilled labor, subsidized electric power, and trade protection at
home and expanding markets abroad, particularly in the Persian Gulf
countries.
By 1974 an estimated 130,000 people were employed in industry,
and the total nominal capital of industrial establishments stood at
around US$1.1 billion. The textile industry alone employed some
50,000 people. A further 20,000 were employed in the furniture and
wood products industry and some 15,000 in the leather products
industry.
Years of strife changed all this. In 1981 the Lebanese
Industrialists Association reported a 25-percent decline in
industrial capacity, and more than 70 percent of all industrial
capacity was believed to have been idle for at least 500 days
during the previous 6 years. Layoffs were heavy, with industrial
employment in 1981 about half of what it was in 1974. The Union of
Textiles Manufacturers estimated that in 1981 the industry employed
only 12,000 workers and that less than half of the 1,200 prewar
factories were still in business. One of the country's biggest
factories, a knitting plant in the Beirut port duty-free zone that
had once employed 10,000 workers, was destroyed. National Cotton
Mill (Filature Nationale du Coton), the biggest weaving and
spinning factory in the Middle East, laid off all but 450 of its
workers. In Tripoli, Lebanon's largest compressed wood factory was
closed in 1981, with the loss of 600 jobs. One of its problems was
that it could not compete with the import of wooden products
through the illegal ports.
Following the 1975-76 fighting, the government could no longer
afford to try to revive the economy through export subsidies. Even
when capital was available, industries were reluctant to use it to
expand capacity or modernize machinery. One commentator noted that
producers tended to concentrate on improving profits rather than
productivity.
Civil strife and disorder continually hampered production, and
the financial climate was rarely conducive to investment. The
comparative calm of 1977-82 allowed considerable decentralization
of Lebanese industry; and Zahlah, Shtawrah, Sidon, and the coastal
strip under the control of the
Phalange Party (see Glossary)
all enjoyed a limited economic boom. In the far north, remote villages
in the Akkar region began to prosper because of their distance from
the country's principal areas of conflict.
The collapse of business confidence that accompanied the
political debacles of 1984 closed hopes for sustained recovery. The
Central Bank's tight fiscal attitude limited the money available
for investment
(see Banking and Finance
, this ch.). Capital
investment in industry shrank rapidly in both real and nominal
terms, which reflected pessimism over the future of Lebanese
industry. For example, investment fell from US$147.4 million in
1980 to US$94 million in 1983. By 1984 investment was down to a
meager US$34.9 million and to only US$10.6 million in 1985. In
addition, industrial production fell 3.7 percent to US$250 million
in 1984.
In April 1986, Central Bank governor Naim offered to allow the
statutory reserves and treasury bonds held by specialized banks to
be used as credit for industry. Although some industrial credits
appeared to be available at reduced interest rates, it was clear
that economic measures alone would not revitalize the nation's
fragmented industries.
Data as of December 1987
The State of Industry
Lebanese industry expanded rapidly in the late 1960s and early
1970s. By 1974 industry accounted for an estimated 20 percent of
GDP, up from 13 percent in 1968, and industrial exports amounted to
75 percent of total exports. This growth was characterized by a
proliferation of small industries and was fueled by easy credit, a
strong local currency, abundant and cheap supplies of skilled and
unskilled labor, subsidized electric power, and trade protection at
home and expanding markets abroad, particularly in the Persian Gulf
countries.
By 1974 an estimated 130,000 people were employed in industry,
and the total nominal capital of industrial establishments stood at
around US$1.1 billion. The textile industry alone employed some
50,000 people. A further 20,000 were employed in the furniture and
wood products industry and some 15,000 in the leather products
industry.
Years of strife changed all this. In 1981 the Lebanese
Industrialists Association reported a 25-percent decline in
industrial capacity, and more than 70 percent of all industrial
capacity was believed to have been idle for at least 500 days
during the previous 6 years. Layoffs were heavy, with industrial
employment in 1981 about half of what it was in 1974. The Union of
Textiles Manufacturers estimated that in 1981 the industry employed
only 12,000 workers and that less than half of the 1,200 prewar
factories were still in business. One of the country's biggest
factories, a knitting plant in the Beirut port duty-free zone that
had once employed 10,000 workers, was destroyed. National Cotton
Mill (Filature Nationale du Coton), the biggest weaving and
spinning factory in the Middle East, laid off all but 450 of its
workers. In Tripoli, Lebanon's largest compressed wood factory was
closed in 1981, with the loss of 600 jobs. One of its problems was
that it could not compete with the import of wooden products
through the illegal ports.
Following the 1975-76 fighting, the government could no longer
afford to try to revive the economy through export subsidies. Even
when capital was available, industries were reluctant to use it to
expand capacity or modernize machinery. One commentator noted that
producers tended to concentrate on improving profits rather than
productivity.
Civil strife and disorder continually hampered production, and
the financial climate was rarely conducive to investment. The
comparative calm of 1977-82 allowed considerable decentralization
of Lebanese industry; and Zahlah, Shtawrah, Sidon, and the coastal
strip under the control of the
Phalange Party (see Glossary)
all enjoyed a limited economic boom. In the far north, remote villages
in the Akkar region began to prosper because of their distance from
the country's principal areas of conflict.
The collapse of business confidence that accompanied the
political debacles of 1984 closed hopes for sustained recovery. The
Central Bank's tight fiscal attitude limited the money available
for investment
(see Banking and Finance
, this ch.). Capital
investment in industry shrank rapidly in both real and nominal
terms, which reflected pessimism over the future of Lebanese
industry. For example, investment fell from US$147.4 million in
1980 to US$94 million in 1983. By 1984 investment was down to a
meager US$34.9 million and to only US$10.6 million in 1985. In
addition, industrial production fell 3.7 percent to US$250 million
in 1984.
In April 1986, Central Bank governor Naim offered to allow the
statutory reserves and treasury bonds held by specialized banks to
be used as credit for industry. Although some industrial credits
appeared to be available at reduced interest rates, it was clear
that economic measures alone would not revitalize the nation's
fragmented industries.
Data as of December 1987
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