Lebanon Industry

Interview with Neemat Frem, CEO of Indevco and President of Association of Lebanese Industrialists

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The Lebanese economy grew 8.5% in 2008 and revised 9% in 2009 despite the global recession.  Furthermore, the World Bank estimates the GDP growth to be 7% in 2008 which is remarkable.  What are the fundamentals behind this growth and what will we see in the future?

Let’s talk about what happened over the past few years and the fundamentals of growth. I believe that political stability in Lebanon was the most important factor because we believe that Lebanon has suffered in the last 10 to 15 years from a failed start of an economy.  In the last two years, we didn’t have adverse conditions, and this helped the economy to start up. Those accumulated years of very slow growth was the most important factor in this jump in growth. Second, we had financial stability in the market which is a fantastic thing. Third, Lebanese are known to be very entrepreneurial.  I believe that 2011 will be a good year if things continue this way. I expect that we will reach beyond 8% growth.  We’re reaching a point where the system is starting up, but in a few years the infrastructure will have to be revisited in Lebanon.

Is the government doing enough to address this issue? We have heard that they are not very active in development, and are trying to come up with partnerships schemes.

It is not enough to just see the problem in Lebanon; you have to take the necessary corrective actions.  It has always been very hard because we have been steered by committees, and this makes for slow decision-making.  There is no way out but to use the private sector to organize our infrastructure.

What is your assessment of industrial development in Lebanon and how competitive is its industry compared to its neighbors, such as Syria and Jordan?

“In the past five years, the Lebanon industry has

been able to grow around 20% a year which

is a very interesting factor.”

I believe the single most important factor in this was the euro-dollar parity.  Lebanon was always a major importer from euro-based countries, and once the euro became that high we observed a kind of replacement of imports by local production. Second, in the past five years we were able to penetrate new markets and compete with European goods in Africa or the Arab countries – even in Europe sometimes.  We have a value proposition which is working quite well.  Again though, the infrastructure will and is creating major problems for industry.

What is the competitive advantage or the specialization of Lebanon industry?

Our real competitive advantage in Lebanon is the human element.  The Lebanese factor itself is the competitive advantage.  The Lebanese factor is young Lebanese who come from good schools in Lebanon, who have come from multi-cultural disciplines and have lived in a multicultural environment, who have left to go for higher education and grow and develop outside Lebanon to then come back and bring with them their expertise.  This is providing Lebanon with very talented key executives plus it is helping us to develop a route to markets outside of Lebanon.  I believe if we know how to position ourselves and have the right value proposition in our products there is a new niche for the Lebanese product.  «Made in Lebanon » is somehow a label for high quality products or products in which high quality is in reach.  Everything that has to do with fashion or system integration, where value creation comes from integrating multidisciplinary issues, where we need creativity in products, where we need high talents for distribution ; you need an extra effort and distribution in sales. We are witnessing very interesting niches that are proving themselves in Lebanon.  For instance, we make baby diapers and feminine napkins and export to maybe 40 or 50 countries.  It is the integration part where Lebanon is always excelling.  They’re mostly human-based industries.

Can you share with us your success stories, and how did you make it to this point?

INDEVCO was started sixty years ago and today we are in our second generation.  The success comes from the fact that we believed a long time ago that the key component for success is the human element.  Our human capital is the most important capital of INDEVCO Group.  This is why our people are very much empowered; we believe that small is beautiful, so we had autonomous companies evolving on their own with very interesting linkage, with central headquarters but also with enough freedom for entrepreneurship to excel.  We have also been very focused, and focus is a very important success factor in companies.  We never diversified.  We focus on four sectors which are all interrelated.  We have been evolving in environments and markets which themselves have been growing in the last 30 or 40 years.  We have production facilities in Egypt, Lebanon, Syria and the U.S. Today we are exporting our production mainly to Europe and Africa.  We consider the Gulf states and the Levant to be regional markets.

Is the euro going down a cause of concern for you in the future, since one of your major markets is Europe?

There’s a change in the environment but we believe that it will not be a long or deep hole.  We are prepared for this.  During the past three or four years we have been thinking of changes in markets. Africa is becoming a major market for us and the Lebanese factor there is very good because there are a lot of Lebanese expatriates there.

How do you devise your communication strategies towards these markets?

We prefer to be very localized; even our products are localized. The product for each market is different from the other products in other markets.  It is important to know how to adapt to your consumers and this is really one of our advantages. We have local representatives, and multiple brands for dealing with marketing.

What are you looking for in terms of international partners?  Would you even consider partnering?

We don’t mind partnering but we are currently satisfied with our growth, which is mostly organic growth; basically, doing the same thing in different markets.  We like to build projects and greenfield factories.  As far as partnerships go, we would like to help the international business sector to rethink Lebanon as the gate for a trillion dollar economy in the Middle East.  We believe that multinational companies should be headquartered in Lebanon.  The advantages of Lebanon are the staff and the high profile executives that you can find in Lebanon.