Interview with Ammar Kanaan, Chairman and GM of IPM Ports Management

---

The next two years are expecting to be highly challenging for the container shipping industry, how do you assess the situation in the sector and what is the outlook?

Globally we are now seeing the beginning of recovery but the market is still unstable.  There has been a lot of new vessel purchases the past five years beyond the capacity of the market.   I believe in the next year you will see a lot of companies going bankrupt but in terms of volume things are beginning to pick up. 

How does the global container shipping industry compare to the Mediterranean region and how is the industry structured? What are the local challenges and opportunities?

One of the most significant trade routes from the far east to the Suez Canal/Gibraltar and northern Europe passes through the Mediterranean.  The opportunities and challenges in the region are similar to those worldwide.

"The past five years witnessed a lot of complex

and irrational growth, similar to the housing market.

A lot of people overpaid and over bought."

For example, The port of Izmir in Turkey was privatized for 1.2 billion dollars which in my opinion was irrational.

How does the Beirut Port compare to other regional ports?

We did not lose volume and the past few years have been very good.  There are two reasons why Lebanon saw growth.  One, the local market grew because people perceived Lebanon to be in a more stable period and two, because we maintained our position as a transshipment hub in the Mediterranean.  This was done by putting a lot of effort into our productivity and efficiency and servicing the shipping lines.

How do you assess the position of the public sector against government in your operations? How does this structure work?

"The model that currently exists for this port

is unique in Lebanon but not in the world. 

It is a model where the port is not privatized

but it is owned and built by the government."

Thus, the risk of the infrastructure and superstructure is the government’s risk.  We are the managers of the assets but we are not paid. a flat fee but we share revenue.  Every dollar the port gets we get 40 cents so it provides us with incentive to attract business, do the work more efficiently, and provide excellent customer service.  The interests of the public sector and private sector are aligned in this model.

Do you think this can serve as a prototype for the future?

The model of total privatization is void now in my opinion.  It didn’t work for many reasons.  If you think about risk and how to distribute it this is the most important thing.  The risk of building infrastructure needs to stay with the public sector because it is too much for private entities to finance.  There is also the issue of strategic importance for the country in terms of military interests and sovereignty. As well, long-term revenue sharing contracts provide a continuous revenue stream coming to the government on a regular basis.  I believe this model also improves operational effectiveness.

Why should your clients chose you over other ports in the region?

It is about efficiency.  There are few measures that our clients care about.  They care that their vessel comes in and out and if we are faster at taking care of this they will come here.  We are very efficient because we have invested a lot in technology and automation and this port is one of the most sophisticated in the world.  We are comparable to Singapore and Los Angeles in this respect.  We also made it a point to hire local people.  We are the only port in the region which has 100% local employees.

How do you communicate these values to your clients and the world?

They communicate by themselves.  Our clients are very smart; they would not go to a port that has longer wait times over another. 

Are your costs competitive?

Not really. In fact, these days we are more expensive than the other ports.

Who are you looking to target with your strategic communication efforts?

We don’t have a communications department.  Our website is more used for local clients to check the status of their container and delivery.  For the purpose of the Port of Beirut it is a self-contained, very small industry.  The shipping lines know the ports and how they operate so there is very little to present.  The best transshipment areas have the most local volume. 

What is your strategy and what are your strategic goals for 2011-2012?

We’re growing outside of Lebanon.  We are very strong in Saudi Arabia and we have operations in the US and Turkey.  I think the market is going through restructuring and we want to take advantage of that.  This is the time when companies change ranks and we are investing heavily in growing.  Automation and systems are the cornerstone of our business.  This is an industry that is less sophisticated than others but if we invest in technology we can do well and grow.  We want to take advantage of the global mess because we can compete on a better platform.  Saudi Arabia will be a great place to invest in because they have not been affected by the economic downturn and is going through another boom period.  It is a country that is very structured and has many opportunities.  There are also many opportunities in Africa but the problem there is a significant degree of corruption.

Where does IPM rank in the world?

We are very small and at the bottom of the list.  However, we have great ambitions and we can only do better.