BEIRUT: Lebanese companies operating in the construction and real estate development industry fear that the political impasse in the country will take its toll on their sector in the second half of 2011.
“The first thing that’s going to happen if the government does not get formed soon is that financiers will slow or delay projects,” Caterpillar sales manager and Partner Tarek Jallad said during the opening of “Project Lebanon 2011.”
“Project Lebanon 2011” is the international trade exhibition for construction and environmental technology in Lebanon and the Middle East organized by International Fairs and Promotions on a yearly basis.
The exhibition, which includes more than 500 companies from 26 countries from around the world, aims to invite all regional and international companies operating in the construction and real estate development sector to take advantage of the investment opportunities that the Lebanese real estate market offers.
Jallad said he expects projects to be pushed back during the second half of 2011 amid ongoing uncertainty over the regional turmoil and the absence of a government in Lebanon. “No country can function without a government for so long and I am a little bit worried about the spillover of some of this negativity on us,” he told The Daily Star.
On the public sector side, Jallad noted that tenders are on hold for the time being which is inflicting losses on some of the construction companies. “These tenders would have helped us a lot and unfortunately we do not know until when they will be suspended,” he said.
But he noted that the dramatic impact of the delay in Cabinet formation had not been felt much yet by the construction industry, particularly when it comes to private projects. “We haven’t felt the impact yet because we are still supplying the already accomplished real estate projects with their needed power equipments,” he said. “The first half of the year was great actually.”
Jallad said that if the second half of the year continues at the same pace, then Lebanon would be representing a good part of Caterpillar’s business in the region. “We are operating in Syria, Jordan and Palestine as well but Lebanon is looking to be the most stable of all,” he said.
Jallad’s fears and concerns were also expressed by the managing director of Taleb&Co steel contractors.
“We haven’t been feeling much the impact of the absence of government because we are still operating with the old contracts signed by our company before the collapse of the Cabinet,” said Khaldoun Taleb.
However, Taleb said if the political situation does not improve in the coming few months, his company would suffer a setback.
“We haven’t been able to get any new contracts for the past three months in Lebanon or in the region,” he said.
Taleb argued that prices nowadays are very competitive due to the lack of business and the fact that all companies are trying to win a share of the market. “The market is very tight for now and I am not very optimistic about the future,” he lamented.
While local firms expressed their doubts of a revival in the construction sector for the second half of 2011, international firms participating in the exhibition seemed to be more optimistic about their investments and trade relations with Lebanon.
“Around 4 percent of our exports go to Lebanon which is not negligible at all,” said Philippe Francois, export sales manager at NMC, a Belgium company specialized in the manufacturing of decorative elements.
Francois argued that the absence of a government is not affecting his firm’s business relations with Lebanese companies. “We come from Belgium where the government has also been absent for more than 300 days and life is still going,” he said. Francois believes the absence of a Cabinet might affect some state contracts but the general construction business shouldn’t be affected.
Francois said his company’s business with Lebanon increased last year by around 15 percent and he expects it to go up by an additional 5 to 10 percent this year. “However, our business in Syria, Tunisia and Libya has gone down by more than 50 percent,” he noted.
Some other companies participating in the exhibition do not have any business relations with Lebanese companies yet but are hoping to establish some good ones in the near future. “We have high hopes in the Lebanese market more than any other markets in the region due to the turmoil hitting most of the countries in this area,” said Fabrizio Re, partner at Torterolo&Re, an Italian company specialized in the manufacturing of houses doors.
More than 8000 Italian companies are engaged in trade relations with Lebanese firms, according to Sebastiano de Monte, trade commissioner at the Italian Embassy.
Del Monte told The Daily Star Italian investments in Lebanon were not affected and the construction market in Lebanon was doing very well compared to the European construction market. “There was only a slight decrease of 3 percent in construction permits during the first three months of 2011,” he said. “But we expect this market to perform very well during the next three years.”