The Finance Ministry will soon implement a law passed by Parliament to slash taxes on industrial exports by 50 percent, Industry Minister Hussein Hajj Hasan said.
“The law was recently issued by Parliament for this purpose and we are expecting the Finance Ministry to implement it soon in order to help industrialists increase their exports,” he told The Daily Star in an exclusive interview.
Hajj Hasan said the ministry was keen on implementing practical measures in a bid to support the ailing industrial sector.
“Another measure that will also go into effect soon is a government subsidy on the interest on operating capital loans,” the minister added.
He said all the concerned government departments had agreed on this measure and it would take place soon. “For instance, instead of paying 11 percent interest on a working capital loan, industrialists would only pay around 6 percent and the rest would be subsidized by the government,” he explained.
“This is the least we can do since we cannot provide industrialists with energy at lower costs like in other Arab countries,” he said.
Lebanese industrialists are saddled with very high energy costs while their counterparts in neighboring countries benefit from subsidized energy bills, providing them with a competitive advantage.
Fadi Gemayel, president of the Association of Lebanese Industrialists, told The Daily Star in a previous interview that the energy costs could reach between 30 and 35 percent of products’ market price, a significant amount.
Besides the high energy costs and the high cost of production in general, the sector has also been suffering from the security situation in neighboring Syria, Hasan said.
“The transportation cost has increased dramatically and we do not really have a solution to that because the government does not have money to subsidize this sector,” he said. “So the cost will only decline when the Syrian crisis is resolved.”
Hajj Hasan added that government policies over the past years were not really supportive with regard to agriculture and industry.
“Some were even thinking of including Lebanon in the World Trade Organization without taking into account the fact that these two sectors are already suffering,” the minister said.
Hajj Hasan believes that Lebanon’s enrollment in the WTO would only contribute to a further deterioration of the productive sectors in Lebanon.
“ Lebanon cannot join the WTO unless the government implements special measures to protect productive sectors such as imposing fees on imported products or even preventing the import of some items to protect local production,” he said.
Hajj Hasan said other countries had taken such measures to protect their local industries. “The United States, for instance, has imposed around 240 percent tariffs on solar panels imported from China while it doesn’t have the right to do so under the framework of the WTO,” he said.
In addition, he added, the U.S. restricted the number of Japanese cars entering its territories to protect its local production. “We haven’t been doing the same in Lebanon because some people don’t have an interest in taking such a measure and only a few industries are protected in Lebanon,” he said.
Aiming to curb the negative repercussions on Lebanon of the regional turmoil, the Industry Ministry is also planning to open a new export market to Russia.
“We are in the process but this needs a lot of preparation,” Hajj Hasan said.
The minister argued that the problem with opening the Russia market was that some industrialists are used to exporting to other specific markets and they are worried about shifting to new ones.
“We cannot blame industrialists for not wanting to shift especially that Russia would certainly ask for a great volume of products while factories may not be capable of producing the required quantities,” he said.
Hajj Hasan said that it was up to industrialists and not to the government to choose the markets that they want to export to.
“My responsibility is only to remove obstacles and secure the proper regulatory and legislative framework to facilitate exports,” he said.
Figures released by the Industry Ministry show that industrial exports totaled $1 billion in the first four months of 2014, constituting a decrease of 14.5 percent from $1.2 billion in the same period of last year.
Industrial exports reached $277.1 million in April 2014, up by 7.1 percent from $258.7 million in March 2014 but down by 6.8 percent from $297.3 million in April 2013.
The Daily Star