Lebanon’s relatively small market is driving local businesses to expand regionally, motivated by a wide array of investment opportunities, bigger profit margins and weaker competition, a leading Lebanese contractor told The Daily Star in an interview. Yet none of this success would have been possible were it not for the highly competitive nature of the Lebanese market, which has shaped the know-how of Lebanese firms, says Abdallah Itani, managing director of Arison, a leading Lebanese supplier and assembler of pump and power generator systems.
Despite the small size of the Lebanese market, businesses can attain here the very experience they need to tap into opportunities across the region
“Despite the small size of the Lebanese market, businesses can attain here the very experience they need to tap into opportunities across the region. Technical know-how is key,” Itani says.
In Iraq’s booming Kurdistan market – mainly in Irbil – profit margins are as much as 20 percent higher than in Lebanon, Itani says, highlighting that his company is bidding for projects 10 times bigger than those being won in Lebanon.
“You cannot even compare Lebanon and other markets. Our biggest project here was around $5 million while the Kurdistan project is worth $45 million in electro-mechanic contracting alone [and worth $90 million in total],” Itani says of a multimillion dollar water treatment and distribution project.
The Kurdistan semiautonomous government awarded the contract to Arison a few years ago, although his firm had submitted the third most expensive price offer for the project, Itani adds.
We convinced the region’s officials that the tenders needed to confirm with high quality standards
“The tender conditions lacked clarity, allowing competitors to lower their bids at the expense of quality. We convinced the region’s officials that the tenders needed to confirm with high quality standards,” Itani explains.
In the past few years, Irbil has drawn investments from many Lebanese entrepreneurs who were motivated by incentives such as free leasing of land, zero taxation and long-term low interest loans.
By the end of the 1990s, we realized that we cannot restrict ourselves to the Lebanese market
“There are no barriers whatsoever,” Itani says. “By the end of the 1990s, we realized that we cannot restrict ourselves to the Lebanese market. We already had expanded across the country and had five showrooms and the market became saturated.
“Over the years we had also gathered an immense technical experience in addition to significant experiences in electro-mechanical contracting,” he added.
In 1998, Arison decided to tap the Syrian market, which is easy to invest in given the great similarities with the Lebanese market.
In 2002, Arison ventured into Abu Dhabi before it entered the booming Iraqi market in 2008 with branches in Irbil. Both expansions were modeled based on the company’s work in Lebanon, Itani says, particularly when it came to assembling generators and pump sets.
Despite its expansion strategy on the regional level, Arison continues to invest in Lebanon with the goal of exporting its products to regional markets where it is bidding for contracts.
In the first half of 2012, Arison inaugurated an advanced maintenance, assembly and production facility in Jiyyeh, south of Beirut.
“Putting together top notch equipment and testing rooms, the new project is set to boost both the pumps and generators operations,” Itani says.
The new facility also allowed Arison to partner with Fiat Powertrain Technologies to assemble generators for the Lebanese and Iraqi markets, Itani adds.
The Daily Star