04 March 2011
BEIRUT: The delay in the formation of a Cabinet in Lebanon is putting on hold the implementation of major projects in the private and public sectors, said Fouad al-Khazen, chairman of the Syndicate of Contractors.
“The implementation of major projects in the country depends to a large extent on political stability, which is currently absent in Lebanon,” Khazen told The Daily Star in an exclusive interview. Khazen has served as Member of the Board of Lebanese Company for the Development and Reconstruction of Beirut Central District SAL (Solidere) since May 1994. He is chairman of the Syndicate of Lebanese Contractors, chairman and general manager of BIT Bank and of various Lebanese contracting and commercial companies.
Khazen said that Lebanon witnessed a boom in the construction sector in the past few years but expressed concern about new projects being put on hold due to the political turmoil in the country. “Foreign investors would not want to risk investing their money in an insecure environment,” he said.
According to Bank Audi’s Lebanon Economic Report, the construction sector continued to show strong activity as figures released by the Order of Engineers in Beirut and Tripoli revealed that the area of newly issued construction permits reached 17.6 million square meters in 2010, up by 23 percent relative to 2009. However, it added, construction activity was hit in the fourth quarter of 2010, as construction permits declined by 14.7 percent over that period relative to the corresponding period of 2009 due to political uncertainties. It added that investments in the sector had dropped, reflecting the negative effect of the political standoff on consumer and investor sentiment.
Contractors complain many projects that had been approved by the Council for Development and Reconstruction were shelved until more funds were made available. They also noted some projects that had been under way were ground to a halt all of a sudden because CDR lacked funds for the projects.
Economists and bankers say the government needs to spend more money on crucial infrastructure projects to stimulate the economy and create more growth. Most of the public infrastructure projects are financed by Arab and international banks and organizations at very low interest rates.
In its 2009 progress report, CDR said over $8.9 billion worth of projects had been implemented over the past 12 years but indicated that vital electricity and water projects had been put on hold due to shortage of funds.
Political bickering and instability have taken their toll on the implementation of the necessary infrastructure projects as well, including the building of water dams and power plants due to the delay in Parliament’s approval of the 2010 and 2011 budget drafts.
The 2010 budget draft allocates LL800 billion to projects such as electricity, water and roads, while the 2011 budget draft sees spending on infrastructure increase by LL104 billion compared to 2010. Moreover, Caretaker Finance Minister Raya Hassan has previously said that all the money that had been allocated for investment last year would hopefully be used this year.
Khazen said that the implementation of projects must not stop when new ministers are appointed. “The new government must ensure the continuity of projects,” he said.
He argued that the major challenge facing contractors in Lebanon was the lack of coordination among governmental agencies. Citing an example, Khazen said that the government tends to delay a project under the excuse of installing water pipes at the site. “Contractors are the ones to be blamed for this all the time,” he said.
He noted that the payments for projects by the government were usually delayed as well. Another challenge cited by Khazen was the sudden increase in the prices of cement which causes the contractors to lose money. “Losses must be shared equally between contractors and the government.”
Copyright The Daily Star 2011.
