International name-brands leaving Lebanon in droves, workers’ salaries slashed
By George Eid, CM middle east correspondent
Four months after August’s apocalyptic Beirut port blast, Lebanon is still drowning in an open-ended economic crisis.
Shops are closing down by the day and international brands are leaving the country in droves. Pavements that were once crowded with shoppers are now empty as some of the once vibrant marketplaces in Beirut and its suburbs have turned into ghost towns.
“The shop owners are struggling very hard to survive. But those who cannot, have dropped out of the race and decided to close down,” said Nicholas Chammas, president of the Beirut Traders’ Association in an interview with the Cyprus Mail.
The triple economic shock that has hit Lebanon is a combination of a worldwide pandemic, an economic crash and a Lebanese capital devastated after the explosion. This has brought the business owners to their knees after years of resilience.
“More than 400 storefronts in Lebanon have closed down for good in 2020,” he said.
International brands such as H&M, Mothercare and Jacadi have already moved out of the Lebanese market this year after the devaluation of the Lebanese lira. Adidas, one of the leading sportswear brands that has always maintained outlets in Lebanon, has also announced it will be closing all its branches by the end of 2020. This is only a small sample of many other brands that have taken the exit door out of the Lebanese market. Others are preparing to do so in the near future.
In a survey this week by Murr television, one of the leading TV stations in Lebanon, 94 per cent of people have admitted noticing a change in the commercial landscape in the country.
Despite the grim turn of events, some businesses have decided to keep their doors open but were forced to implement temporary measures of survival including “seasonal discounts on their merchandise” or “salary cuts for their employees, asking them to work half-days only”, Chammas explained.
“The measures taken are on two levels: cost and revenue.”
When it comes to revenue, business owners have lowered their expectations but also the quality of their products.
“Introducing new products that fit the purchasing power of the Lebanese customer. Honestly? We have decided to downgrade!” he said.
“We are simply looking to meet the new demand of more modest Lebanese household budgets and a continuously decreasing purchasing power.”
He said that 40 per cent of world-famous brand outlets in Beirut have closed down this year.
“We expect that number to reach 60 per cent by the end of 2020. Most of the Lebanese customers are unable to afford such brands today.”
On the cost side, most traders are paying their salaries in Lebanese lira at the official exchange rate (1515 LBP= 1 $).
“This by itself means a five-fold drop in the value of the salary,” Chammas said.
The black market value of the Lebanese lira today is somewhere between 7000- 7800 LBP= 1 $. This gives a good idea about the purchasing power of an employee.
Other business owners have taken more drastic measures by imposing a part-time working schedule and thus adjusting the salaries accordingly.
The “survival kit” of the Lebanese traders also includes negotiating with landlords to take into accounts the long lockdown due to Covid-19 and thus the lack of activity.
“Most landlords are being responsive. They are agreeing to collect rents at the official rate of the Lebanese lira,” Chammas confirmed.
Despite the gloomy outlook, economic analyst and professor Jasem Ajaka told the Cyprus Mail “that Lebanese merchants are currently making a profit from the difference between the official exchange rate (1515 LBP= 1 $) and the black market exchange rate (7000-7800 LBP= 1$). As a result, there is a transfer of wealth from the households to these merchants, the last draw on some savings which will soon finish. But it is only a matter of time before this changes.”
Ajaka said that the only way out is “the formation of a government, the implementation of the reforms requested by the IMF, and the inflow of fresh US dollars”.
“The country is on the way to the worst food and social crisis in its history. So the issue is a political issue that should be resolved as soon as possible,” he added.
“The implementation of the reforms could restore confidence internally and externally, and this could ultimately lead to the return of investments that are considered to be the lifeblood of the economy.”
The process of forming a new government has been ongoing since August. Four months into a political deadlock, there is little sign of hope.
