Interview with Sami Salman, President of TransMed

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The Lebanese Economy grew 8.5% in 2008 and a revised 9% in 2009 despite the global recession.  Furthermore, the World Bank estimated its GDP growth in 2010 to be 7%.  In your opinion what are the drivers behind this growth and is it based on sound fundamentals.

There are several reasons for this. Such growth in an environment where the world economy is depressed is due to Lebanon’s new found stability after Lebanese emerged from a 7-10 year period of turmoil and this triggered economic growth.  Part of this growth is driven by the expansion of activity like investments but it is also due to an adjustment.  This was an economy that was undervalued and underperforming due to the political situation and regional instability for a number of years.  Lebanon is also very much effected by what goes on around it and when you have places like the Gulf that grow by leaps and bounds, Lebanon has missed out and grown very little in comparison. Indeed, there was growth but this growth was long overdue and it was due in part to stability and as a result of an adjustment.

Do you think this may result in the overvaluation of the Lebanese economy?

I believe that we have a long way to go because we missed out on a lot of things.  The real value of things in Lebanon have none realized their true value.  Yes, there is always the possibility of overheating the economy, especially due to the lack of investment opportunities in Lebanon.  The main recipient of foreign investment is real estate and there is so much that this can absorb.  There may be overheating and exaggeration in real estate but the country as a whole has not reached its full potential.  People are not investing in industry, infrastructure and touristic projects but are investing mainly in real estate.

A report issued by RNCOS, the Middle East retail market is expected to flourish in years to come.  How does the Middle East market and Lebanon retail in consumer goods compare globally and what is consumer confidence like in the region?

The retail business has a long way to go because it hasn’t caught up with the latest worldwide practices.  Talking about consumer goods we don’t have hypermarkets or retail chains so we are lagging behind.  Malls and department stores are also small and few and far between unlike other countries in the region.  The major players are going to come into the country, for example, CarreFour is coming soon.  The consumer index is related to the political outlook.  If people are confident in the stability of the country people will spend and borrow ahead. 

What do you think about the recent crisis in Greece and will it have a significant impact on Lebanon and the Levant region?

I think there is one very important effect of this in my opinion.  Greece has demonstrated that governments can, indeed, go bankrupt.  The fallacy of thinking that a government can go on indefinitely borrowing money has been demonstrated by Greece.  If the Lebanese think they can go on borrowing indefinitely with a deficit that continues to grow year after year they are mistaken.  No one will tolerate this.  The world will not tolerate irresponsible practices and policies.  This is a big lesson to derive from the Greek experience.

The EU would bail out Greece but who would bail out Lebanon in the event of a crisis?

Even countries who have big brothers like the EU find that the big brothers are reluctant to help because they have enough problems on their end.  In Lebanon and the GCC countries this is also true.  Maybe GCC countries could help but the solution is to be self-reliant, exercise good self-governance, be cautious, reduce the deficit, and to have a very responsible policy.

In your opinion what should the policy be like in Lebanon to address deficit issues?

The beauty of Lebanon is that everyone is aware of the solutions but the thing is to implement it with the political will and political possibility to do so. 

TransMed is a regional sales distribution and bottling organization operating in UAE, Jordan, Syria, and Africa.  You mentioned that the retail market is changing.  How will this impact your organization and how will you cope with this?

The change in the retail market will make the sector much more competitive and offer consumers more choices and a better shopping experience.  For people like us it means we have to brace ourselves to give the consumer what they are looking for in terms of quality and customer service.  Improving customer service and products is a never-ending journey. 

How do you fit in?

We are partners with the trade and have to play the game according to new rules by delivering real value.  The distribution sector in Lebanon cant think of itself as being a simple supply operation, it has to be a full partner in this equation and fully committed and dedicated to provide services at a competitive rate in order to enhance the value equation for the product.

Can you mention some examples of how you are adding value to you customer base?

We add value by having a product offering that caters to all different price segments.  We also ensure that our product offering in the supply chain has no inefficiencies and to improve existing cost-efficiencies. When the consumer goes to pick up the product he should not pay for our inefficiencies. 

Has your strategy changed over the years?

Of course because we operate in different markets and this dictates we have a high degree of adaptability.  In the GCC the retail market is far ahead of what you will find in the Levant.  In order to be successful we had to adapt ourselves and make room for the new realities.  What has taken the Gulf thirty years to do, Lebanon will do in thirty months.

What are some of the key challenges you are facing?

The infrastructure in Lebanon is still inefficient.  The journey from Beirut to Jouniyeh is 20 km and takes between one and one and a half hours to make, for example.  Power shortages also add to this and add cost to the system.  This burdens the whole system.  The strategic challenges are how to be able to survive in a country like Lebanon with all of the ups and downs.  The consumer index is very volatile and out of our hands.  Being able to predict whether there is going to be an Israeli invasion this summer because then we have to adapt our business.  Managing these extremes and the uncertainty is very difficult.