Lebanon Port Sector Reform, Recovery and Development TECHNICAL ASSISTANCE APRIL 2024 Report Content 1. Executive Summary 2. Project Context 3. Port Sector Governance and Management Reform 4. Lebanon Ports Vision 5. Port of Beirut Reconstruction and Development Plan 2 Executive Summary 3 The Scope of the World Bank’s Engagement on the PoB The August 2020 explosion at the Port of Beirut (PoB) highlighted the overall institutional collapse of the Lebanese port sector and was a wake-up call for profound change, starting with the urgent implementation of longstanding structural reforms ahead of the physical reconstruction of a modern, efficient and transparent port system. The development of other ports, both in the region and globally, as well as a fast-changing, post-pandemic geoeconomic and geopolitical global recovery, have cast a spotlight on the opportunity costs—financial, economic, social, environmental and political—of the slow reform, recovery and reconstruction of the PoB. Following the blast, the World Bank undertook a Rapid Damage and Needs Assessment, and proposed, in partnership with the European Union (EU) and United Nations (UN), a Reform, Recovery and Reconstruction Framework, designed to build back better. As part of this framework, the Bank recommended that key reforms and modernization be rapidly initiated as crucial pre-requisites to the rebuilding of PoB. These building blocks consist of: (i) A new governance structure based on the landlord port model; (ii) efficient and modern customs, border agency and trade processes, critical to address transparency, predictability and security issues; (iii) open and transparent bidding processes for the selection of operators or concessionaires; and (iv) quality infrastructure contingent on a countrywide strategy for the port sector and a revised Masterplan for PoB. To help the Government of Lebanon prepare and implement the reforms recommended, the World Bank’s work has included providing technical assistance for: (i) a new port sector law; (ii) a national vision for the port sector; and (iii) a reconstruction and development plan for the Port of Beirut. 4 Replacing a legal void with a best-practice new law The Port Sector Law was prepared by the Ministry of Public Works and Transport (MPWT), with technical assistance from the World Bank. It was cleared by the Public Works Committee of Lebanon’s Parliament in April 2023. The law is based on the landlord port model. It addresses a longstanding legal vacuum in port governance, ensures efficiency and transparency, and enables capital mobilization in the sector. The law introduces three changes by establishing: MPWT 1. A National Port Council, which draws on all port sector stakeholders, public and private. The council is to articulate a National Port Policy with a ten-year outlook and propose public funding allocations for port development, prioritizing policies that maximize private participation and investment in the sector. It also champions a digital infrastructure vision. 2. Autonomous port authorities, set up as private corporations with full public ownership, will Port be responsible for the long-term development of the port and its operations. Port authorities Regulator National Port will develop and manage the port’s physical and digital infrastructure and enter into Council agreements with private investors and operators to design, build, operate and maintain terminals and facilities. 3. An independent Port Regulator, which oversees the economic regulation of the port system, ensures fair and equal market access for the delivery of port commercial services, guards against the development of anti-competitive practices, monitors the activities of port Port Port Port authorities and operators, and reviews decisions issued by port authorities when appealed to Authority Authority Authority do so by operators or customers. These pivotal changes work together as an integrated system that responds well to Lebanon’s situation, its urgent need for capital investment and the modernization of its ports, and their re- integration into the regional trade system using global terminal operators. PCC PCC PCC 5 Placing the Roles of the Ports of Lebanon in an Integrated National Vision This vision proposes a national system of mutually reinforcing and complementary ports that drives sustainable economic growth. The MPWT approved it in November 2022 following an extensive consultation process. A unique and timely opportunity exists for Lebanon and the PoB to insert themselves into new trade corridors and position themselves as a European market nearshoring destination. 6 Building Port of Beirut back better Based on traffic forecasts, and making provision for unexpected The proposed PoB Reconstruction and Development potential overflows, the proposed plan offers space allocation Plan seeks to reconcile the need to cost-efficiently principles that will enable the efficient handling and transit of all handle prospective traffic—both domestic and categories of goods through the port facilities right up until 2040. international—with an imperative to stimulate job It has been designed to provide Lebanon with the flexibility creation and promote value-adding innovation in all needed to: sectors of the blue economy. 1. Rapidly rebuild critical port infrastructure in a cost- effective manner It is a medium- to long-term plan, aligned with the Integrated 2. Efficiently serve current and future traffic in all key cargo National Vision for Lebanon’s ports, but subject to two critical categories assumptions: 3. Respond to circumstantial opportunities without sacrificing 1. The port sector’s institutional set-up is enacted and essential functions and future requirements implemented in line with the draft law now being reviewed 4. Restore trust, allowing partnerships with existing and future in Lebanon’s Parliament. terminal operators, their customers and international donors 2. Customs and Border Management Agencies implement 5. Develop value-added activities through port-city integration effective trade facilitation measures, as spelled out in the to generate additional income for the port while serving as an WTO’s Trade Facilitation Agreement. economic accelerator 6. Offer a space of healing for the victims of the blast, their families and all those affected. 7 Recommended reconstruction and development plan 8 Consultations and Market Sounding The plan has been subject to rigorous technical analysis, as well as wide and extensive The Bank also consulted stakeholders on the recommended value-adding stakeholder engagement (Annex 4). Four priorities were identified during consultation: port-city integration area of the PoB. Participants included government authorities, private sector bodies, businesses, urban and economic ► Port-city integration development organizations and experts, civil society and port neighborhood ► A memorial around the silos, accessible to all organizations. Most expressed the need for urgent, rapid interventions that ► Sustainability in the design, construction, choice of materials, water collection, energy saving, target constraints, particularly in the vital export sector: etc. ► Offer affordable, reliable, safe and well-maintained infrastructure with ► Reformed governance, with the enactment of a new port sector law based on the landlord port good physical connectivity to the city, including electricity, high-speed model internet, transport connections, bus services, parking space. ► Support technical education and vocational training in transport-logistics- supply chain-trade (TLST), e-commerce, outsourcing, ICT, tourism and A soft market sounding tested interest among private investors and operators in the proposed other high-skills industries and services. plan. The Master Plan was adjusted following the feedback received: ► 17 globally recognized operators (five to seven per cluster), were approached. ► Provide fast-rising firms affordable shared-space, and training-support- mentoring in key processes, such as fundraising, BD-marketing-sales, ► Responding companies saw opportunity for further development in the port. production design-planning-process, hiring-training-HR. ► Some expressed interest in further stages of the development and reconstruction process. ► Supply affordable, international quality serviced light manufacturing, e- ► Most expressed a requirement for greater clarity on the legal framework, port governance commerce and research-development-innovation land and buildings, model and contracting terms for possible participation in future port terminals’ tenders. mostly powered by renewable solar energy. ► A clear remark was made on their interest in combining different activities, as the port volumes were relatively modest. ► Create an improved investment and operating environment (ease of creating, operating and closing a business), with the possibility of creating ► Operators indicated that a concession contract or a lease contract would be suitable options. an SEZ in the area, thus creating scale with Tripoli’s zone. ► Key concerns were related to clarity on the contract structure and clarity on the options to reduce country risk. The parties were all highly interested to learn more about the timelines and ► Include a waterfront, connected to a “human-sized” cruise terminal, happy to discuss the next steps with the Lebanese government and World Bank. linked to the city and supporting the hospitality industry 9 Context and Rationale 10 Project Context and Rationale On August 4, 2020, a massive explosion in the Port of Beirut (PoB) devastated the city, killing at least 200, wounding thousands, and displacing hundreds of thousands. The World Bank (WB), in cooperation with the United Nations (UN), the European Union (EU) and other partners, launched a Rapid Damage and Needs Assessment (RDNA) to estimate the impact of the disaster on the population, physical assets, infrastructure, and service delivery in Beirut. The blast caused between $3.8 and $4.6 billion in damage to physical assets, with damages to the PoB amounting to around $300 million. The blast also resulted in losses, including changes in economic flows, estimated to be in the range of $2.9 to $3.5 billion. A Reform, Recovery, and Reconstruction Framework (3RF) was developed as the need emerged to balance the immediate works required to restore vital operations with the opportunity to “build back better”. The August blast highlighted the overall institutional collapse of the Lebanese port sector and was a wake-up call on the need for profound change, starting with the urgent implementation of longstanding structural reforms ahead of the physical reconstruction of a modern, efficient and transparent port system. Port developments in the region, as well as a fast-changing post-pandemic geoeconomic and geopolitical recovery, have highlighted the high costs to opportunity—financial, economic, social, environmental and political—of a slow process of reform, recovery and reconstruction by the PoB. 11 Port Sector Roadmap The World Bank chaired a unified port sector platform, Proposed guiding principles for the reform of the port sector in Lebanon Donors and Group of Experts bringing together international development and World Bank IFC diplomatic partners involved in the port’s UNODC reconstruction to coordinate the technical and financial UN-ESCWA support offered to the Government of Lebanon (GoL). European Union Delegation ICMPD project in Lebanon EIB EBRD Composed of more than 25 institutions, the platform identified the AFD reforms pivotal to recovery and reconstruction. These remain Expertise France essential to fight corruption and ensure efficiency and transparency in USAID the recovery and reconstruction process. IMO The reforms were structured into a port sector roadmap with four French Embassy building blocks: Netherlands Netherlands Enterprise Agency (RVO) 1. A new governance structure based on the landlord port model to Embassy of Italy address the legal vacuum in which the port is currently operating; Italian Customs Agency 2. Efficient and modern customs, border agency and trade processes Italian Trade Agency that have an essential role in addressing transparency, German Embassy predictability and security issues; GIZ Embassy of Spain 3. Open and transparent bidding processes for the selection of US contractors, operators or concessionaires; DFID-UK 4. Quality infrastructure that is contingent on a countrywide strategy Belgian Embassy Embassy of the Republic of Poland for the port sector and a revised Master Plan for the PoB. World Bank, 2021 12 Technical Assistance Deliverables and Status In October 2021, the newly appointed Lebanese government Focus Goal Status sought the Bank’s support for the reconstruction of the PoB using a state-of-the-art approach. The Bank mobilized funds to provide the Ministry of Public Works and Transport the technical assistance To address the longstanding The MPWT championed and necessary both to develop sector reforms and to inform decisions legal vacuum in port finalized a Draft Port Sector Law. Port sector governance, ensure on reconstruction. It was cleared by the Public governance efficiency and transparency, Works Committee of Parliament and enable capital in April 2023 mobilization in the sector The slow post-blast recovery of the PoB in 2020 and 2021 compounded the socioeconomic crisis affecting Lebanon. Despite some shifting of traffic to other national ports, the PoB has remained Lebanon’s main access point to the rest of the world, critical to the country’s recovery. Other ports in the To define the roles of the The MPWT approved the Eastern Mediterranean, Black Sea and Persian Gulf have recovered to their ports in an integrated and Integrated National Vision in pre-pandemic levels. Fast changes in regional and global geopolitical and Integrated balanced development November 2022 after an geoeconomic dynamics have led to the loss in the position of Lebanon’s ports. national port strategy aligned with the extensive consultation process sector vision principles of the National Their slow recovery has thus had important opportunity costs nationwide. Physical Master Plan of the that supplemented expert analysis Lebanese Territory The Bank mobilized funds through several multi-donor trust funds, namely the Global Infrastructure Facility (GIF), the Public-Private Infrastructure Advisory Facility (PPIAF) and the Lebanon Financing Facility (LFF), toward To design a medium- to three strategic deliverables: long-term plan, aligned Draft options were submitted to PoB with the Vision and the Port the PoB, MPWT and ► A new port sector governance framework Sector Law, that boosts the stakeholders in early 2023. development POB’s recovery / Comments and results of the ► An integrated national vision for the port sector plan reconstruction and market sounding on best options ► A comprehensive development plan for the PoB catalyzes development are presented here nationally and in Beirut 13 Port Sector Governance and Management Reform 14 Port sector governance and management reform 1. An Outdated, Non-Performing Governance Model 2. Inefficient Management Systems 3. Recommended Reforms 4. Recommended Governance Model 5. Replacing a Legal Void with a Best-Practice New Law 15 An outdated, non-performing governance model In December 2020, the Bank published a note, Reforming and Rebuilding Lebanon’s Port Sector: Lessons from Global Best Practices. Designed to define the most appropriate governance model for the port sector, it observed that: ► The governance of the port sector in Lebanon is a patchwork of ad-hoc institutions and structures that does not allow coherent strategy. A port is not a monolithic structure delivering a service to traders; it is primarily a place where many public and private the port sector is urgently stakeholders interact and play a part in providing essential services to the economy as its gateway to the rest of the world. ► Lebanon adheres to a port management `system that arguably reflects the country’s complex political-economic realities, and which, as a result, runs counter to many recognized good practices. ► The port’s current governance is not conducive to efficiency as key government agencies for transport, trade and border management have overlapping mandates, divergent strategies, and often operate with outdated processes and regulations. A comprehensive strategy for needed, aligning its various objectives, development plans, and operations. There is therefore a need for a new governance framework for the port sector to restore the trust of Lebanese society and economic operators in its capacity to strengthen the country’s economic fabric and help overcome the economic crisis. 16 Port of Beirut and Port of Tripoli Governance The PoB has been managed since 1990 by a temporary administrative committee, established in a legal vacuum. This has led to governance, transparency and accountability issues. The PoB has failed to guarantee safe and efficient operations, and to undertake the long-term planning necessary for the benefit of the port and the country. Its performance as a key enabler of national economic development has not been optimal. The year 1990 saw the end of a 30-year concession for the Compagnie de Gestion et d’Exploitation du Port de Beyrouth SAL (CGEPB), when the PoB became national public property managed by a temporary administrative committee, the Temporary Committee for Management and Investment of the Port of Beirut. The Temporary Committee is responsible for spending port revenues, specifying the works needed and awarding corresponding contracts. Unlike a registered corporation, the Temporary Committee does not publish balance sheets or financial statements. It is not in itself a legal entity. The absence of a real port authority, coupled with inefficient management by the Temporary Committee, has allowed serious governance, transparency and accountability issues to take place. This has resulted in a lack of focus on socio-economic development, a lack of planning, poor safety and the declining efficiency of operations, along with the failure to create a level playing field and the right conditions to give the port a competitive edge. Container terminal operations were, until 2022, subcontracted to the Beirut Container Terminal Consortium (BCTC), a joint venture between Lebanon’s International Port Management Beirut SAL, the United Kingdom’s Portia Peel Ports Limited, and the United States’ Logistics and Port Management Americas LLC. BCTC had signed a ten-year management contract in 2005, which was then extended for five years and renewed on a three-month rolling basis. BCTC did not adequately invest in the terminal. A new ten-year contract was signed with CMA CGM in February 2022. While the signing of a long-term contract is a positive development, the Bank had recommended that the GoL implement its governance reforms before entering into new contracts and concessions. At Lebanon’s Port of Tripoli (PoT), the container terminal is operated by Gulftainer, now partly owned by CMA CGM, through a concession. The port has a Governing Board, appointed by the MPWT, with a renewable term of three years. The PoT is independent, both administratively and financially, and is governed by the General Code for Public Institutions, according to Lebanese government decree Number 4513. 17 Inefficient Management Systems A second note, Reforming and Rebuilding Lebanon’s Port Sector Part II: Policies and Solutions for Digitalizing the Port of Beirut, was published in June 2021 in collaboration with Agence Française de Développement (AFD). It observed that: ► Current digital systems are inadequate. The present digital infrastructure and its services offered at the port do not serve the port community in the most efficient and effective manner. ► There is a low level of digitalization, interoperability, and process automation between port public and private stakeholders. ► This has intensified with Lebanon’s financial crisis and the blast (which destroyed IT infrastructure), impacting the public sector’s ability to maintain the current infrastructure. ► As a result, the vast majority of the port’s business processes are paper-based and conducted with limited support from automated systems. ► This is far from international best practice, in which there is a clear trend toward the development of distinct data sharing systems, and the adoption of policies and standards to ensure their interoperability. 18 Recommended Reforms The two World Bank notes recommend that key reforms and modernization be rapidly initiated as a crucial pre-requisite to the rebuilding of the PoB, with the establishment of a robust institutional framework for the port sector. This new framework would restore the trust of Lebanese society and economic operators in the PoB’s capacity to strengthen the country’s economic fabric and provide support in overcoming the country’s economic crisis. The paper Lessons from Global Best Practices states “while economically sustainable measures do not preclude Lebanon from adopting temporary measures to speed up functional recovery of the port for a limited transition period, the ultimate objective must involve sustained implementation of this institutional framework to make the PoB a modern, transparent and efficient port.” The Bank recommends two sets of actions: 1. On governance: i) a new governance structure based on the landlord port model; ii) efficient and modern customs, border agency and trade processes that have an essential role in addressing transparency, predictability and security issues; iii) open and transparent bidding processes for selecting operators or concessionaires; and iv) quality infrastructure contingent on a countrywide strategy for the port sector and a revised Masterplan for the PoB. 2. On management systems, a port digitalization system that will deliver key benefits: i) combat corrupted practices; reduce trade costs and bureaucracy; ii) upgrade safety and security; iii) bring high levels of service efficiency; iv) increase supply chain predictability; and v) improve regulatory oversight and policy decision making. World Bank, 2021 19 Recommended Governance Model OPERATING MODEL 1. Superstructure development and cargo handling operations are 1. Investments in port infrastructure and 1. Single entity (private sector) responsibility of same organization equipment (particularly ship/shore executes cargo handling operations 1. Maximum flexibility with respect to (unity of command). equipment) are planned, funded and and owns and operates cargo investments and port operations. provided by the public sector, handling equipment. 2. No direct government interference. avoiding duplication of facilities. 2. Terminal operators are loyal to port Ownership of port land enables Public Service Port and likely to invest through their market-oriented port development long-term contracts. and tariff policies. 3. Private terminal operators are 3. In case of redevelopment, private Tool Port market-savvy, digitalized, have operators realize premium price for customers and integrate port in their sale of port land. 1. No or limited role for private ecosystem. operators in cargo-handling 4. Strategic location of port enables operations. operator to broaden activities. 2. Dependence on government budget leads to limited capital investment, and poor resource-allocation. 1. Port administration and private Landlord Port Private Port 3. Conflicted missions, political operators jointly share cargo handling interference, conflicts of interest. Recommended governance services, risking conflicts. 4. Low labor problem-solving capability 2. Operators do not own major and flexibility, as port is key employer equipment, tend to function as labor 1. Government needs port regulator to not incentivized to pursue efficiency. brokers, do not develop strong control monopolistic behavior. 5. Lack of competition, leads to balance sheets, limiting future 1. Risk of overcapacity as a result of 2. Government loses control of long-term inefficiency, no innovation, with expansion. pressure from various private port-related economic policy. management not incentivized to 3. Risk of underinvestment, lack of operators. 3. In case of necessity to redevelop port, perform, be user-focus and market- innovation, possible instability in 2. Risk of misjudging the proper timing of government must buy it back. driven. service continuity and quality. capacity additions. 4. Serious risk of port land speculation by private owners. RISKS 20 Recommended Governance Model The landlord port is the dominant model for large- and medium-size ports. It Port function allocation per port governance model maintains the balance between the creation of public and private goods. The separation of roles and responsibilities between landlords, operators, customers and Public port Tool Landlord Private port other key stakeholders ensures proper oversight and regulation. This is a critical port port requirement in Lebanon. Port administration Nautical management The port authority acts as regulatory body and landlord. Port operations are carried out by private companies. Infrastructure is leased to private operators or to industries, such as refineries. The lease Nautical infrastructure to be paid to the port authority is usually a fixed sum per square meter per year, indexed to inflation. Port infrastructure The amount is related to initial infrastructure capital and ownership costs. Private operators provide and maintain their own superstructure, including buildings, which revert to the landlord at the end Superstructure: Equipment of the lease. They purchase their own equipment. Labor is employed by private terminal operators, although some of it may be provided through a port-wide labor pool. Superstructure: Buildings In addition to its economic benefits, the model offers the clear separation of policy and regulatory Cargo handling responsibilities at national and local levels. The port authority has wide autonomy. It has the right to state-owned land and infrastructure. It administers, maintains, and develops port infrastructure Pilotage assets. It manages and enforces navigation safety measures. It enforces environmental protection Towage regulations. It grants and monitors leases governing private sector activities. It markets the port to attract new investors. Mooring As well as a port authority and private operators, an independent regulator ensures that all parties, Dredging including the government, abide by the rules, adhering to laws, regulations and contracts. Other functions World Bank Port Toolkit Public sector function Private sector function 21 Replacing a legal void with a best-practice new law A new port law has been drafted by Lebanon’s MPWT with the support of the World Bank, bringing Lebanon in line with best practice. This law is an essential foundation for the port sector and for the economy. The draft law fundamentally changes a governance structure that has failed in its mission to regulate, invest in, manage, promote and ensure the safe and efficient functioning of the country’s ports. It strikes a balance between the current port model and fully private ports in a way that responds MPWT well to Lebanon’s many requirements, both urgent and long-term. The law introduces three pivotal changes: 1. It establishes a National Port Council that draws on all port sector stakeholders, public and private. The Council develops the National Port Policy for a ten-year timespan, proposes public Port funding allocations for port development, prioritizes policies that will maximize private National Port Regulator participation and investment in the sector and champions a digital infrastructure vision. Council 2. It establishes autonomous port authorities, set up as private corporations with full public ownership, responsible for the long-term development of the port and its operations. The port authorities will develop and manage the port’s physical and digital infrastructure and enter into agreements with private investors and operators to design, build, operate and maintain terminals and facilities. 3. It establishes an independent Port Regulator, which carries out economic regulation of the port system, ensures fair and equal market access for the delivery of port commercial services, guards Port Port Port against the development of anti-competitive practices, monitors the activities of port authorities Authority Authority Authority and operators, and reviews decisions issued by port authorities when appealed by operators or customers. This organization works as an integrated system that responds well to Lebanon’s situation and urgent need for capital investment in its ports and their modernization, and for their re-integration PCC PCC PCC into the regional trade system through global terminal operators. 22 Port Sector Vision 23 Context of Ports Vision and PoB Development Strategy 1. Lebanon’s Economic Situation 2. Lebanon’s Regional Position 3. Lebanon’s Trade and Port Performance 24 Lebanon’s Economic Situation The World Bank’s latest Lebanon Economic Monitor In the Grip of a New Crisis (Fall 2023) sums up the gravity of the situation. By 2022 and early 2023, the economy was able to hold still, following years of sharp contraction, thanks to tourism and sizeable remittances. Lebanon’s long economic contraction was estimated to have narrowed in 2022, to 0.6%. The temporary bottoming out helped the exchange rate to stabilize temporarily. Prior to October 2023, economic growth was projected—for the first time since 2018— to slightly expand in 2023 (by 0.2%). However, with the onset of the current conflict, Lebanon’s economy was projected to be back in recession in 2023. Real GDP growth would decline to between –0.6% to –0.9% depending on the extent of the tourism shock. The current account deficit was projected to narrow to 12.8% of GDP in 2023, following a dramatic increase to 32.7% of GDP in 2022. Inflation was projected to accelerate to World Bank, 2023 231.3% in 2023. Lebanon topped the list of countries hardest hit by nominal food price inflation in Q1 2023 (350% year-on-year). The Lebanese Pound (LBP) had lost more than 98.3% of its pre-crisis value by July 2023. Remittances continue to act as a de-facto social safety net. Net remittances to GDP are projected to stand at 23.4%, whereas remittance inflows are projected to reach 35.2% of GDP—a record high since 2019. Services like electricity are unavailable and unaffordable for many. 25 Lebanon’s Regional Position 1. The Geoeconomics of Corridors 2. The Southern-Central Corridors 3. The Northern-Central Corridors 4. The Middle-Central Corridors 26 The Geoeconomics of Corridors Regional economic integration is reflected in the rise of new corridors, with accelerating competition between existing and emerging corridors. This competition sees multilateral agreements being signed and billion of dollars being invested by governments and transport infrastructure and logistics operators. The war in Ukraine has redirected transit south and disrupted the Euro–Eurasian landbridge of the Northern Corridor, part of China’s Belt and Roads Initiative. Issues in the Red Sea aside, prospects for Southern Corridors have improved and the need for them increased. The dominant corridor is the East–West axis, anchored in the Suez or Southern Corridor. Traffic and revenues hit record highs in 2022. The canal gives Egypt outsize importance. But it is also a source of global vulnerability, as the Ever Given—the ship that blocked the Suez Canal in mid-2022—showed. The only alternative route capable of handling such vast volumes of trade remains the long, costly Cape Route. But other corridors are forming and/or expanding at a rapid pace. East––West focused, they seek to displace, bypass or complement the Suez Canal. The South–Central corridors pass through the Arabian Peninsula, while the North– Central corridors pass through Türkiye and the Caucasus. In-between stand an emerging set of corridors that offer the prospect of connecting the North–Central, South–Central and Southern corridors. Located in the Fertile Crescent, their infrastructure and trade facilitation are poor, their trade is low, and they remain impacted by instability and conflict. The Port of Beirut can place itself strategically on two of these ten routes: the Arab–Mediterranean Corridor and the Iran, Syria, Iraq route. The following pages provide more details on each corridor. 27 The Southern-Central Corridors The Suez Corridor provides the shortest and cheapest maritime route between Europe and the Indian and Pacific oceans. In 2021, around 1.27 billion tons of cargo used it. It is currently being expanded. The Ever Given spurred on projects that deflect the threat presented by a fast-opening Artic and other trade routes. One is to link the Gulf of Aqaba with the Mediterranean to support the chokepoint at Suez. There are talks of a canal linking the Red Sea and the Dead Sea, to be connected to the Mediterranean by either railroad or another canal. The Arab–Mediterranean Corridor, 2,500-kilometre-long, links Jebel Ali Port and Free Zone to the Mediterranean via the Kingdom of Saudi Arabia (KSA) and Jordan. Significant capital investments in infrastructure and trade facilitation are expected to progressively shorten transit time. A 140 km rail section between Jebel Ali and the United Arab Emirates–KSA border at Al Ghweifat was completed by Etihad Rail. A 1,400 km railroad connecting southeast KSA and Jordan is now – also operational, managed by Saudi Arabia Railway. The 300 km between Al-Haditha and Haifa, through Jordan, is conditional on the normalization of Israel–KSA relations and is costly and would require funding. The Naseeb–Jaber border crossing between Jordan and Syria was established on the initiative of DP World in 2019. Transit takes six days. In parallel, an oil pipeline between Eilat and Ashkelon may be used by Gulf states to reach the Mediterranean and is also contingent on Israel–KSA normalization. The India–Arab–Mediterranean Corridor (IAMC) is an emerging multi-modal, commercial corridor that could reconfigure trade between the Indian Ocean, the Middle East and Europe. It is anchored in the strong relationship between India and the UAE (India’s third trading partner), the Abraham Accords and efforts to normalize the KSA–Israeli relationship. DP World’s and the Adani Group’s extensive, complementary footprints promise to link Piraeus, Haifa, Jebel Ali and Mumbai. Currently relying on the Arab–Mediterranean Corridor infrastructure, IAMC is supported by the I2U2 group, a partnership between India, Israel, the UAE and the USA seen as a competitor to China’s Belt and Roads initiative. The rapid construction of railways between Israel and the UAE promises to shorten the transit time between India and Europe to ten days. 28 The Northern-Central Corridors The Trans-Caspian International Transport Route (TITR, Middle Corridor) is a rail line linking China to the EU through Central Asia, the Caucasus, Türkiye and Eastern Europe. In 2022, Georgia, Azerbaijan, Türkiye and Kazakhstan established the operating Joint Venture. The project has gained strategic importance since the war in Ukraine. It is now positioned as an alternative route between Asia and Europe, bypassing Russia. Its time- and cost-savings potential are substantial: ten days versus 20 for the Northern Corridor, and 45 to 60 days by sea. There are plans to link up with the International North–South Freight Corridor (INSTC, see below) through the Caspian Sea ports, thus extending the corridor to Iran, the Arab countries along the Gulf, East Africa and India. According to the TITR Association, container traffic should double, and cargo volumes increase greatly. The corridor needs massive investment in infrastructure and trade facilitation and requires time to reach maturity. Istanbul–Tehran–Islamabad (ITI) is a multimodal corridor of the Economic Cooperation Organization (ECO). Trains started operating at the end of 2021. The journey takes 13 days—much faster and less expensive than the 35 days taken on the sea route. Türkiye’s ambition is to become both a bridge and a logistics base between Asia and Europe. Through this corridor it can reach South Asia, with the highest population density globally. For Pakistan, this is an opportunity to increase its exports and support its connectivity to international markets, especially Europe. Iran could become a transit route for trade between East and West, a move that would help the country maneuver around US sanctions, as trade between ECO countries is conducted in local currencies. Covid-19 and the rail connections developing in Türkiye and Iran seem to have reignited China’s interest in the ITI. The International North–South Transport Corridor (INSTC) is a multimodal corridor between India, Iran, Afghanistan, Azerbaijan, Russia and Europe. It is seen as an alternative to the Suez Canal, with reduced travel times and costs. Its objective is to increase trade connectivity between major cities, such as Mumbai, Moscow, Baku, Astrakhan, Tehran, Bandar Abbas and Bandar Anzali. There are numerous initiatives within this corridor, such as the Gulf to Black Sea Project, which could benefit the INSTC. Iran is negotiating with Georgia, Armenia, Azerbaijan, Bulgaria and Greece to expand the connections between the Gulf and the Black Sea, using rail and sea links. The project is hampered by the war in Ukraine and the conflict between Armenia and Azerbaijan. 29 The Middle-Central Corridors The Middle–Central Corridors, which could be called the Fertile Crescent Corridors as they encompass the Levant and Mesopotamia, are not yet a reality. Their roles and benefits, though, are tantalizing: By linking up the Southern-Central and Northern-Central corridors, they would unlock trade and investment. They would also connect to China via Iran and Pakistan. The Southern-and Northern- Central Corridors all incorporate the Fertile Crescent in some ways. But infrastructure and trade facilitation are poor. Yet progress is now being made through dedicated investments. The Development Road Project (or Dry Canal) is planned as a multimodal corridor stretching between Al- Faw Grand Port in Iraq and Türkiye, bypassing Suez. Envisaged after World War Two, port construction is now progressing. Plans are at the final stage of reviewing the corridor’s feasibility; work would begin in 2024, with completion by 2030. At $19 billion, it comprises a new, two-way railroad and an expressway extending 1,200 kms. Iraq has garnered support for it across the geopolitical divide, from Iran to Saudi Arabia and China to the US. All involved view it as the potential missing link in the region and an opportunity to stabilize Iraq. However, the corridor passes through Kurdistan, and the Islamic State is still a threat. The Iran–Iraq–Syria corridor is Iran’s plan for a railway link from Imam Khomeini port to Latakia. Discussions between the three countries appear to make progress. Iraq and Iran recently agreed to construct a 32 km-long rail link between Shalamcheh and Basra. However, Iraq appears reluctant to invest in a project it sees as competing against the Dry Canal. The New Levant Initiative is a project to link Egypt, Jordan and Iraq. Jordan, already key to the Arab– Mediterranean and India–Arab–Mediterranean corridors as a historic buffer-state, seeks to revive its economic relationship with Iraq. The initiative features an oil pipeline plan. But, again, Iraq is concerned the project may compete with the Dry Canal. Neither Egypt nor Jordan have the financial resources needed to fund it and are seeking other regional partners. 30 Lebanon’s Trade and Port Performance 1. From Globally-Integrated to Survival Trade 2. Regionalizing Trade Relations 3. Trade with the Hinterland and Syria’s Reconstruction 4. Commodities in the Ports of Lebanon 31 From Globally-Integrated to Survival Trade Lebanon’s trade has displayed the attributes typical of a small, resource-poor, non- industrial, high-skill, open economy. It is dominated by services and merchandise trade is 60 GDP Services trade import-driven to serve high levels of domestic consumption. The model was fragile and 50 Merchandise trade dependent on the careful macroeconomic management of debt and external accounts. The US$ Billion, current country’s crisis deeply disrupted trade patterns. 40 30 Before the crises, and after the civil war, Lebanon had played a niche regional role, underwritten by 20 the country’s comparative advantage in social and human capital at home and abroad, and its unique geopolitical standing. Finance and insurance, construction and property, commerce and 10 hospitality dominated the economy. Merchandise trade displayed a large, structural deficit, with the share of imports never below 75% and rising continuously in the 2010s to average 90%. 0 2015 2016 2017 2018 2019 2020 Source: World Bank, 2023 2000 2005 2010 2015 2020 With the crises, the service sector Services trade Exports 5 collapsed, as did its exports. Fuel imports Merchandise imports Merchandise trade shifted to Cumulative % share in GDP 0 Merchandise exports basics like fuel and grain, highlighting a sudden shift to a -5 “survival economy”. Imports -10 The destruction of the grain terminal at the PoB has worsened -15 Break bulk food security crises in the Container Liquid bulk country. Its reconstruction is Dry bulk Ro-Ro -20 Million tons :UN Comtrade therefore most urgent. 32 Regionalizing Trade Relations Shifting regional dynamics and the Lebanese crisis have affected the country’s trade patterns. The structure of its trade has changed: the regionalization and diversification of its partners are noticeable, in part accelerated by crisis, as the import basket has changed. In 2000, Europe accounted for 56% of Lebanon’s trade value, Asia 12%, North America 10% and the East Mediterranean and Middle East (EMME) 22%. By 2010, Europe’s share had fallen 100% 2.5 to 44%; Asia’s had risen to 16% and EMME’s to 28%. In 2018, this share of value was 38%, 17% 90% and 34%, respectively. The crisis accelerated this change, with the share of trade value at 26%, 80% 2 US$ billion, current Europe 20% and 45% in 2022. Composition of trade has been a decisive factor, with a decline in the 70% 1.5 domestic consumption of non-staple merchandise. North America’s share has remained 60% EMME relatively constant. 50% 1 40% Trade between Lebanon and EMME is more balanced, even more so than with America and 30% 0.5 Asia, to which Lebanon does not export goods. Without fuel, trade with EMME would Asia 20% 0 approach balance. Fuel imports have shifted, Türkiye and Greece filling the gap left by Russia— 10% 2000 2010 2022 a result of sanctions, as well as of fuel imports from Europe. 0% EMME 2000 2005 2010 2015 2018 2020 2022 Lebanon exports to EMME Lebanon non-fuel EMME imports 3 Lebanon imports of goods The UAE has fast risen as 10 2.5 Lebanon exports of goods Lebanon’s third regional trading 9 8 US$ billion, current 2 partner, importing more from 7 6 US$ billion, current 1.5 Lebanon than it exports to it. 5 4 1 Egypt has taken over the KSA as 3 0.5 its fourth regional partner. Trade 2 1 with Kuwait rapidly expanded in 0 2000 2005 2010 2015 2018 2020 2022 2000 2005 2010 2015 2018 2020 2022 2000 2005 2010 2015 2018 2020 2022 2000 2005 2010 2015 2018 2020 2022 0 the 2000s to 2010s and has since 2000 2015 2022 2010 2020 2005 2018 2000 2015 2022 2010 2020 2005 2018 2000 2015 2022 2010 2020 2005 2018 2000 2015 2022 disappeared. Qatar is an EMME Europe Asia America Qatar Iraq Jordan Kuwait Syria KSA Egypt UAE Greece Turkiye emerging, though very small, 1 2 3 4 export destination. Source: UN Comtrade, 2023 Source: UN Comtrade, 2023 33 Trade with the Hinterland, and Syria’s Reconstruction Trade between Lebanon and Iraq, Jordan and Syria (IJS) has been the subject 35 100% of numerous discussions between the Bank and project stakeholders, 90% notably the Port of Beirut. IJS have accounted for small volumes of trade 30 80% over the past 25 years. Syria’s reconstruction will boost a trade relationship 25 70% that collapsed in the 2010s, but which has revived since 2020. If it were to US$ billion, current 20 60% revert to its 2010 peak, trade with Syria would still account for a small share 50% of Lebanon’s trade. 15 40% 10 30% 20% 5 In value, trade with the EMME expanded 680% between 2000 and 2022, or 10% 890% when IJS are excluded. Trade between Lebanon and IJS only doubled in 0 0% current $US. In real $US, it has stagnated, as reflected in trade volumes. Syria, 2000 2005 2010 2015 2018 2020 2022 2000 2005 2010 2015 2018 2020 2022 seen by many stakeholders as a key prospect for the port sector, accounted Lebanon world trade Trade with non-IJS EMME Trade with IJS for only 4.5% of trade value, though 16.5% of tonnage. While Lebanon’s trade Trade with Syria expanded fast in the 2000s, that with Syria grew much less. Volume peaked in Trade with Iraq 2010 at two million tons, valued at $560 million. 50% 25 18% 45% Syria and Iraq’s shares in Lebanon’s goods trade’s Syria and Iraq’s percentage shares in Lebanon’s Both then collapsed, bottoming out at 300,000 tons and $300 million in 2020. 16% 40% While no data for volume appear to be available for 2021 to 2022, its value 20 Share of trade’s value, with trend 14% 35% rose to $480 million in 2022. The pattern applies to Iraq, too, though at much goods trade’s tonnage 12% 30% smaller levels. Reconstruction in Syria will probably not change this trend. FORECAST 15 relative to total 10% 25% These low trade volumes have profound significance on the growth of the 10 8% 20% competing corridors. This is particularly so with the Middle–Central corridors, 6% 15% which for the foreseeable future will not be anchored in trade within and 5 4% 10% between Lebanon, Iraq, Jordan and Syria. At best, these corridors might 2% 5% enable trade between them. 0 0% 0% 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2000 2010 2020 2000 2010 2020 Million tons Source: UN Comtrade Source: UN Comtrade, 2023 34 Commodities in the Ports of Lebanon Container market: Beirut was the only container port in Lebanon until 2016, when the Lebanese port of Tripoli handled its first containers. While the Port of Beirut kept its position as the main Lebanese port for container trade, the throughput has drastically decreased. Total container throughput increased to reach 1.13 m twenty-foot equivalent units (TEUs) by 2015 and peaked in 2017 with 1.31m TEUs, of which 68% was local cargo and 32% was trans-shipment. Volumes decreased drastically in 2020 due to COVID and the blast in the port. In 2021, the total throughput was only 0.59 m TEUs. General cargo market: The Port of Beirut handled 1.8 million tonnes in 2019. The most important cargoes were cereals (43%) and steel (32%). While the number of vehicles doubled from 2005 to 2018, volumes of general cargo and grains have mostly remained stable. Tripoli handles some 4,000 cars and 21,000 trailers a year. Despite some fluctuations, those volumes remained broadly stable. Transit: In 1974, Beirut handled about 923,000 tonnes of transit cargo, with a large share going to Damascus and Amman. When the Lebanese civil war started in 1975, Lebanese trade, along with transit volumes, dropped sharply. After the civil war, transit volumes increased again to 350,000 tonnes in 1993. Historical numbers show that in the last decade, total transit volumes have accounted for no more than 0.5% of the country’s total containerized volumes. In the short term, the ending of the Syrian conflict may result in a small boost, but overall, the transit market is not expected to play a major role in Lebanese trade. 35 The fast-changing global world of ports 1. Ports: Vital Pillars of the Global Economy 2. Ports and the Global Economic System 3. National Function and Contribution of Ports 4. The Four Generations of Ports 5. Fourth Generation Port Activities 6. EMME Ports’ Latest Developments 7. Lebanon’s Transport, Logistics and Ports’ Competitiveness 36 Ports: Vital Pillars of the Global Economy Ports are pivotal to infrastructure in international trade and economic growth. Their role—long vital to small economies—has become critical to the functioning of the world economy, particularly since the globalization of trade in the 1990s. The rise of global value chains (GVCs) has been enabled by technology, and by the regulatory, economic and social changes that play out in the functions and configurations of ports. Fourth-generation ports are highly advanced nodes in the functioning of GVCs. GVCs are “where the different stages of the production process are located across different countries. Globalisation motivates companies to restructure their operations internationally through outsourcing and offshoring of activities. Firms try to optimise their production processes by locating the various stages across Global economic different sites. The past decades have witnessed a strong trend towards the international dispersion of value system chain activities such as design, production, marketing, distribution, etc.” (1) Global value chains A port is “a transit area, a gateway through which goods and people move from and to the sea. It is a place of contact between the land and maritime space, a node where ocean and inland transport systems interact, and a place of convergence for different transportation modes. Since maritime and inland transportation Global supply modes have different capacities, the port assumes the role of a point of load break where cargo is chains consolidated or deconsolidated.” (2) The position and role of ports in the global economic Fourth generation ports are driven by containerization, intermodal transport and information technology. Global system They are high-turnover, fast-moving, low-cost turntables integrated in GVC and global supply chains (3). logistics Unlike previous generations, they are not simply load breakpoints, but function as value-adding transit point systems and centres in trade, logistics and production: trading and trade finance, transports and logistics services, e- commerce, light- and heavy-manufacturing, etc. They are deeply weaved into their direct, generally urban, Global transport hinterland, rather than operating as transport and customs enclaves physically cut-off from it. systems Ports (1) https://www.oecd.org/industry/global-value-chains (2) Notteboom, T., Athanasios, P. and Rodrigue, JP. 2022. Port Economics, Management and Policy, New York: Routledge (3) https://www.cips.org/intelligence-hub/supply-chain-management/global-supply chains 37 Ports and the Reshaping of the Global Economy About 80% of the volume (20 billion tons) and 70% of the value ($25 trillion) of traded goods transit through ports, with the axis shifting from Atlantic–Med to Pacific westward and eastward. Asia is the assembly plant of GVCs, handling 65% of discharged and 42% of loaded goods in 2021. Contrary to pandemic- era belief, trade in goods has recovered, but rapid changes are taking place, especially in Europe’s new preference for near-shoring, with implications for an EMME that sits between Asia and Europe and its transport systems. 25 Seaborne goods handled by ports, in billion tons Global trade value was greater in 2022 by 30% than in 2019, 50% than in 2016, and 25% than in its peak of 2014. Volume recovered to its 2019 pre-pandemic high in 2021. It is forecast to have exceeded it in 2022, with ports 20 reporting record handling figures. This growth is testimony to the relative resilience of the global economy, as well Asia as to the embeddedness of GVCs that cannot easily be modified, time-wise, resource-wise and cost-wise. 15 Americas Europe Most significant is the fast disconnection between Europe’s goods trade value and the region’s seaborne trade 10 Oceania volumes. The international ratio between the two has been around $900 million per million tons for the past 15 5 Africa years. Asia’s peaked at that level in 2011 and decreased continuously to about $600 in 2018, slightly increasing since. The same has happened with the Americas. 0 2006 2011 2016 2021 Source: UNCTAD, 2023 However, the opposite is occurring with Europe’s trade. The ratio Ratio of international goods trade value to 25000 International goods trade, in US$ billion rose from $1.5 billion per million tons in 2006 to over $2.5 volume of seaborne goods handled by port million in 2021. Two concurrent factors explain this: Europe’s 20000 trade in goods is rising, but the volumes of its seaborne trade is Asia decreasing. Europe is leading the shift from off-shoring to near- 15000 Americas shoring and friend-shoring to secure supply chains, as geo- Europe 10000 political, geo-economic and environmental disruption push for Oceania greater GVC resilience. 5000 Africa 0 2006 2011 2016 2021 Source: UNCTAD, 2023 38 National Function and Contribution of Ports Ports are critical national infrastructure. They provide sea-connected countries with a crucial advantage over landlocked ones through greater autonomy. Efficient ports cut the cost of trade and boost growth. They support and anchor economic activities not available to landlocked countries or to those with poor performing ports. Third and fourth generation ports, though demanding capital investment, have large socio-economic multipliers and are catalysts for economy-wide digitalization and boosting the knowledge economy. They have potential adverse effects on the environment, which the emerging fifth port generation is seeking to reduce. The most significant economic contribution ports make are as a gross value-added contribution to GDP, employment, trade volumes and values. The main financial benefits include fiscal revenue to national, regional and municipal governments, and investment by the public and private sectors in port activities. Fiscal revenue is central to justifying the public expenses that support port activities, particularly infrastructure. Here, public-private partnerships are an essential lever to decrease public spending, while maximising direct and indirect revenue. Ports are essential for the economic development and performance of their market. These strategic aspects are more difficult to quantify. “Most available reports and figures on the economic impact of seaports portray the national or regional economic effects. Ports impact the wider economic space and international trade, with logistics receiving less attention. While leakages of port-related benefits to regions in the more distant hinterland can be substantial, policymakers focus on maximizing the port’s input payback for the local or regional communities under their jurisdiction. The main port development objective is to provide infrastructures for the local, regional, or national interest at the lowest combined cost to the port and its users.” Source: Notteboom, T., Athanasios, P. and Rodrigue, JP. 2022. Port Economics, Management and Policy, New York: Routledge Notteboom, T., Athanasios, P. and Rodrigue, JP. 2022. Port Economics, Management and Policy, New York: Routledge 39 The Four Generations of Ports First generation Second generation Third generation Fourth generation Port attributes Before 1960s 1960s to 1980s 1980s to 2000s Since 2000s External environment Petrochemistry; Trucks and pipelines; Structural Multinational corporations; Containerization; Global economy; Information Systems; Development factors Steamships; Rise of Nations; Rise of trade prosperity; Industrialization Environmentalism; Globalization Sustainability; Digitalization Trans-shipment; Storage; Trade; Industry Trans-shipment; Storage; Trade; Industry; Port functions Trans-shipment; Storage; Trade Trans-shipment; Storage; Trade + Industry +Distribution Distribution + Logistics Cargo/information flow; Cargo information/ Cargo flow; Cargo transformation; Combined Cargo/information flow; Cargo distribution; Nature of production Cargo flow; Simple services; Low value added services; Improved value-added Multiple service package; High value-added distribution; Multiple service package; High value- added; Supply chain management Types of cargo General cargo and bulk General cargo and bulk + Liquid bulk Bulk + Unitized/containerized cargo General cargo; Containerized cargo + Information Spatial organization Port spatial scale Port-city Port area Port region Port network Port spatial expansion Quay and waterfront area Enlarged port area Terminals and inland corridors Network-related functional expansion Access to raw materials; Access to sales market; Availability of transshipment facilities; Access to Availability of trans-shipment facilities; Access to Location factors Labor and market access Availability of capital sales market; Space; Flexibility; labor costs sales market; Space; Flexibility; Labor costs Strategy Close port/users’ relationships; Loose Port community; Port/transport chain integration; Port network community; Close relation between Independent activities within port; Informal Organization relationship between port and port users port/activities relationships; Casual port/city Close relation between port and municipality; port network and public authorities on different relationships Enlarged port organization levels Nautical services; land and infrastructure Nautical services + land and infrastructure Nautical services; land and infrastructure Role of port authority Nautical services development development + port marketing development; port marketing + Network management Integrated transport, logistics and information Port strategy Port as changing point of transport Transport, industrial and commercial center Integrated transport and logistics center complex and network Source: Notteboom, T., Athanasios, P. and Rodrigue, JP. 2022. Port Economics, Management and Policy, New York: Routledge 40 Fourth Generation Port Activities Transport Transport attracts many specialized services apart from the movement of passengers and cargo, such as ship agency, freight forwarding, customs clearance, cargo insurance, security services, crew transfers, road haulage, and document processing. Value-added logistics Port-related industries Recreational activities Storage, re-packing, cross-docking, customization, assembly, Used or generating port-handled cargo as inputs and outputs, Through ferries bringing tourists, cruise ships, and marinas, servicing and selling-on are common in and around ports, partly they are located nearby to reduce their impact and facilitate ports function as tourist centers. They can host hotels, because the cargo must be temporarily stored because of scale the movement of goods. They are treated as part of the port restaurants, shops, museums and other entertainment difference between sea and land transport, and partly because complex, even when not within the port itself. Ship-building, facilities. In addition, port land that is no longer required for ports are natural de-consolidation points, splitting up bulk chemicals, food processing, power generation, oil refining, cargo handling and storage may be converted into public space loads to distribution to large numbers of small customers. construction, steel, fish processing and automotive or redeveloped for mixed use. In many port cities, public access manufacturing are present in large ports. to the waterfront is much sought after but in short supply. Sustainable and green ports Blue ports Smart ports City-integrated ports Landlord ports Ports are no longer seen as isolated In line with UN Sustainable Development Leading ports are implementing projects Landlord ports are common. In this model, industrial centers, but as integral parts of Goals, many port operators understand and measures to become so-called “smart financial stability and maximization of Frequently, ports become hubs of the cities in which they are located; having the need for sustainable operations, ports”. The concept is mostly related to added value for the port community, is port-related industries. The Blue a positive or negative impact on the local the use of the latest technologies key to port management bodies. They increased efficiency and minimizing the Economy established sectors, population and ecosystem. In-depth (including Big Data, Internet of Things, 5G, consumption of resources, as well as the including marine living resources, consultation process of all relevant often act as initiator, facilitator or co- Cloud Computing) to improve and impact on the environment. Initiatives marine non-living resources, marine stakeholders has led to many successful investor, and partner in innovation optimize port operations and include energy reduction, electrification, renewable energy, port activities, port city integrations around the world. projects with customers, port operators or management, to gain efficiencies, boost alternative fuels, emissions control, shipbuilding and repair, maritime Port Reconstruction and Development other companies, as a way of stimulating operational capacity and minimize the biodiversity protection and circular transport and coastal tourism. Plans must integrate all the relevant the uptake of innovative solutions in the investment required in hard economy. stakeholders involved in the port port. infrastructure. ecosystem. 41 EMME Ports Latest Developments EMME ports are transforming through investments and international partnerships that drive fast, world-class modernization. Major port operators, shipping lines, and logistics companies are entering the region or expanding in heated competition. Underlying this are geo- economic and geo-political drivers, sometimes for interest in the same ports. EMME ports rank prominently in the global Container Port Performance Index. PIRAEUS COSCO increased stake to 67% as India IZMIR Engaged in negotiations with Gulf Arab CHABAHAR India and Iran to sign a deal for considering using port to expand its EU exports. countries to sell operating rights of port. development. MERSIN ERBD loan of $50 million to finance 2nd phase BANDAR ABBAS Chinese private sector evaluating of East Med. Hub Project, to increase container logistics and investment opportunities. capacity. LIMASSOL DP World invested €8.7 million since 2017; AL FAW GRAND PORT First phase of $4.7bn port plans to invest in equipment and automation. ISKENDERUN Performance up after re-opening, ongoing. following earthquake in February 2023. SHUAIBA Ongoing expansion, with $40 billion two berths’ lease signed with Kuwait Oil Company (KOC). TARTOUS Government keen to establishing new MARSAXLOKK Invests €89 million to raise capacity. Russian military bases. HAMAD Highest volume of break-bulk ever handled in March 2023, boosting Qatar's maritime sector. HAIFA Acquired by India's Adani Group for $1.2 billion. KING ABDUKAZIZ PORT Newly launched India-Saudi- Iraq (ISI) shipping service by Singapore’s Bengal Tiger ASHDOD Agreement signed with Thessaloniki Port to Line (BTL). PORT SAID AD Ports to develop projects in ports of expand the national ports technological incubator. East Port Said, West Port Said and Al Areesh. JEBEL ALI DP World opens direct freight line to Iraq. SAFAGA AD Ports Group signed $200 million 30-year KHALIFA Expansion of China’s footprint. agreement to develop and operate the port. AQABA AD Ports inaugurates Aqaba Cruise Terminal, FUJAIRAH Chinese ownership stake in fuel terminal. ALEXANDRIA Hutchison Ports to invest in new Egyptian market gateway container terminal. with direct shipping line between Aqaba and the U.S. 42 Lebanese Ports: Threats, Opportunities, Uncertainties, Orientations Threats Opportunities Uncertainty Orientation Lebanon's loss of competitiveness in its traditional sectors of activity means Fast delivery of the new port sector law and A continued, lasting collapse of the Lebanese economy would reduce local that it has seen its previous high labor cost structure rebased, presenting implementation of the institutional framework will demand for imported goods in the long-term and shrink the economic and opportunities around export-oriented activities in the service, transport and facilitate the emergence of an agile, resilient integrated The degree to which the crisis can be sufficiently controlled. financial size of the port sector. The war in Ukraine represents a sudden shock logistics, agriculture and light manufacturing sectors. Lebanon’s comparatively port system that prioritizes the rapid improvement of 1 to the Lebanese economy that is an aggravating crisis factor, given its high human capital and its vast diaspora could act as catalysts. The port sector the performance of individual ports (particularly those The duration of the war in Ukraine is a critical variable. dependency on grain imports from Ukraine and Russia, and the dramatic rise could benefit from this, as well as catalyze this opportunity through such things that are economy-critical) with sufficient redundancy to in food and energy costs. as mechanism-improved trade facilitation, freeports and SEZs, and multisector accommodate localized crises and the specialization hubs near or within the ports. needed to take advantage of opportunities. The Abraham Accords present a profound shift in the geopolitics and thus the geoeconomics of the MENA region. Key relationships were being realigned in Lebanon has been, since the onset of its civil war in the 1970s, the theatre of ways that would transform economic relations and the structure of finance, Regional and intraregional politics feed global uncertainty, with The port sector has the opportunity to be a lead in the regional geopolitical and geoeconomic contest, in part because of its strategic trade, production and consumption. They enabled detente between the Gulf many of these shifts still at an early stage and affected by events country reform, stabilization, reconstruction and geographic position, and because of its multi-confessionalism. The economic States and Qatar, tentative dialogue between Saudi Arabia and Iran, and a like the Yemeni civil war, the war in Ukraine, and reconstruction in restructuring process. The draft port sector law, should crisis, the Abraham Accords, and the war in Ukraine could shift this costly rapprochement between the Emirates and Turkey. With the putative Syria. Long- awaited reforms of Lebanon’s political and economic it be adopted by Parliament soon, could generate 2 normalization of diplomatic and economic relations with Israel, the GCC stood phenomenon and re-establish Lebanon’s pre-civil war position as a regional structure are yet to be implemented, yet these are prerequisite further reform. It should lead to the creation of a highly economic hub, using its multi-confessional, highly educated population, its to gain access to the East Mediterranean at a time when Israeli ports were for many potential investors. Lebanon faces an exodus of its most competitive port sector, connected to all sectors of diaspora and its historic relations with key regional and global powers. Port already taking advantage of the economic crisis in Lebanon and the damage to educated citizens, and with it, the skills critical to seizing economic activity relating to international trade in sector reform could act as a catalyst through partnerships targeted for the the Port of Beirut. New trade transport corridors are being created. Numerous opportunity. services and goods, including the financial sector. sector's redevelopment. infrastructure projects are planned in order to improve connectivity across MENA. Lebanon risks further marginalization. The region has seen a pronounced increase in the development of transport infrastructure projects at national and transnational levels. Significant Lebanon's geographic position in the middle of the Eastern Mediterranean investment is being made into the ports of the Middle East as countries rely on In a highly dynamic environment, a critical factor will be, as coastline and its vast hinterland remain a crucial natural attribute that carry The Vision and Reconstruction and Development Plan private and public sector capital to feed intense competition for pre-eminence. identified previously, the speed and scope of reforms, and the will inherent competitiveness. The current strategy for domestic logistics corridors must rapidly reduce uncertainties around port sector These projects are often parts of transport and economic and urban and ability of Lebanon to accommodate geopolitical and 3 development corridors. While traditional global powers continue to play an provides an opportunity for rejuvenating the port sector. The Covid 19 crisis geoeconomic shifts rather than remain constrained by domestic stakeholder strategies and investments, in order to highlighted the need for resilient supply chains. Even in the face of stiff accelerate these investments, where warranted, and important role, China and regional countries contribute to this competition economic crisis and legacy international relationships. At the port competition, near-shoring should be considered part of these. CMA-CGM now balance them where needed. and the resulting contest between trade routes and logistics hubs. Ongoing sector level, reform is a priority. manages the two main container terminals of Lebanon (POT & POB). port projects in Egypt, Israel, and Jordan threaten the weakened Lebanese ports. A prospective discovery of oil and gas in the Lebanese offshore would benefit Some of the ports should be adapted to the transport, sectors such as transportation and electricity, reducing the impact of the storage and trans-shipment of natural gas. To use Natural gas exploration is hampered by regional political Lebanon's high structural dependence on energy supply is compounded by the economic downfall the country is facing now. Lebanon may seize the potential gas reserves for the domestic market, Lebanon instability. However, key stakeholders seem to be ready to find 4 current high price of oil, worsened by the collapse of Lebanon’s currency and opportunity by seeking to connect its ports to the transport of oil and natural compromises, given many have common or mutual interests in first needs to build gas-run power plants and supporting the rise of hyper-inflation. gas from the Middle East to Europe. In doing so, it could restructure and infrastructure. These could be co-located near existing the Eastern Mediterranean gas projects. modernize its aging, polluting electricity sector by co-locating gas-fired power ports, where environmentally and economically stations. justified. 43 Lebanon Port Sector Vision 1. Objectives of the National Port’s Vision 2. Strategic Pillars 3. Clusters and Port Activities 4. An Integrated National Port System 5. Beirut: A Gateway Port Integrated in the City 6. Tripoli: A Gateway Industrial Development Port 7. Saida: An Agri-food, Marine Research and Tourism Hub 8. Zahrani: An Energy Security and Transition Port 44 Objectives of the National Port’s Vision The National Port Vision defines the port sector strategy. It is based on technical analysis and wide consultations to serve the national interest. The Vision serves three overarching national policy goals: 1. To serve Lebanon’s reconstruction and development through a clear and easily communicated modernization of the port sector in a manner that rapidly, visibly and decisively expands international and national trade, foreign and domestic investment, private sector growth, value addition, government revenues and employment and livelihood to the Lebanese people. 2. To catalyze activities that have shown resilience under duress and turn into sources of competitiveness some of the negatives of crisis through creating an environment that supports the recovery of Lebanon into a world-class diversified economy rooted in the high skills, social capital, globalized wealth and creativity of its people. 3. To take opportunity of fast regional geopolitical and geoeconomic changes to return Lebanon to its historic role as a regional logistics and trade hub. The “Middle Corridors” potentially offer the country a timely and urgent opportunity to offer solutions to complex locational, infrastructure, economic and political dilemmas. World Bank, 2020 45 Strategic Pillars 1 2 3 4 5 The integrated Vision for Lebanon’s ports rests on 15 strategic pillars Operationally- Socio-economy defining the port sector mission as a tool of economic performance Trade-facilitating Self-financing Well-governed and social development. excellent catalyzing These incorporate the situation nationally, Lebanon’s economic Operates as a landlord Eases importing, Generates revenue Functions efficiently, port which facilitates Contributes to economic potential, available resources, regional and global context, port exporting and associated sufficient to fund basic cost-effectively and is private sector growth and socio- sector performance, best practice and stakeholders’ needs. infrastructure and operations competitive investment and economic development services operations The five first strategic pillars represent the five primary missions of the port sector as a whole, as well as those of each of the ports 6 7 8 9 10 included in the National Port Sector Vision. These primary missions, which are mutually reinforcing, are: Industry-logistics City-integrated Sustainable Smart Green integrating Trade-facilitation Self-financing Opens a waterfront that Reduces emissions, Operational excellence Good governance Creates clusters of Adopts social and Implements fosters urban decarbonizes, uses industries directly and environmental digitalization, Port Socio-economic development development and alternative energy, and indirectly linked to port standards, methods and Community Systems and enhances port eliminates waste and activities practices single window competitiveness pollutants 11 12 13 14 15 The ten secondary missions advance a primary mission and may Hinterland- Climate change- Food security- Health- and quality support other primary missions. Tourism-promoting connected resilient enhancing of life-supporting For example, smart ports support operational excellence through digitalization, the adoption of Port Community Systems and the Connected to its Attracts visitors and Implements sea-level Supports cost-reducing Enhances quality of life single window. In addition, they support trade facilitation, improve hinterland through good tourists via a cruise and extreme events imports of food and around the port through the financial autonomy of the landlord port and contribute to infrastructure and trade terminal, a city- mitigation and contributes to supply impact management and economic growth and socio-economic development. Adoption of the facilitation processes integrated waterfront management measures chain resilience urban integration smart port pillar is both a mission and an enabler of the fulfilment of the Vision. 46 Clusters and Port Activities Beyond the clusters and activities that the Lebanese ports system hosts – most having significantly suffered from the economic crisis and the August blast – the ports included in the Vision have the potential to attract additional core port activities. In addition, they have the potential to consolidate and grow existing ones. Finally, they should be able to attract new activities. All these would fulfil the three strategic goals of the Vision and support some of its strategic pillars. The identification of the existing activities to consolidate and attract new activities was based on market, economic, financial, infrastructure, skills and private sector and societal support. The expected timelines and environmental impacts of activities were also incorporated. The result is a heat-map of core port and value-adding activities that are either vital to the economy or have high economic multiplier effects, with the following classification: ● Activities that should be part of the Vision immediately or in the short-term. ● Activities that should be part of the Vision in the medium-term, depending on progress in its implementation and in the recovery of the national economy and ports performance. ● Activities that should not be part of the Vision or may only be considered in the long- term. 47 Clusters and Port Activities Each port considered in the Vision has unique Cargo Productivity Hinterland Traffic Environment attributes, advantages and constraints: site, Container terminal situation, size, purpose, activities, configuration, Ro-ro terminal infrastructure, operating costs, efficiency, skills pool, expansion space, natural environment, Grain terminal cultural and architectural context, distance to Break-bulk handling – Steel markets, etc. Livestock handling The allocation of activities in the four clusters Dry port was done for Lebanon’s main ports: Value added logistics Free zone Cold storage Tyre Container services Saida Offshore supply base Beirut Vegetable oils & biofuels Jounieh Light and medium manufacturing Tripoli Boat-building and repair Special economic zone Floating regasification & storage unit Each was evaluated in a five-criteria rating process: Energy generation Cruise terminal 1. Value of cargo Marina 2. Handling productivity Port-city integration/waterfront 3. Impact on land traffic Blue economy innovation hub 4. Impact on the environment Marine research 5. Relevance of hinterland 48 An Integrated National Port System The outcome of this process proposes: ► A national activity/port matrix structured by three core activity clusters. ► A national port specialization map. The result is a national system of mutually reinforcing, complementary, integrated ports, serving the three strategic goals and the 15 strategic pillars of the National Port Vision. The Vision is a national port sector that becomes an efficient system that uses resources optimally and is focused on trade and business facilitation to drive sustainable economic growth. 49 Beirut: A Gateway Port Integrated in the City A regional gateway port that acts as a catalyst for national economic recovery by attracting world-class terminal operators, incentivized—through a best-in-class landlord port model--to invest in port infrastructure, as well as equipment and innovative processes. A port transformed into a regional, trailblazing adopter of cutting-edge, customer-driven practices and technologies, aiming to expand national and regional trade. A value-added logistics’ services hub and model of the blue economy and port-city integration. An accelerator of economic transformation, that provides a cost-effective environment for transport, logistics, trade, commerce, light manufacturing and other services. An anchor for investment in trade- and services-related innovation and the knowledge economy, offering the highly-educated and entrepreneurial Lebanese people a safe, transparent, supportive platform for business creation and expansion. A showcase for turnaround and reconstruction that improves confidence and supports relations between Lebanon and its economic partners. A focal node as a modern, efficient, sustainable Eastern Mediterranean entry- and exit-point for the Central Corridors. 50 Tripoli: A Gateway Industrial Development Port A gateway industrial port, focused on the northern Lebanon and Syria region, and capitalizing on its expanded, state-of-the-art container terminal and its rising performance to attract merchandise trade and port-related industries. An efficient landlord port with scope for the diversification of its terminals through the use of private sector operators bringing customers, expertise, systems and equipment. A lower-cost, value-added logistics and storage center, thanks to the availability of land, with efficient cargo flows made possible by good connectivity with the city center and hinterland. A center for industrial activities, associated with the supply of affordable energy and skilled labor, in an investment- and operations-facilitating complex made of a complementary and well-integrated free zone and a special economic zone. A port-related industry cluster targeting import-substituting activities to relieve the rising cost of imported goods and its impact on livelihood, with focus on agri-food industries, fisheries and boat-building and repair. A base for the nascent offshore oil and gas industry and a possible center for generating affordable energy. 51 Saida: An Agri-Food, Marine Research and Tourism Hub An expanded regional port, primarily dedicated to the agri-food sector, fishing, and handling of steel products, as well as tourism and marine research. An enabler of growth in the high-potential agricultural and food production exports sector, equipped with state-of-the-art cold storage and packaging facilities and endowed with a berthing and handling infrastructure ideally-suited for small general cargo and reefer vessels. An accelerator of tourism and hospitality in a historic city through a new marina located in the new port. A small, newly-established marine research center that takes advantage of the city’s unique, prestigious marine and archeological endowments, supporting the positioning of the Sidon campus of the American University of Science and Technology and the American University of Beirut’s marine science and culture program. 52 Zahrani: An Energy Security and Transition Port A key industrial port, principally focused on national energy security, dedicated to energy generation, fuel storage and distribution, offshore supply basing, hosting a floating regasification and storage unit, and supporting national energy transition. A leader in the adoption of energy-efficiency, safety and environmental management standards in the handling, storage and production of energy. A catalyst for the location of energy-intensive industrial activities in a dedicated investment and operating context. 53 Port of Beirut Reconstruction and Development Strategy 54 Port of Beirut Reconstruction and Development Strategy 1. Damage Assessment 2. Building Back Better 3. Recommended Reconstruction and Development Plan 4. Digital Infrastructure 5. Port of Beirut Clusters 6. Sectors with High Growth Potential 7. Market Sounding 8. Investment Program and Risks 55 Updated Damage Assessment The proposed reconstruction and development plan Build back better rather than rebuilding as it was takes into account the damage caused by the Rebuilding the PoB as it was would entail repairing Quays 9 and 10 at a cost of at least $30 million (2021). All August 2020 blast. The estimate includes the cost of warehouses and infrastructure would be rebuilt, irrespective of its current and projected traffic, which are now much lower than at the time of the blast. cleaning-up, decontamination and reconstruction, There would be no port-city integration. The silos area would be reclaimed but not made available to the public. based on returning the Port of Beirut to its pre- blast condition. Where the Port of Beirut currently stands Estimated cost, Infrastructure Damage level in US$ million Quay 9 Significant 29 Quay 10 Significant 8 Removal of vessels 2 Debris removal 3.5 Admin. Buildings 3.8 Warehouses Complete/significant 41.5 Free zone Partial 1.4 Logistics free zone Complete/significant 22 Grain silos Complete 14 Equipment Complete 2 Total estimated cost in early 2021 127.2 56 Building Back Better The Integrated National Vision for the Lebanese port sector outlines the need for the country’s ports to use the crisis and fast-changing environment as an opportunity to An efficient port, with seamless cargo and information flows, that gives priority to high value create a modern, competitive, value-adding sector, integrated into Lebanon’s cities commodities that allow high productivity, given and economy. The PoB Development Plan is a unique chance to do this. the high value of the port land. The port would handle containers (both local and for trans-shipment), vehicles, grains and veg oils, provided these are handled by specialized This opportunity comes from four complementary factors: equipment to avoid air contamination. Value-added logistics would take place in and around the port. 1. The gains in efficiency the landlord port model will deliver once the Port Sector Law is adopted and implemented. Long-term concessions would be awarded through international tenders to operators, specializing in 2. The gains in efficiency the recommended plan will bring by better allocating space and creating different types of cargo, that are able and willing to specialized modern terminals, supported by the right infrastructure and systems. Port reform and invest in the terminal’s superstructure and the implementation of the development plan will greatly improve the productivity of port clusters equipment. by attracting specialized terminal operators, while generating additional revenues. 3. The timely chance for Lebanon and the PoB to insert themselves into new trade corridors and Connectivity by road with the hinterland, close and position themselves as a European market nearshoring destination. far, would be improved and optimized, reducing road congestion in the city. 4. The availability of port-owned space outside the security perimeter but inside the free zone presents the Government of Lebanon and its partners with an option to create a new type of Marinas and a cruise terminal would be integrated port-related environment, one that contributes to improving the perception of the Port of Beirut, into a new waterfront, creating a unique leisure- both in Lebanon and internationally. This could also generate new economic activities supporting based environment. sectors that have shown resilience in crisis, with potential to grow, as well as additional revenue streams. It would improve the port’s integration into the life of Beirut—a process that would itself Port Vision Report, November 2022 generate positive feedback. 57 Building Back Better Cont. Because of the considerable damage caused by the August 2020 explosion at the port, and the loss of berthing, handling, and storage space, the Port of Beirut operates today below current capacity—and far below design capacity. Some traffic has already shifted to other ports. The Port of Beirut Reconstruction and Development Plan seeks to reconcile the need to The plan has been subject to technical handle prospective traffic, domestic and international, cost-efficiently, with a strong need to analysis and stakeholder engagement. stimulate job creation and promote value-adding innovation in all sectors of the blue economy. Consultations identified four priorities, listed by stakeholders as follows: Based on traffic forecasts, and while making provisions for unexpected potential overflows, the proposed plan offers space allocation principles that will enable the efficient handling and transit of 1. Port-city integration all categories of goods through the port facilities until 2040. It has been designed to provide 2. A memorial around the silos, Lebanon with the flexibility needed to: accessible to all 3. Sustainability, including the design, 1. Rapidly rebuild critical port infrastructure in an affordable manner construction, choice of materials, 2. Efficiently serve current and future traffic in all key cargo categories water collection and energy saving 3. Respond to circumstantial opportunities without sacrificing essential functions and future 4. Reformed governance, with the requirements enactment of a new port sector law 4. Restore trust, to allow partnerships with existing and future terminal operators, their customers based on the landlord port model and international donors 5. Develop value-added activities through port-city integration to generate additional income to the port while serving as an economic accelerator 6. Offer a space of healing for the victims of the blast, their families and all those affected. 58 Recommended Reconstruction and Development Plan The plan is subject to two critical assumptions: 1. The port sector institutional set-up is enacted and implemented according to the draft law now being reviewed in Parliament. 2. Customs and Border Management Agencies implement effective trade facilitation measures, as spelled out in the WTO Trade Facilitation Agreement. Area Cluster Needed (m2) Container Terminal 440,000 Grain Terminal 60,000 Roll-on Roll-off (RoRo) and General Cargo 125,000 Terminal Container Freight 20,000 Station Free Zone 60,000 59 Digital Infrastructure The Port of Beirut plays a key role as a hub for trade passing in and out of Lebanon. Digital Port Infrastructure It is critical for supporting the successful implementation and application of ► Vessel Traffic Management Information System systems, managed by the Customs Authority, that monitor trade and collect (VTMIS) revenues and duties. The Port Authority should make sure that all the necessary ► Port Management Information System (PMIS) digital infrastructure is in place to enable it to conduct its own operations and ► Maritime Single Window control functions in the PoB. ► Port Community System ► Trade Single Window ► Terminal & Gate Operating Systems Some of the regulatory changes and improvements needed are understood to lie outside the ► Truck & Appointment Systems control and scope of the Port Authority and to require support from other agencies and from leadership at a senior level within the government. Such regulatory changes, and the setting-up ► Fixed & Mobile Networks of the port community council, have been proposed, and the Port Authority is expected to take a ► Cloud Data centers leading, active role in this to deliver the impact needed to improve the port environment. ► Digital Twin ► Cybersecurity A holistic approach, looking at the processes for the movement of cargo, vessels and personnel movement through the port, is needed. These will necessitate the re-engineering of processes, ► Security Information Management Systems affecting multiple government and non-government entities. The digitalization of these ► Supply Chain Security (automating them and making them transparent for all parties involved) is seen as a way of ► Environmental Monitoring System limiting opportunities for fraud, bribery and corruption. ► Safety Management System The following systems and infrastructure are considered critical for deployment within the port environment to support improvement in cargo flows, transparency, control, and revenue and Estimated Cost (US$) cost management. Digital Port Infrastructure 59 million 60 Container Terminal and Container Freight Station The plan proposes to maintain the location of the container terminal. With a length of 340m and a water depth of Estimated Estimated 16.5m, Quay 16 is the only existing quay able to accommodate large ships (New Panamax vessels) and trans- Cost (US$) Revenues in shipment operations at normal working drafts. The terminal is operated by CMA-CGM under a 10-year 2040 (US$) management contract (2022 to 2032). CMA-CGM is committed to investing $33 million in improving the terminal Container and to increasing capacity to at least 1.5 million TEU per annum. 22 million 49 million Terminal CFS 8.5 million 12 million To reach international best practices, operational efficiency needs to be upgraded by: ► Repairing or removing Ship-to-Shore (STS) cranes ► Repairing the eastern part of the yard Basin 4 ► Adding a workshop ► Separating the gate-in from the gate-out with adequate technology ► Including a container services area ► Reforming and digitizing customs procedures Basin 3 ► Introducing a Container Freight Station (CFS) Basin 1 Basin 2 There is no CFS within the PoB. Containers are loaded and unloaded in open yards, without proper controls. The proposal is to build a CFS adjacent to the container terminal, in a way that the sea-facing side lies within the terminal boundary and the land-facing side is open, for trucks. 61 Grain Handling and Storage Terminal Grains are of strategic importance for food security in Lebanon. A new grain handling and storage terminal (for 1.2 million tons in handling and 250,000 tons in emergency reserve) is needed. However, rebuilding the terminal where it was prior to the blast (that is, rebuilding at the epicenter of the blast on Mole 2) would be operationally sub-optimal and less attractive to private investors if compared to the location proposed below, on Mole 1. The area of the blast cannot be used in the immediate term as the investigation into it is still going on and the cost of refilling the crater and reinforcing the quay is very high (above $30 million). Moreover, based on traffic forecasts, the recommendations are that all port commercial operations (grain terminal, RoRo, and general cargo terminal) are conducted in Basins 3 and 4, which would free up space for better port-city integration around Basins 1 and 2 (to be discussed later). This would make it possible to preserve the site of the blast, pending consensus between the Lebanese people and all other stakeholders on the future of this area. Facilities needed for the grain handling and Basin 4 storage terminal include: ► One berth ► 16 silos Basin 3 ► Conveyors Mole 2 ► Flat storage Basin 1 Basin 2 Mole 1 Estimated Estimated Revenues in Cost (US$) 2040 (US$) Grain Handing & 48 million 20 million Storage Terminal 62 RoRo and General Cargo Terminal An area is planned for RoRo cargo (vehicles) and break bulk (steel, vegetables, construction materials and Estimated Estimated similar). Cost (US$) Revenues in 2040 (US$) Capacity calculations for RoRo cargo show that one berth can handle the volume of vehicles projected by 2040 RoRo and 30 million 62 million (160,000 tons, equivalent to 120,000 cars), with a berth occupancy rate of 20%, which means the quay can also General be used for other cargo. Cargo Terminal Basin 4 The amount of space needed for car storage is dependent on vehicle dwell times and the efficiency of customs. In addition to reengineering and digitizing port processes, an increase in storage Basin 3 tariffs would help reduce dwell times and raise productivity, thereby decreasing capacity needs. Basin 1 Basin 2 In break-bulk cargoes, iron and steel represent the largest commodities handled at the port. 63 Cruise Terminal With its geographic location and tourist attractiveness, Beirut has the potential to be a port-of-call in cruise Estimated Cost itineraries, particularly in the East Mediterranean. With a length of 340m and a draft of between 9 and 13.50 m, (US$) Quay 7 can accommodate cruise ships. Cruise Terminal 3 million Cruises are a growth industry, and one that Lebanon is well-placed to tap into, Basin 4 with cruise lines constantly seeking new destinations. The Port of Beirut can offer visits to the city center via Martyrs’ Square. Many other tourist attractions, suitable for excursions, lie within 50km Basin 3 of the coast, allowing the benefit of a newly rebuilt port to spread beyond Beirut to places such as Jeita, Harissa Basin 1 Basin 2 and Byblos. 64 Value-Added and Port-City Integration Area The proposed plan maintains the location of the free zone and identifies development avenues to take advantage of areas that may not be needed for the port’s traditional commercial services, but which lend themselves to profitable activities in sectors of the blue economy while strengthening the links between the port and the city of Beirut. Designed to attract activities that leading ports compete to bring in, this area will unlock extra value without affecting the port’s core activities. It will contribute new revenue and increase the port’s financial value. It will aid in revitalizing a free zone devastated by the blast and the crisis. It will bolster private sector activities that have shown resilience but demand support. It offers Beirut a space for innovation and port-city integration, Lebanon a catalyst for diversification, and the Lebanese people a place of healing. Inspired by what pioneering EMME ports and cities now do—and adapted to the conditions of port, city and country—the area will participate in returning Lebanon to its position as an economic, creative and intellectual hub. TRANSPORT Transport attracts many specialized services apart from the movement of passengers and cargo, such as shipping agencies, freight forwarding, customs clearance, cargo insurance, security services, crew transfers, road haulage, and document processing. Value-added logistics Port-related industries Recreational activities Storage, re-packing, cross- Used or generating port-handled Through ferries bringing tourists, docking, cus-tomization, assem- cargo as inputs and outputs, they cruise ships, and marinas, ports bly, servicing and selling-on are are located nearby to reduce their function as tourist centers. They impact andfacilitate the movement can host hotels, restaurants, common in and around ports, shops, museums and other partly because the cargo must be of goods. They are treated as part entertainment facilities. In temporarily stored because of of the port complex, even when not addition, port land that is no scale difference between sea and within the port itself. Ship-building, longer required for cargo handling land transport, and partly chemicals, food processing, power and storage may be converted because ports are natural de- generation, oil refining, into public space or redeveloped consolidation points, splitting up construction, steel, fish processing for mixed use in Recreational bulk loads to distribution to large and automotive manufacturing are activities. In many port cities, numbers of small customers. present in large ports. public access to the waterfront is much sought after, but in PoB Free zone short supply. 65 Value-Added and Port-City Integration Area Cont. The area envisaged for value-added activities and port-city integration is represented in the recommended development plan as clusters C5, C6 and C7. Two broad options exist, with the flexibility to respond to Option 1 economic conditions, private sector interest, and government priorities. The Bank does not envisage nor encourage investment in real estate and property development in the area. None of the clusters make provision for this, as there is a well-documented surplus of residential, office and commercial property in Beirut—particularly in the western part of the city. The purpose of the area is not to create wasteful competition and repeat past mistakes of over-investment in certain sectors and under-investment in others. The goal is to enhance the resilience of the port’s financial and economic position and to create the types of sustainable economic activity for which there is existing demand, and which can be expanded over time. In both options, this area is allocated to a mix of port added value logistics and light processing, light manufacturing, high value-added ICT services, and tourism-related activities. In Option 1, the free zone would be redeveloped to focus on value-added logistics, light-processing and in-bond e- commerce. It would remain in the port’s security and customs perimeter. Connected to it would be a business and innovation hub offering an augmented business environment outside of the port security perimeter but still within Option 2 publicly-owned land. A waterfront would be west of the cruise terminal, with which it would be integrated. Flowing into the city via pedestrian paths, it would offer environmentally-responsible tourism and space for hospitality and entertainment. In Option 2, the free zone would be absorbed in a Special Economic Zone (SEZ) that would incorporate all or part of the business and innovation hub. The SEZ would operate under the current SEZ law, benefiting from its provisions for an improved investment and operating environment targeting new domestic and foreign activities. The eastern part of the zone would continue to function as an in-bond, port-integrated, logistics value-added area. The SEZ and waterfront constitute powerful poles of economic growth, development and renewal. In both options, the plan allocates a land reserve to the east of C6. Depending on the actual evolution of general cargo traffic and the uptake of C6 and blue economy activities, this reserve makes it possible to rebalance the space allocation to maintain the optimal exploitation of all land resources. 66 Sectors with High Growth Potential Enterprise surveys and economic data confirm the resilience of private sector development and employment creation. They have identified four high- potential sectors for in-depth diagnosis, whose growth could be fast accelerated, whose exports could rapidly expand, and whose employment could be quickly increased with targeted interventions. All four sectors closely match the offerings for value-added activities and the port-city integration area. The area has a ready market, but it must contribute to reducing the endogenous constraints firms in these sectors face. ► Outsourcing services ► Restaurants ► Chemicals ► Olive oil ► Software development & digital services ► Hotels ► Cosmetics ► Fruits & vegetables ► Data analytics ► Guesthouses ► Pharmaceuticals ► Raw material production serving the agri- ► Digital marketing (SEM.) ► Catering services ► Machinery food sector (potatoes, grapes...) ► CRM ► Printing and packaging ► Local products ► Cyber security ► Recycling & repair ICT and Outsourcing Hospitality Manufacturing Agriculture and Agri-food To position Lebanon as a key hub for tech and Provided the minimum of security and stability, ► Manufacturing is one of the few sectors that ► Local production is driven by increases in digital talents sourcing at a global level. the tourism sector is expected to be one of the stood still during the crisis and witnessed local demand due to the socio-economic crisis, main drivers of the Lebanese economy and a signs of growth. which has decreased purchasing power and ► COVID-19 acted as a catalyst for major source of fresh funds for the country in ► The demand for locally produced goods increased import prices. digital transformation, creating millions of increased imported products became ► The sector plays a key role in ensuring food the coming years. too expensive for many after the devaluation. security and sustainability for the local jobs in tech worldwide. ► Lebanon has a solid education level in STEM ► The decrease in production costs, as a result population. The hospitality and Food and Beverage sector of devaluation, has made Lebanese products ► The sector is witnessing a consolidation of actors, and good language skills.​ has experienced unexpected growth and ► The crises in Lebanon created new more competitive on international markets. with medium and large firms the ones able diversification in the past year. to survive and thrive in the crisis. opportunities for the sector as labor became more competitive, particularly for companies ► Opportunities based on certification, based in the US, Europe and GCC. compliance with quality standards, local ► The digital sector is dematerialized, hence grassroots collaboration among agri-sector less affected by the local economic and members, and the smart use of natural food political context.​ export windows have resulted in success stories and will continue to do so. 67 Sectors with High Growth Potential A recent Bank survey of the key binding constraints WORLD BANK SURVEY OF THE FOUR SECTORS BY CONSTRAINTS encountered by companies operating in the four sectors 100% above—ICT/outsourcing, agriculture/agrifood, 90% 80% manufacturing and hospitality—shows that, when they have 70% managed to find customers, markets and ways to deal with 60% 50% the country’s instability, their main constraints are supply- 40% 30% side. 20% 10% 0% Four sectors ICT Manufacturing Tourism Agrifood The survey shows that the two, key binding constraints across the four sectors Energy Financing Human capital are energy and finance, followed by human capital, instability and the effect of Instability/geopolitics Currency Legal/Regulatory currency collapse. Others ► The energy crisis is the predominant constraint for tourism and manufacturing. WORLD BANK SURVEY OF THE FOUR SECTORS BY ENTRANTS' TYPE ► Financing constraints prevail by a wide margin in the agrifood sector, Four sectors somewhat less in manufacturing. ► Human capital is the dominant constraint for the ICT sector, followed by financing. Agrifood ICT ► Instability affects all sectors, but tourism in particular. Production entrants ► Legal and regulatory issues are the third most important constraints for the Business climate agrifood sector. Others Production entrants account for nearly 60% of reported constraints and business-climate 25%. Tourism Manufacturing 68 Market Sounding A soft market sounding was undertaken to test interest from private investors/operators in the proposed plan. Seventeen globally recognized operators (five to seven per cluster) were approached. The responding companies saw opportunities for further development in the port. Some expressed interest in further stages of the development and reconstruction process. Most expressed the need for greater clarity on the legal framework, port governance model, and the contracting terms for possible participation in future port terminal tenders. General cargo and Ro-ro terminal cluster soft market sounding feedback Subject Feedback Market ► It was noted that it would be helpful to review the 2022 actual volumes handled. opportunity ► It was noted that, most likely, operators will try to combine handling different cargo, as the volumes are modest. ► It was noted that auxiliary services will probably be proposed as addition to RoRo handling, as these services will generate higher margins. ► It was noted that, potentially, vegetable oils could be added to the commodity mix proposed. ► It was noted that for an analysis of the commercial viability of a general cargo berth, further analysis would be recommended. Port Master ► It was noted that it is valuable that there still is some flexibility to review the exact configuration; the operators indicate they would be interested to be involved in this process. Plan layout ► It was noted that the excess space at the GC/RoRo terminal or the adjacent plot of land without defined allocation, could be used for auxiliary services for RoRo. ► It was noted that the plot of land currently used for inspections of containers could be of more value when used as part of one of the terminal plots nearby. ► There were initial concerns on potential risk at the RoRo terminal because of potential contamination from the grain terminal, but as discussed and as outlined in the Master Plan, the grain handling operations will be completely covered, so this is not an issue. PPP ► It was noted that a concession type of contract or a lease contract would be preferred; however, the operators are open to other contract structures as well. structure ► It was noted that a clear division of tasks between the Port Authority and the operator is required in order to enable the investors to judge. ► The investors showed interest in a role during design and construction as well. ► It was noted that in order to move forward, clarity on the available legal security to manage the country risk (such as clarity on what would happen in case the Port Law is not passed for example) would be required. General ► Overall, the operators were interested in further discussions to explore the opportunity: A combination of commodities could be of most interest; the layout offers some flexibility which is feedback appreciated; on the contractual set-up different options can be discussed as long as the division of tasks is clear (including a potential role during design and construct). Key point of attention is that clarity from the government on the management of the country risk shall be provided. 69 Market Sounding Cruise terminal cluster soft market sounding feedback ► In feedback, potential operators Subject Feedback made known their interest in combining different activities, as Market • Beirut could be a complementary port, offering existing cruise itineraries an added attraction in the Eastern Mediterranean. It was recommended that volume was relatively modest. Opportunity market research be conducted for its development as a retail destination and a destination for onshore excursions. • Its proximity to Cyprus and other countries in the Eastern Mediterranean makes it easier to initially promote Beirut as an extra port-of-call. ► Operators indicated concession • Homeport operations could start with a superstructure to be developed further once security in Lebanon has improved. The Port of Beirut would be best suited for small- to mid-size cruises with mainly Red Sea destinations. contracts or lease contracts Port Masterplan • Being located in a cargo port or near a cargo berth/quay is not the most desirable thing for cruise ships, but the proposed cruise berth/s and surrounding would be suitable options. Layout area can be isolated from the cargo port. • The longest (west) berth of roughly 340m is large enough for the purpose. The remaining two berths (north and east) stretch 200m to 220m. A minimum depth of 10 meters of water must be provided along all berths. ► Key concerns were related to • Nearby Zaituna Bay and the Corniche promenade can be considered as alternatives. clarity on the contract structure PPP Structure • The operator might in principle be interested in holding a concession on the cruise terminal, while assisting the Port Authority. and options to reduce country General • The operator could identify opportunities for Beirut to develop cruise-related activities, providing port facilities accommodate cruise passengers (as risk. The parties were all highly Feedback required) and offer sufficient activities and entertainment. interested to learn more about • The operator would be interested in considering operating a concession. timelines, as well as happy to discuss the next steps on the Grain terminal cluster soft market sounding feedback port jointly with the Lebanese Subject Feedback government and World Bank. • Operators would prefer to manage the grain silos themselves and rent out capacity, if possible, instead of renting the storage capacity from the government. Market Opportunity • This would likely be a multi-user terminal, without preferential treatment of clients. It would not be ideal to have any small millers using small ► The market sounding was also silos at the terminal (something to be looked into.) • The Port of Beirut's market share used to be about 80% of Lebanon’s overall market, historically; it is unclear how this share will develop once used to produce adjustments in new silos in the port of Tripoli become operational, and this needs to be assessed. Lebanon’s northern region has captive demand and opportunities to trade with neighboring countries. the Master Plan. Port Master Plan Layout • No comments were made on the layout. PPP Structure • The operator said they were flexible on this, as long as the structure is clear. General Feedback • Overall, this looked like an interesting opportunity. • Competition from the Lebanese port of Tripoli should be taken into consideration and properly understood. 70 Market Sounding The Bank consulted stakeholders on the value-adding and port-city integration areas recommended: Participants included government authorities (national and local), private sector bodies, businesses, urban and economic development organizations/experts, civil society and neighborhood organizations. Altai Consulting Lebanese Economic Forum Amazon Lebanese Federation for Tourism Syndicates Arab Center for Architecture Lebanese Foundation for Renewable Energy Aramex Lebanese Franchisee Association Most expressed the need for urgent, rapid interventions that targeted constraints, particularly in the vital Association of Banks in Lebanon Live Love Beirut export sector. Private sector participants confirmed the existence of the broad opportunities identified by Association of Global Lebanese Investors Microsoft Lebanon the Bank. Many stakeholders saw this as a driver and potent symbol of reconstruction and socio-economic Association of Insurance companies in Lebanon Ministry of Agriculture Association of Lebanese Industrialists Ministry of Economy transformation, and a catalyst of small but important reforms and foreign investment: Association of Owners of Restaurants, Cafes, etc. Ministry of Environment ► Offer affordable, reliable, safe and well-maintained infrastructure, with good physical connectivity to the Association of Petroleum Importing Companies Association Pour le Developpement de Gemmayze Ministry of Public Works and Transport Ministry of Tourism city, including electricity, high-speed internet connectivity, well-designed roads alleviating congestion, bus services and parking space. Beirut DC (filmmakers) Beirut Digital District MIT Forum Arabe National Council for Lebanese Economists ► Support technical education and vocational training in transport-logistics-supply chain-trade (TLST), e- Beirut Traders Association Net Global commerce, outsourcing and back-office functions, ICT, tourism and hospitality, creative industries and Beirut Urban Lab, American University of Beirut Office of the Prime Minister other high-skills industries and services. Beit El Fann Organization, Tripoli Berytech, Berytechfund Property Developers Association RDCL ► Provide fast-rising firms affordable shared-space and training-support-mentoring in key processes (such CCIA, Beirut and Mount Lebanon Real estate developers for Lebanon as fund-raising, BD-marketing-sales, client management-order fulfillment-exports, production design- CCIA, Zahle & the Bekaa Saleh Shipping CMA-CGM Sea Sky Services Sarl planning-process, hiring-training-HR, accounting-compliance-legal). CNRS, National Centre For Marine Sciences Solidere ► Supply affordable, international quality serviced light manufacturing, e-commerce and research- Code Technologies Sursock Museum development-innovation land and buildings, mostly powered by renewable solar energy. DHL Express Syndicat des complexes balneaires du Liban Ecomz Syndicate of Contractors & Public Works in ► Improve investment and operating environment specifically for the ease of creating, operating and Lebanon closing a business, with the possibility of creating an SEZ in the area, thus creating scale alongside the ENI CBC Med The Arab fund for Arts and Culture European Bank for Reconstruction and Development The Mediterranean Biodiversity Center SPA/RAC Lebanese port of Tripoli’s zone. FedEx The Policy Initiative ► Include a waterfront, connected to a human-size cruise terminal linked to the city to support the Governor of Beirut Tripoli Special Economic Zone (ISEZ) hospitality industry, showcasing Lebanon’s rich culture. International Chamber of Commerce of Lebanon UN-ESCWA International Union of Arab Bankers Zakka Technologies 71 Short-Term Capital Expenditure Program ► The Proposed Plan includes the development of the following Overview of Capex estimates per cluster (in USD, local 2023 price level) clusters in the short term: • C1 – Container terminal related improvements • C2 – Grain terminal—Complete construction of the new grain Cluster Name Infrastructure Superstructure Equipment Total terminal Short-term • C3 – General Cargo and Ro-Ro terminal construction C1 Container terminal 318,000 16,385,450 5,092,000 21,795,450 • C4 – Construction of the complete CFS C2 Grain terminal 8,914,752 22,504,032 16,780,970 48,199,754 • C5 – Innovation hub General Cargo & Ro- • C6 – Special Economic Zone C3 Ro terminal 1,500,000 16,476,120 12,350,000 30,326,120 • C7 – Waterfront Container Freight C4 8,504,160 8,504,160 • C8 – Cruise terminal Station C5 Innovation hub 3,000,000 3,000,000 ► Inthe longer term, further development of the abovementioned areas as well as the potential development of a logistics zone is C6 Special Economic Zone 2,907,770 2,907,770 anticipated. C7 Waterfront 4,500,000 4,500,000 ► An overview of the Capital Expenditures (Capex) requirements as C8 Cruise terminal 3,000,000 3,000,000 estimated for the abovementioned activities is provided in the Governmental and Annex. G landlord facilities 15,060,200 59,000,000 74,060,200 Total Capex 200,326,726 Short-term 72 Governmental and Landlord Facilities CAPEX Government investments Capex (USD) Digital Infrastructure Capex (USD) Demolishing of vegetable market 89,000 Vessel Traffic Management System 8,000,000 Earth works and levelling of the area 89,000 Port Management Information System 1,500,000 Demolishing of the slaughterhouse 55,000 Maritime Single Window 3,500,000 Pavement and utilities 2,932,200 Port Community System 10,000,000 Fencing 1,500,000 National Single Window 15,000,000 Office 2,000 sqm 1,600,000 TOS/GOS for general cargo & bulk 2,000,000 Upgrade of the port access road 2,595,000 Call up and appointment systems 500,000 Fixed and Mobile Networks 2,500,000 Upgrade of electrical supply network 3,000,000 Data Centers / Telecom rooms 1,000,000 Digital infrastructure Port Authority 59,000,000 Cloud hosting (SaaS / PaaS / IaaS) Opex Total Capex 74,060,200 Digital Twin 5,000,000 Security Inf. Manag. System 2,000,000 Intrusion Detection System (IDS) 1,000,000 Environmental Monitoring System 2,000,000 Safety Management System 3,000,000 Supply Chain Security System 2,000,000 Total Capex Digital 59,000,000 73 Private Sector Participation Options: GOL Consideration ► BOT: GoL does not need to invest in the project, since everything is designed, built and financed by the Private Operator. Therefore, the government does not have any participation in the project, but the Port Authority will be entitled to receive concession fees and port dues, related to the use of the public port domain (land and water surface). ► Concession: GoL, through the PoB Authority, designs, builds and finances the required enabling infrastructure for the project, such as the dredging, reclamation and quay- walls. The Private Operator develops the superstructure on top of the port infrastructure and provides the handling equipment. The investment, split between the public and the private sector, will be defined by the Capex associated with each of these items. The right of performing a public service (port operation) is granted through the concession agreement, awarded by the governmental entity representing the landlord (Port Authority), which has jurisdiction in the port area as regulator. The private sector participation option to be decided upon following transaction advisory. 74 Private Sector Participation Options for GOL Cont. ► Leasehold agreement establishes the rent of an asset (such as land, pavement, equipment) for an agreed period in return for a payment or a series of payments by the lessee (operator) to the lessor (Port Authority). Berths may be included or excluded from the lease rent. If excluded, the public port organization is entitled to receive all revenues derived from berthing fees. The lease rate could be a fixed amount paid on a monthly or quarterly basis with a level defined according to the investment made by the Port Authority (return of investment). ► Management Contract, the full investment is done by the Port Authority,from its own resources and/or external funds or financing, while the private sector is only responsible for undertaking commercial port operations through a management contract. The Port Authority selects and contracts a private firm to carry out operations for a specific period of time, normally between three and five years, using the facilities built and funded by the Port Authority. The selection of the contractor can be done through a tender-bid procedure. The winner of the tender will operate the facility with their own personnel and maybe bring (part of) the handling equipment. The private sector participation option to be decided upon following transaction advisory. 75 Functions of the Public and Private Sector Port function Ministry Port Authority Customs Operator National infrastructure for accessing to the port: Roads, waterways and aids ● ● to navigation Maintenance of port access (roads, channels, etc) ● ● Regarding tariff setting: Relevant tariffs Establishment of a national port policy ● should be set by the operator but under Customs and immigration ● the regulatory regime implemented by Landlord function ● the Port Authority, that is the tariff will Regulatory, supervisory and surveillance ● be capped in case of a local monopoly Oversight of nautical operations, harbourmaster ● Vessel traffic safety ● situation. The Port Regulator may Granting of licenses and concessions ● regulate the operator’s tariffs, either Setting of tariffs ● through a direct tariff cap on specific Port security ● services or through a rate-of-return cap Investment in basic infrastructure ● on the profitability of the operation. Maintenance of basic infrastructure ● Lease or concession agreements need to Pilotage, towage and mooring services ● include provisions to make this possible. Apron equipment: Cranes, MHCs, ship loaders ● The only case in which the handling tariff Yard equipment: RTG, TTUs, forklifts, etc ● Cargo handling ● is set by the Port Authority is through a Cargo storage ● management contract. Terminal security, safety, maintenance and repair ● Fire protection ● ● Customer-oriented marketing ● Insurance ● ● Human resources ● 76 Risk Matrix Based on the risk profile of the different clusters, the following investments are recommended to in the short-term: Cluster Projects Risk Building Gate-in and Gate-out Improvements on the east part of the yard C1 – Container Re-organisation of the STS and RTG cranes Low terminal Construction of a workshop Setting up an empty container depot Complete construction of the new grain terminal by C2 – Grain terminal Medium private operator C3 – General cargo Repair and dredging of Quay 10 Low & Ro-ro terminal Storage yard for general cargo and ro-ro C4 – CFS Construction of the complete CFS Low Reconstruction of warehouses of the free zone and C6 – Free zone Low first expansion block G – Governmental Infrastructure and digital investment Low facilities 77 Annexes 1. Traffic Forecast 2. Operational Parameters 3. Documentary Sources 4. Stakeholders Consulted 78 Traffic Forecast Container traffic forecast Port of Beirut - Container Forecast ► To forecast total container throughput, gateway and trans-shipment volumes are forecast separately. Forecast driver: GDP First the national gateway volume is forecast, then a market share for the Port of Beirut over time is 1,600,000 estimated which, applied to the national volume, provides the volume forecast for the Port of Beirut. 1,400,000 ► A regression analysis between Lebanon’s gateway trade and GDP has been undertaken to obtain the 1,200,000 historical relationship between both variables. It is assumed that GDP is the main driver for gateway 1,000,000 container volumes, since containers are mostly transporting consumer products, which are strongly TEU 800,000 related to the national GDP. 600,000 ► Regarding the trans-shipment forecast, first the total regional (East Med) trans-shipment volume is 400,000 projected. This projection takes into account the GDP forecast for all the economies located in the East 200,000 Med region. Then the regional trans-shipment growth rate is applied to the Port of Beirut trans-shipment - 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 volume, which gives its long-term trans-shipment forecast. Port of Beirut Gateway Forecast Port of Beirut Transhipment Volume Forecast Grain volume forecast Port of Beirut - Grains Forecast Forecast driver: Population ► A top-down approach has been used by forecasting total volumes at country level before estimating the 1,000,000 market share the Port of Beirut will achieve in the future, which gives the volume forecast. 800,000 ► To forecast Lebanon’s grain import, we have used regression analysis between Lebanon’s grain import 600,000 Tonnes volumes and population. Population is the key driver for grain imports in Lebanon, since grains are 400,000 mostly destined for human food consumption while export volumes are negligible. 200,000 ► The market share of grain for the PoB has decreased since the August 2020 explosion. However, we - assume that the PoB’s grain market share will reach its long-term average again, driven by the service 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 provided by a new grain terminal with more efficient facilities. This long-term market share, which is around 77%, has been used to arrive at PoB grain forecasts. Port of Beirut Grain Forecast (With Grain Terminal Rebuilt in Beirut) 79 Traffic Forecast Vehicle traffic forecast Port of Beirut - Vehicles Forecast Forecast driver: GDP per capita ► To forecast the vehicle imports of the PoB, we have applied a top-down approach and first forecast the vehicle import for the whole of Lebanon. We have then estimated the market share that PoB will achieve 250,000 over the forecast period. Further, we have run a regression analysis of Lebanon’s vehicle imports and 200,000 Lebanon’s GDP per capita. 150,000 ► Government subsidies for fuel started to be phased out in 2019 and the impact on vehicle imports can Tonnes be seen in imported volumes, with a sharp drop since 2019. Taking this into consideration, we have 100,000 applied regression only for the period up to 2018 to forecast volumes under a hypothetical scenario in which the fuel subsidy were still in place. 50,000 ► As the average of the PoB’s vehicle imports’ market share had been fairly stable prior to the period of the - liquidity crisis, we have decided to use the long-term historical average market share of the PoB to 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 forecast its import volumes. Port of Beirut Vehicle Import Forecast Port of Beirut Vehicle export Forecast Port of Beirut – Iron & Steel Forecast Iron and steel volume forecast Forecast driver: GDP 1,600,000 ► The assessment of iron and steel imports through the Port of Beirut is based on a top-down approach by 1,400,000 first assessing the total Lebanon iron and steel import forecast. Next, an estimate has been done for the 1,200,000 market share for the Port of Beirut in the long run. 1,000,000 TEU 800,000 ► To forecast Lebanon’s iron and steel import, a regression of Lebanese import versus GDP, both in 600,000 absolute levels, has been undertaken. An event factor for the years 2019 to 2025 (to account for the 400,000 200,000 negative impact of the liquidity crisis on volumes) has also been included. It has been assumed that - these issues will be largely resolved by 2025, and that, from that point onwards, the economy will revert 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 to its pre-2019 structure. Port of Beirut Iron and Steel export Forecast Port of Beirut Iron and Steel Import Forecast 80 Traffic Forecast The graph shows that in 2016, with a total throughput of 3.3m tonnes, the berths used for general cargo and dry bulk were Berths 7 to 13. This means that Berths 1 to 6 were not used and neither Berths 14 and 15. The berths with highest utilization were Berth 12, mostly used for handling steel, Berth 8, used for handling cereals and soya, and Berth 10, used for handling steel, grains, vegetables and other minor cargoes. The same berth utilization analysis can be done for the vessel calls corresponding to 2022, as shown in Figure 2-3. It must be considered that some of the quays were damaged by the blast and are no longer operational. 81 Operational Parameters CONTAINER TERMINAL 2018 2022 1,305,754 TEU 677,000 TEU (Estimated) Port of Beirut - Container Forecast 1,600,000 1,400,000 1,200,000 1,000,000 TEU 800,000 600,000 400,000 200,000 - 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 Port of Beirut Gateway Forecast Port of Beirut Transhipment Volume Forecast 82 Operational Parameters CONTAINER TERMINAL 83 Operational Parameters CONTAINER TERMINAL The calculation shows that the total annual yard capacity is 1.4m TEU, which is slightly above the berth capacity and the projected volume for 2040. This means that the existing yard is large enough to handle the forecast volume. However, it must be mentioned that additional facilities will be required to upgrade the container terminal and reach international best practices, namely: ► Repairing or removing STS cranes ► Repairing the East part of the yard ► Workshop ► Separated gate-in and gate-out with adequate technology ► Container Freight Station (CFS) ► Container services area ► Reform and Customs procedures 84 Operational Parameters CONTAINER TERMINAL C1 - Container Terminal Revenues 60,000 50,000 40,000 USD '000 30,000 20,000 10,000 - 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 85 Operational Parameters GRAIN HANDLING AND STORAGE TERMINAL 86 Operational Parameters GRAIN HANDLING AND STORAGE TERMINAL C2 - Grain Terminal - Revenues 25,000 20,000 15,000 USD '000 10,000 5,000 - 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 87 Operational Parameters RORO TERMINAL The calculation shows that one berth can handle the projected volume of vehicles by 2040. In this case, the productivity currently achieved at POB has been used, since the operation of driving out cars from a car carrier is relatively simple and doesn't require any handling equipment. The table shows that such volume of cars (160,000 tonnes, equivalent to some 120,000 tonnes) generates a berth occupancy rate of 20%, which means that the quay can be also used for other cargoes. 88 Operational Parameters GENERAL CARGO TERMINAL With regard to break bulk (steel), the projected volume for 2040 requires a storage area measuring 2.6 ha. C3 - Ro-Ro & General Cargo Terminal Revenues 70,000 60,000 50,000 40,000 USD '000 30,000 20,000 10,000 - 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 As the table above shows, the projected volume of 1.3m tonnes of steel, provided by 105 vessel calls with an average parcel size of 12,475 tonnes can be handled with two berths (length of 180m each). 89 Operational Parameters CONTAINER FREIGHT STATION The table below shows the capacity calculations for the CFS. It has been assumed that 15% of the import/export containers will be Loaded/unloaded at this CFS. C4 - Container Freight Station - Revenues 14,000 12,000 10,000 8,000 USD '000 6,000 4,000 2,000 - 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 90 Operational Parameters FREE ZONE Existing Configuration and Use of the Free Zone Beirut: Land use and damage survey undertaken in October 2022 91 Operational Parameters FREE ZONE Assumed tariff: 31 USD/m2/ year Current tariff C6 - Free Zone Revenues C9 - Free Zone - Bourj Hammoud - Revenues 2,500 4,500 4,000 2,000 3,500 3,000 1,500 USD '000 2,500 USD '000 2,000 1,000 1,500 1,000 500 500 - - 2025 2026 2027 2028 2029 2030 2040 2031 2032 2033 2034 2035 2036 2037 2038 2039 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 92 Documentary Sources The report is based on a large number of documentary sources, interviews and consultations: Port sector governance and management Lebanon Ports Vision Port of Beirut reconstruction and reform development plan ► World Bank. June 2023. Lebanon Economic ► World Bank, AFD. June 2021. Reforming and Monitor: The Normalization of Crisis is No ► Royal HaskoningDHV. July 20223. Port of Beirut Rebuilding Lebanon’s Port Sector Part II: Road to Stabilization Reform and Reconstruction Support. Task 4: Policies and Solutions for Digitalizing the Port ► Royal HaskoningDHV. November 2022. Port of Port of Beirut Investment Program, and PPP of Beirut Beirut Reform and Reconstruction Support. Options and Risk Assessment ► World Bank. December 2020. Reforming and Task 2: Contribution to the Vision ► Royal HaskoningDHV. December 2022. Port of Rebuilding Lebanon’s Port Sector: Lessons from Beirut Reform and Reconstruction Support. Global Best Practices Task 3: Port of Beirut Reconstruction and ► World Bank. 2013. Port Reform Toolkit. Second Lebanon Ports Vision Development Plan Option Assessment and edition Physical Infrastructure Development Plan ► Economist Intelligence Unit, Eunomix, Euromena Consulting, Fund for Peace, IMF, Port of Beirut, UN Comtrade, UNCTAD, UNDP, World Bank 93 Stakeholders Consulted The report is based on a large number of documentary sources, interviews and consultations: Consultations on the Integrated National Vision for the port were Consultations on the PoB’s reconstruction and conducted by the Consultant, with representatives from: development plan were conducted by the Consultant, with representatives from: ► Prime Minister’s Office, MPWT, Ministry of Economy and Trade, Ministry of Energy and Water, Electricite du Liban, Lebanese Petroleum Administration, Beirut ► Prime Minister’s Office, MPWT, Ministry of Economy and Trade, Governor, Beirut Mayor, PoB, Port of Saida, Mayor of Saida Beirut Governor ► Freezone operators, Lebanese Business Leaders Association (RDCL), freight ► Order of Engineers and Architects, RDCL, CMA CGM, Chamber of forwarders, MSC, CMA CGM, Maersk, Cosco, El Fil Shipping (Turkon), Arkas, Henry Commerce, Solidere, Beirut Urban Lab, Live Love Beirut, Heald (Roll-on Roll-off), Sealine (evergreen), HLL, Car ops operators, Chamber of Association of Lebanese Industrialists Navigation, Saleh Shipping, cruise operator, Chamber of Commerce, Beirut Traders’ Association, National Council of Lebanese Economists, Lebanese Business Association, Association of Mills of Lebanon, Shipping Lines’ Syndicate, Lebanese Soft market sounding on the PoB reconstruction and Contractors’ Syndicate, Global Leaders Investors, Syndicate of Used Car Importers, development plan was conducted by the Consultant with Syndicate of Owners of Restaurants, Cafés, Night Clubs and Pastry Shops, Saida Mission and Association, shipping company, civil society and commercial representatives from: representative from Saida city, importers and exporters, Transit Trucks’ Syndicate, North Traders’ Syndicate, Special Economic Zone, Glass Manufacturing ► Euroports, Abu Dhabi Ports, Qterminals, Solaris, Global Ports (Import/Export), Livestock operator at PoB, Solidere, Beirut Urban Lab, Live Love Holding Beirut 94