Study: Good Governance is Essential to Rebuilding Port of Beirut

port of beirut
Volunteers search for survivors at the port of Beirut after the blast (Palestinian Red Crescent)

Published Apr 15, 2021 3:20 PM by Njiraini Muchira

Just days after a German consortium led by Hamburg Port Consulting (HPC) and Colliers International unveiled a $7.2 billion proposal to rebuild the blast-damaged Port of Beirut, Munich-based management consultancy Roland Berger has released a study detailing the need to undertake strategic reforms in order to make the port “an efficient economic hub for Lebanon”.

“Crises create opportunities. In the case of the Port of Beirut, the devastating explosion of August 2020 creates an opportunity to carry out the reforms urgently needed at a national and local level to turn it into a transparent, safe and efficient economic hub for the country and wider region,” said the study.

The study, which was co-financed by the German Federal Ministry of Economic Cooperation, found that the Beirut port governance structure does not enforce accountability for performance and development. In effect, the port currently lacks a clear management structure, considering it is managed by a "temporary committee" and there are multiple entities with overlapping mandates.

The port lacks a proper regulatory framework and currently gives decision-making control to the committee, Roland Berger found - a scenario that has made it susceptible to influence by vested interests, particularly by the political class.

The Port of Beirut is the main gateway for Lebanon's foreign trade, and it mainly serves domestic demand, handling approximately 90 percent of the country’s sea trade by value. Throughput at the port amounts to six to eight million tons of merchandise annually and mainly consists of containerized cargo, general cargo and dry bulk. Overall trade volumes consist of about 90 percent imports and 10 percent exports, indicating a significant trade imbalance. “The port, catering to domestic demand, is thus a mirror of the Lebanese economy and depends strongly on the economic situation in the country,” the study noted.

Despite its strategic importance, no financial auditing, performance monitoring or supervision takes place at the port, Roland Berger found. 

Rebuilding from the ground up

In August last year, a fire led to the detonation of 2,750 tons of ammonium nitrate that was stored in one of the port’s warehouses. The blast ripped through the port and adjacent city districts, killing over 200 people, wounding over 6,500 and leaving over 300,000 people displaced.

The World Bank estimated the cost of the physical damage at $3.8-4.6 billion, with the economic losses amounting to $2.9-3.5 billion.

On April 9, Germany ambassador to Lebanon Andreas Kindl led a delegation of HPC and Colliers International officials to Beirut, where they presented their proposal for a "European revival of the Beirut Port and of the surrounding area."

"We have strived for a concept that will create employment for tens of thousands of people, the reconstruction of hundreds of thousands of damaged homes and the opening up of Beirut to the sea, providing livable and socially oriented new homes in parts of the harbor not suitable to be operated as a port," said Suheil Mahayni, HPC MD.

French shipping giant CMA-CGM and a host of Russian, Chinese and Turkish companies have also expressed interest in rebuilding the port.