Lebanese port eyes China as it sells itself as hub for Syria

Financial times

Lebanon

Cash-strapped country is keen to attract investment from Beijin

The port of Tripoli in Lebanon – Chinese cranes and equipment are expected to boost the port’s capacity ©️ Alamy

January 3, 2019 4:40 am by Chloe Cornish in Tripoli, Lebanon and Archie Zhang in Beijing

A container ship belonging to Cosco, the Chinese state-owned shipping group, recently docked in north Lebanon’s port of Tripoli.

It was the first vessel to sail Cosco’s newly established China-Tripoli maritime route, following the French shipping company CMA CGM, which has also begun a China-Tripoli line. Lebanon hopes the arrival of Chinese ships augur Beijing’s interest in the country’s neighbour — Syria.

As Bashar al-Assad’s regime retakes control of most of Syria and aims to rebuild devastated cities, cash-strapped Lebanon wants to tap into the estimated $200bn reconstruction. Tripoli, just 35km from the Syrian border, is selling itself as a logistics hub for reconstruction. China, the one country with the cash and diplomatic position to drive Syria’s reconstruction, has shown interest. It has sent delegations to Syria and Lebanon but, despite high hopes in Beirut, it has not yet committed.

“China has not invested in our port yet [for] reconstruction of Syria,” admitted Ahmed Tamer, Tripoli port manager. “We’re looking forward to do that, but it has not done yet.”

Without becoming an active party to the Syrian conflict, China has cultivated diplomatic ties with Damascus. While western nations closed their Syrian embassies, China stayed and reportedly maintained an embassy staff of around 80 people. China and Syria have signed agreements of co-operation on trade issues and Chinese companies participated in last summer’s Damascus international fair. Syrian state media reported that China had granted 800 electrical transformers to Syria, and the Syrian national basketball team has trained in China.

The Syrian regime has rejected European and American interference in reconstruction, oil-rich Gulf countries remain estranged, and its allies Russia and Iran both suffer from sanctions-damaged economies. So China, the world’s second-largest economy, is considered by outsider observers as the most realistic big investor.

China typically funds infrastructure abroad through loans, usually requiring Chinese companies to undertake the construction.

Chinese companies have experience in war-torn Middle Eastern nations. Many Chinese firms landed lucrative postwar infrastructure contracts in Iraq to the chagrin of US officials, said Paul Haenle, a former US National Security Council director on China.

“China will see that in its sweet spot, the [Syria] reconstruction efforts,” added Mr Haenle, now director of the Carnegie-Tsinghua Centre in Beijing.

When it comes to the rebuilding of Syria, Tripoli thinks it could play a logistics role.“The Chinese saw that even before we did,” said Raya Haffar El Hassan, former Lebanese finance minister and chairman of the Tripoli Special Economic Zone.

But while Chinese firms took plum contracts in Tripoli’s port, including a new $58m quay plus the manufacturing and installing of six gantry cranes, no further investment has come.

A proposal to expand Tripoli port by Qingdao Heavy Duty Machinery is under review by stakeholders in Lebanon’s caretaker government. But eight months since elections, Beirut has been unable to agree on a cabinet, meaning it cannot sign off big infrastructure deals.

Communist party officials and private business have sent some six delegations to Lebanon since 2017, said Mrs Hassan, remarking that this was unusually frequent. China has also cultivated soft power in Lebanon, with a Confucius Institute at a Beirut university and a programme in Chinese studies set to start enrolling students at another. Last month, Wang Kejian, Chinese ambassador, judged a Chinese singing contest for Lebanese children.

“Lebanon can become a charming pearl in the Belt and Road,” said Ambassador Kejian at the China-Arab Banking and Business Forum last month. He was referring to China’s policy of infrastructure development along its historic silk road trading route, fuelled by loans and generally built by Chinese contractors.

That route has a gap which Tripoli could bridge, explained Tao Duanfang, researcher at the Center for China and Globalisation, a Beijing think-tank: “China only has one trans-shipment hub, Tel-Aviv …But the problem is many Muslim countries don’t accept goods that have been transported via Israel. So in the long term, Tripoli has a big potential.”

Yet unwillingness to commit also underscores China’s continued risk aversion over Syria, where instability persists and sporadic fighting continues in the north. Mr Duanfang said: “people in China may be discussing the plans but Chinese are cautious about making substantial investments there.”

Meanwhile, China’s own economic growth has slowed. Experts say attention is now focused on ensuring a healthy return from overseas projects.

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So close is Tripoli to Syria that, less than 100 years ago, it was in Syria. The once powerful trading city was only incorporated into Lebanon in 1920, after the ruling Ottoman empire collapsed and borders were redrawn. Tripoli is nearer Damascus than Syria’s own deepwater ports of Latakia or Tartous, which are currently used by Russian military.

Trucks loaded with twisted metal fragments roll into Tripoli port each day from Syria, carrying recyclable remnants of war to be ferried to Greece or Turkey. It is good business, according to a port official, who says one ton of scrap can fetch $1-2,000.

Tripoli is competitive in terms of price and location, and has just secured a loan from the Islamic Development Bank to improve its logistics capacities. But other factors are less attractive to investors — it has no rail links to Beirut or Syria’s industrial cities, and, although security has improved since 2015, the city has also suffered periodic armed clashes between groups belonging to Sunni and Alawi Muslim sects.

“The Chinese are not stupid anymore,” said Eliana Ibrahim, president of the China Arab Association for Promoting Cultural and Commercial Exchange, who moved from Beijing to Beirut more than a decade ago and advises potential Chinese investors. “It’s not like before: ‘OK, you propose something — and the Chinese, without thinking, just invest’.” The Chinese government now wants to see “profits from the investment”.

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