The engineers of the Khlat & Moawad Group are working round the clock in offices north of Beirut in preparation for the task of rebuilding the infrastructure of the city centre. Moawad and its Italian partner signed the $63.7 million contract for the first stage infrastructure works with Beirut central district (BCD) property developer Solidere on 18 November 1994. The contractor will receive a 20 per cent bonus if it completes the project in three years instead of the originally specified four, and Moawad is sparing no effort to achieve that target, and earn the promised reward of some $13 million.
Chairman Georges Moawad says he is recruiting 6,000 workers, most of them Lebanese from the company’s base in the northern Akkar area, to work on the project. The scheme will involve building roads, bridges, tunnels, gardens, drainage and wastewater systems.
Solidere will be a fruitful source of business for contractors long after Moawad’s workers have departed. The BCD project is planned to stretch into the third decade of the next century, as a Manhattan-style city is created out of the debris of the civil war.
Next in line is the contract to build a sea wall along a 1,000-metre stretch of the BCD’s coastline. This contract alone is expected to be worth some $250 million. Solidere is also preparing to go ahead with a number of smaller jobs, including the rehabilitation of buildings, the construction of a new corporate headquarters for the company, residential buildings and two three-star hotels.
One attraction of the Solidere project for contractors is the assurance that the company has the funds to pay for the work. Solidere’s capital is made up of 11.7 million A shares relating to property rights in the BCD and 6.5 million B shares paid for in a public subscription. The shares have a par value of $100, but are now trading at about $125, giving the company a market capitalisation of $2,275 million. Solidere is paying for the construction work itself, but is being reimbursed for $475 million of infrastructure and environmental expenses in the form of extra land from the state.
The Solidere project has been strongly supported by Prime Minister Rafiq Hariri, who has a substantial personal shareholding in the company. Critics have said that the premier’s commitment to this single project has been disproportionate, and that the scheme itself is hopelessly over-ambitious. Hariri’s argument has been that the Solidere project and others like it involve no public money, and that Beirut needs to think big if it is succeed in playing any kind of role as a regional financial centre.
The need to tap into private funds is evident, given the scale of the reconstruction effort and the state of Lebanon’s public finances. Hariri’s government has had no more success than its predecessors in reducing the budget deficit, and there are limits to how much Lebanon can depend on foreign aid. The Council for Development & Reconstruction (CDR), the semi- autonomous agency in charge of most project work, says foreign loans and grants received for reconstruction now total $1,900 million. But this is only $100 million higher than the figure one year ago, and there is little sign of any substantial fresh finance about to be provided.
The major contracts awarded in 1994 have been for infrastructure projects, including the airport expansion, the Beirut sports stadium, the construction of two new power stations and the repair of the telephone system. Aid has been the main source of finance for these schemes. However, in 1995, the picture is likely to change, with the emphasis being placed on privately financed projects.
These will include the construction of a toll highway from Beirut to the Syrian border. France’s Dumez has taken an early lead in this project, with a highly competitive low bid of $405 million. Another French contractor, Bouygues, is bidding for the estimated $200 million-300 million contract to build a conference centre in Beirut on a build-own-operate basis. Lebanese investors are also aiming to create a string of ‘mini-Solideres’ along the coastline in and around the capital following the relaxation of laws on reclaiming land from the sea.