Lebanon 2012 | ECONOMY | FOCUS: FDI

A bastion of economic growth in the region, Lebanon is among those leading the FDI charge in the Arab world. Strong human capital and a unique location are also increasing the country's attractiveness to foreign investors.

Sheltered from the political storms in the region, foreign direct investment (FDI) to Lebanon increased by 3.2% in 2010 to reach $4.95 billion, the fifth highest FDI growth rate among all 18 countries in the Middle East and North Africa (MENA) region—making the country the fourth major recipient in nominal terms. FDI inflows stood at 12% of GDP in 2010—against a trend in the MENA area that saw a 23.4% aggregate drop in FDI. Inflows to Lebanon accounted for a total 7.7% of total inflows to MENA countries, and 0.44% of the global total in 2010. While it is predicted that continuing turbulence in the MENA region could cause these figures to stall, Lebanon's prospects for 2011 are looking decidedly bright.


Lebanon's unique business environment is helping to channel FDI inflows. The country emphasizes its non-discriminatory treatment of both foreign and domestic investors, providing them both with a level playing field. Unlike other countries in the MENA region, having a Lebanese partner is not a prerequisite for investment, and there are no restrictions on the transfer of money into or out of the country. Customs duties are reduced to 2% for the import of machinery and equipment needed to start up a factory, as well as on raw materials in the agriculture sector. Imported hotel equipment and other tourism-related imports are exempt entirely from duties. Other contributing factors to Lebanon's positive FDI outlook include strong human capital, monetary stability, advanced financial services, and its status as a regional trading platform.

In order to further attract investments, the authorities have begun modernizing various aspects of business legislation, including simplifying regulatory procedures. The Investment Development Authority of Lebanon (IDAL), with government support, works to attract FDI as a one-stop-shop for foreign investors. Its success stories include Ericsson and the Four Seasons Hotel—which currently employs 350 Lebanese workers—to name a few.


The Lebanese population living abroad is a major investor base, with various programs in place to encourage those who have been successful overseas to bring that success back home. Another major source of investment is from the Gulf Cooperation Council (GCC) area, with inflows from the GCC region increasing of late, according to IDAL. The final source is international companies that look to take advantage of Lebanon's strategic regional location and high-quality workforce. Investors are also protected from double taxation as the country's fiscal system nets out any taxes incurred on investments in Lebanon from compulsory taxes paid in investors' countries of origin.


FDI flows into the MENA region are expected to drop by 17% in 2011. Lebanon, although remaining sheltered from unrest, saw its inbound FDI slow in the first half of 2011. According to IDAL, it has assisted in investments worth over $500 million, with total FDI having jumped by 3% by July 2011. Two major foreign investments were made in the pharmaceuticals industry, at $12.4 million and $17 million, creating over 150 jobs. A further $31.8 million has been allocated to expand the five-star Vendome Hotel, and $21.1 was allocated by Matelec, a company producing transformers, for the expansion of its facilities in Jbeil (Byblos)