THE ROAD AHEAD

Lebanon 2015 | ECONOMY | VIP INTERVIEW

TBY talks to HE Dr. Alain Hakim, Minister of Economy and Trade, on projected growth, the balance of trade, and the role of PPPs.

According to UNHCR, the number of registered Syrian refugees in Lebanon passed 1.2 million at the end of September 2014, representing 26.3% of the total Lebanese population. What are the costs and benefits of hosting Syrian refugees in Lebanon?

Until 2010, Lebanon's economy was relatively stable and many sectors—particularly construction, tourism, and banking—continued to witness good economic performance. Moreover, economic growth rates ranged between 7.5% and 9% between 2007 and 2010. However, this trend has reversed since 2011, and the Lebanese economy has been witnessing contractions in investment and consumption trends as a result of the massive influx of Syrian refugees. Economic indicators also showed weakened results, producing negative factors, eroding the Lebanese labor market. Displaced Syrians began working in many of the commercial and economic sectors, taking jobs from hundreds of thousands of Lebanese employees. The budget deficit has also increased as a result of the international community's weak assistance to the displaced Syrians and Lebanese hosting communities. There has been erosion in the educational sector as well, since a large number of public schools in Lebanon started providing educational services exclusively to Syrian students. There has been a marked decline in private, public, and foreign direct investments as well. In addition to economic factors, the security situation is also deteriorating, with the increasing acts of disruption carried out by some of the displaced, which in turn has lead to a worsening in the overall economic activity.

According to the World Bank's report on the Global Economic Prospects, Lebanon is among the non-oil-producing economies in the region expected to see reasonable growth from 2015 to 2017. What is the Ministry's outlook for the Lebanese economy over the medium term?

Most forecasts indicate an increase in economic growth rates in the year 2015; however, this improvement primarily depends on a better security situation and on political stability, which can revive the economy and allow an increase in the various economic sectors' activities. Political stability will be achieved, first and most importantly, by the election of the President of the Lebanese Republic as soon as possible in order to rebuild investor and consumer confidence and increase capital inflows to Lebanon. It should be noted that in spite of all that the Lebanese economy has endured since has 2011, it was able to record positive rates of growth, ranging between 1% and 1.5%, and this is evidence of the economy's immunity and ability to survive in the face of these crises. Also, the IMF raised its estimate for growth to 2.5% in 2015, according to its latest report.

“Most forecasts indicate an increase in economic growth rates in the year 2015."

Which sectors of the Lebanese economy hold the most potential for growth and development in the near future?

Lebanon has a resilient mindset, a highly skilled labor force, a wide-reaching diaspora, and a service-oriented economy. In light of these factors, potential sectors in Lebanon for economic development include banking and finance, civil engineering, construction and related sub sectors, infrastructure, agro-foods, pharmaceuticals, medical materials equipment, cosmetics, logistics, and fashion.

What steps are being taken to improve Lebanon's balance of trade?

The Ministry's aim is to promote Lebanon as a trade partner in foreign markets and this is being done through pursuing an action plan and a program of meetings, which aim to activate economic diplomacy with countries outside of the Middle East. Economic diplomacy is the use of the full spectrum of economic tools of the state to achieve its national interest. Economic diplomacy includes all the economic activities related to export, import, investment, lending, aid, and free trade agreements. As such, various meetings with the ambassadors of countries that Lebanon wishes to expand its economic and trade relations with are taking place. Moreover, the Ministry is mobilizing potential trade agreements that would facilitate the market access of Lebanese products such as the Free Trade Agreement with Aghadir Countries (Jordan, Egypt, Tunisia, and Morocco) and the MERCOSUR countries (Brazil, Argentina, Uruguay, Paraguay, and Venezuela). Also, MoET organized the Lebanon EU Trade, Industry, and Agriculture Services and Internal markets subcommittees, where major subjects were discussed to increase the trade exchange and facilitate the market access to European countries.

What is the role of public-private partnerships (PPPs) in the development of the economy, what initiatives are aimed at strengthening the investment climate and promoting the country as a FDI destination?

The primary objective of the PPP is to be able to use the experience and the ability of private funding on the public platform, whereby investments are private and are managed by the private sector, but within the legal framework depicted in the public-private partnership law. As such, reforms should be set and implemented, in terms of liberalization of economic sectors such as electricity and telecommunications, and in terms of securing an investment climate that allows the development of a suitable economic infrastructure for the execution of existing and expected activities such as oil extraction. On another note, and with regards to the initiatives aimed at strengthening the investment climate and promoting the country as a FDI destination, the MoET launched the “Lebanon SME strategy: a roadmap to 2020," which aims to accelerate the creation of startups, increase the productivity of existing SMEs, and improve the performance of existing SMEs. The main pillars of this strategy are to improve access to finance for startups and existing SMEs particularly through equity financing, strengthen and upgrading the legal and regulatory framework for businesses, facilitate access to markets for SMEs and increasing their compliance with international standards, upgrade the skills available and aligning them with the needs of businesses, and promote innovation.

© The Business Year - March 2015