WHAT A YEAR
Lebanon's economy continues to find new ways to grow despite regional challenges, yet deadlock at the top level of politics remains a barrier to reform.
GDP growth slowed a touch in 2015 to 1.5% YoY, following 1.8% in 2014. The World Bank, however, projects a return to 2014 levels of growth for 2016. This is despite the arrival of over 1 million Syrian refuges into the country—Lebanon's population was previously just over 4 million—and the loss of the country's main export route: Syria. Lebanon's economy is shored up by a strong banking sector—bank assets to GDP stands at around 345%—and a steady stream of remittances from its diaspora, which is over twice the size of the population of the country itself. The influx of refugees from Syria has taken its toll, stretching public services. Mountains of trash built up across the capital, Beirut, in early 2016, leading to protests that blamed mismanagement at the top of government. And despite subsequent efforts to open new landfills, the public remains frustrated at the political deadlock caused by the failure to elect a new president. The country's last president, Michel Suleiman, finished his tenure in May 2014, and since then over 30 attempts have been made to elect a successor in parliament, which is split between Christian, Sunni, and Shia coalitions. At the economic level, the deadlock was reflected in the World Economic Forum's 2015-2016 Global Competitiveness Report, which cited government instability as the number-one barrier to doing business in Lebanon.
Lebanon is far from lacking leadership, however, and in terms of economic resilience the Banque du Liban (BDL), the country's central bank, has looked to show the way. Since 2013, when external pressures pulled the economy off the tracks, the BDL has injected four stimulus packages of USD1 billion a year in the form of soft loans to Lebanese banks in order to boost lending activity. Sectors that have benefited include housing, education, and renewable energy, but also the high-tech sector, especially through the encouragement of entrepreneurialism. One such effort is Circular 331, a BDL initiative that pumped USD400 million into the local enterprise market and guaranteed 75% of banks' investments in startups. The initiative has helped to generate jobs and allow firms to pay the kind of wages necessary to keep talent within Lebanon. Going forward, the BDL “has a firm commitment to renew these stimulus packages as much as it is needed with the aim of strengthening economic and social stability in the country," Governor Salameh told TBY in an interview.
And for high-tech sectors such as IT, the outlook is good. An expected CAGR of around 9.7% from now until 2019 will see the sector grow from a value of USD436 million to upward of USD540 million, mostly the back of long-awaited upgrades to infrastructure, including the 2020 Telecom Vision initiative, which seeks to extend a 4,700km nationwide fiber-optic network. Future success will, however, depend on Lebanon's long-term potential to retain its highly skilled workforce.
Other sectors, such as transport, have more grounded concerns. War in Syria effectively cut off Lebanon's only land-based export option, pushing exporters toward ports and airports. Ever a people to jump on opportunities, however, plans are already under way to upgrade the country's maritime infrastructure. Under the spotlight is the Port of Tripoli, the second-largest sea port in Lebanon. Located within a 150,000sqm free zone, the port is getting a new, 600m-long berth for container trade. Located just 30km from the border with Syria, it is hoped that the port will become a key hub for regional imports once peace comes to Syria and the reconstruction effort begins.
The tourism industry also had cause for panic as external developments continued to paint the region in a negative light. That said, in 2015 the sector made a contribution to GDP of an impressive USD9.9 billion (22.1%), of which 36.6% was direct. A further 16.4% of the figure came from spending, of which 80% was carried out by foreign visitors, and the remaining 47% in the form of supply chains, investment, and government collectives. And the troubles have certainly not kept the tourists away; in 2016, total contribution to GDP is expected to grow by 5.3% to USD10.6 billion. Over the next 10 years, the WTTC projects the contribution to increase at 6.8% per annum, reaching USD26.3 billion by 2026 and thus representing a hefty 30.6% of GDP.
All being said, Lebanon, as ever, is in a better position than its external conditions dictate it should be. And as ever, a solid banking sector and keen fiscal management are to thank. Moving forward, Lebanon is set to play a key role in post-conflict Syria, yet in the short term it must look to circumventing the political impasse in parliament if it is to ensure the kind of stability businesses need to invest on surer footing.
WHAT A YEAR
TABLE OF CONTENTS
Focus: Lebanese-French Relations
Let’s be Franc
Lebanon shares a close relationship with its former colonizer, both in terms of economic relations and cultural identity among Lebanese. In spite of hardships like the presidential power vacuum and Syrian war next door, the bond is only getting stronger.
read articleFocus: Tripoli Economic Free Zone
The Tripoli Transformation
The Tripoli Special Economic Zone (TSEZ) is one of most ambitious projects in Lebanon at the moment. With an initial cost of USD27 million, it is meant to provide an alternative to the heavily centralized economic activity in Beirut, a new gateway for investments and trade to settle in northern Lebanon, and will transform the image of a long-neglected region.
read articleInterview
Dr. Freddie Baz, Vice Chairman & Group Strategy Director, Bank Audi
TBY talks to Dr. Freddie Baz, Vice Chairman & Group Strategy Director of Bank Audi, on the bank's increase in profits, dealing with currency devaluation, and working to turn the economy into an export-driven one.
read articleReview: Insurance
Life is a Rollercoaster
Unlike many emerging markets, Lebanon enjoys a relatively high insurance penetration rate and strong life segment, buoyed by compulsory lines and bancassurance. Competition remains fierce, however, and reform aimed at encouraging consolidation looks far off.
read articleInterview
Max R. Zaccar, Chairman of Commercial Insurance & President of the Association, Insurance Companies
TBY talks to Max R. Zaccar, Chairman of Commercial Insurance & President of the Association of Insurance Companies, on the resilience of the sector, increasing the already-high penetration rates in the country, and remaining one of the strongest insurance companies in the region.
read articleInterview
HE Arthur Nazarian, Minister, Energy and Water Resources
TBY talks to HE Arthur Nazarian, Minister of Energy and Water Resources, on the potential offshoots from oil and gas explorations, the country's National Energy Efficiency Action Plan, and attempts to increase renewable energy consumption.
read articleInterview
Wissam Zahabi, Chairman, Board of the Lebanese Petroleum Administration (LPA),
TBY talks to Wissam Zahabi, Chairman of the Board of the Lebanese Petroleum Administration (LPA), on making the investment climate attractive for foreign companies and becoming self-sufficient in energy.
read articleFocus: Sovereign Wealth Funds
Gas Pipe Dreams
Despite excitement over exploration of Lebanon's hydrocarbons, the creation of a sovereign wealth fund, which was included in legislation, has yet to take place. The country faces several obstacles in its path to creating and properly managing a fund.
read articleInterview
Pierre El Khoury, General Director, Lebanese Center for Energy Conservation (LCEC)
TBY talks to Pierre El Khoury, General Director of the Lebanese Center for Energy Conservation (LCEC), on the development of energy efficiency in Lebanon, awareness of energy conservation, and the country's 2020 renewable energy goals.
read articleInterview
Dr. Fady Gemayel, President, Association of Lebanese Industrialists (ALI)
TBY talks to Dr. Fady Gemayel, President of the Association of Lebanese Industrialists (ALI), on the group's work to promote industrialists, new developments in terms of industrial cities, and the future of industry in the country.
read articleFocus: Industrial Cities
Industrial Solution
Domestic and regional events have stifled Lebanon in building a strong national industry to protect and sustain its economy. Four proposed industrial zones throughout the country may provide it with the economic backbone it so desperately needs.
read articleInterview
Marianne Hoayek, Director of the Executive Office, Banque du Liban
TBY talks to Marianne Hoayek, Director of the Executive Office of Banque du Liban, on the roots of the Circular 331 concept, bridging funding gaps throughout the startup lifecycle, and the country's growing knowledge economy.
read articleRoundtable
Thinking It Through
On June 12, TBY and the American-Lebanese Chamber of Commerce (AmCham) organized a roundtable titled “Startup ecosystem sustainability: fostering cooperation to drive entrepreneurship." The participants discussed the impact of Circular 331, an initiative by Bank du Liban, the Lebanese central bank, to inject a potential of USD400 million into the local enterprise market and guarantee 75% of banks' investments in startups and startup support.
read articleFocus: Infrastructure for the startup ecosystem
The New Star
Startups are ubiquitous in Lebanon despite the difficulty of starting a business and the lack of services available to new businesses. However, a number of actors, both public and private, are innovating the environment and allowing startups to fulfill a greater role in the country's economy.
read articleFocus: Maritime Exports Bridge
Bridging The Gap
The conflict in Syria has wrought serious damage on the Lebanese economy, effectively closing off the country's trade routes through Syria. However, a new program geared at balancing the price disparities between land and sea transit is poised to help Lebanese industries.
read articleFocus: Real Estate
A Stimulus For The Rest Of Us
The real estate market in Lebanon is nothing like it used to be. The sector has slowed considerably, and demand has shifted from the traditional center, Beirut. However, stimulus packages from the central bank over the years have proven beneficial for all parties involved.
read articleInterview
Armand Pahrés, President, Lebanese Pharmaceutical Importers Association (LPIA)
TBY talks to Armand Pahrés, President of the Lebanese Pharmaceutical Importers Association (LPIA), on the development of legislation in the sector, boosting further innovation, and opportunities for Lebanon to become more self-sufficient in pharmaceuticals.
read articleFocus: Incentives for pharmaceuticals in Lebanon
Pharma Land
Lebanon has always been the region's leader in all things health related. Its pharmaceutical industry is no exception, and the country's incentives for international pharma companies to operate, manufacture, and distribute in Lebanon are only getting stronger.
read articleInterview
HE Elias Bou Saab, Minister, Education and Higher Education
TBY talks to HE Elias Bou Saab, Minister of Education and Higher Education, on the ministry's initiatives to improve the education system, ensuring access to education for Syrian refugee children, and reversing the brain drain in the country.
read articleInterview
Mohamed Harajli, Provost, American University of Beirut (AUB)
TBY talks to Mohamed Harajli, Provost of the American University of Beirut (AUB), on his upcoming plans for the university, the key role played by the AUB alumni, and fostering an entrepreneurial spirit among students.
read articleFocus: Programs to school Syrian refugee children
High Marks
Proportional to its population, Lebanon has taken in significantly more Syrian refugees than any other country. With the country now facing the problem of placing the tens of thousands of Syrian children in school, international donors and local and foreign organizations are making educational support a priority.
read articleInterview
Joseph G. Jabbra, President, Lebanese American University (LAU)
TBY talks to Joseph G. Jabbra, President of the Lebanese American University (LAU), on embracing technology at the university, the challenges of Lebanon's brain drain, and the importance of having international links with other institutions.
read article
