My research and investment-banking boutique, M.I. Associates, has been producing yearly economic reviews of the Lebanese economy since 1981. And over the last quarter- of-a-century, we have endeavoured to provide the most comprehensive sector analysis and historic narration of economic development in Lebanon. The latest report pertaining to 2006 has just been published and shows the most contradictions yet.
The year started out with incredible economic performance equating to the best figures since 1993. Ultimately, however, this period would only last six months before the onset of the summer war. Lasting from July 12th to August 14th, the conflict brought with it devastation on a grand scale. Indeed, Israeli threats of setting Lebanon back 15 years seemed to materialise. Investment, which had flowed at the rate of three billion USD in the first six months of 2006, has already all but dried up. Also, major Kuwaiti and Emirati real estate developments worth over 1.5 billion USD were put on hold and, worst still, widespread internal political dissent along with the anti-government tented settlement in Downtown Beirut brought about severe economic loss.
But at the start of 2007, Lebanon found itself in a peculiar situation. Even with many businesses and industrial plants closing down or moving to other countries, the loss of five per cent in GDP, the young and educated leaving to wherever opportunity beckoned, somehow banks were flush with money with total deposits exceeding 60 billion USD – about 2.5 times the total GDP.
The ingredients for growth can be enumerated essentially as four factors: direct investment flows, revenues from tourism, aid money and transfers by Lebanese. The first two sources of revenue and growth had shrunk because of prevailing political differences; but transfers by Lebanese had reached a record of just over six billion USD and aid pledged to Lebanon at the Paris III Conference held on January 25th, 2007 reached an astronomical figure of 7.6 billion USD. It must be stated, however, that most of the pledges are in the form of long term and low interest financing for developmental projects. These projects, which account for six of the 7.6 billion USD, have to be approved by the Parliament. But with Parliament closed due to political differences, funds made available by the World Bank, Saudi Islamic Fund, Arab Fund and the European Investment Bank continue to remain frozen until such time as there is internal political reconciliation.
In spite of all the odds, the Lebanese economy is still functioning, albeit at a slower pace. The most significant contributor to expectations of continuity comes from the work and production of Lebanese-owned or-managed companies that enjoy a regional or global role. Within our report we focus on five such enterprises as examples of how the Lebanese can succeed beyond the confines of their internal economic circuit. Although the five enterprises covered reveal the importance of knowledge-based activities and financial and insurance services as well as restaurants and hotels, there are hundreds of Lebanese-owned or-managed enterprises which are just as successful. Some such examples include contracting and engineering companies such as C.A.T., Al Mabani, Oger, Dar Al Handasah, Khatib & Alami and Solidere International. These all provide thousands of work opportunities to Lebanese engineers, accountants, finance specialists and craftsmen.
The 2006 report does not deal with a large number of Lebanese-owned or managed-regional or international enterprises. However, it does predict that in the eventuality Lebanon enjoys durable security and introduces a modern, comprehensive and encouraging legislation for activating a financial market, it can generate a pull for investments in a range of these companies, which could surpass the country’s overhanging public debt of over 40 billion USD. If Israel managed to pull it off during its political crisis-driven recession between 1988 and 1993, so can Lebanon.
M.I Associates full report on Lebanon’s Economy 2006 can be ordered on +9611 735 704/9 or HYPERLINK "mailto:mia@cyberia.net.lb" mia@cyberia.net.lb.
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