LEBANON - Economy

The Lebanese economy is characterized by a liberal economic activity and a strong banking sector with high financial standing. In 2006 the conflicts that took place In Lebanon had a negative impact on the Lebanese economy.

However due to the government's proper handling, the reconstructions and the recovery of the economy improved speedily. The global economic crisis affected slightly the Lebanese economy in 2009. There was an obvious decelerate in foreign trade-in goods and on the general transactions, in the economy. Moreover the inflation decelerated in 2009, following the drop in international prices, which have brought import costs down.

Imported inflation in Lebanon had a strong impact on the Consumer Price Index (CPI) since imports of goods amount to about 40 per cent of domestic absorption. However, the decline in international prices of goods had a positive impact on Lebanon's foreign accounts.

The trade-in-goods deficit increased by only 0.8 per cent in 2009 compared to a 41 per cent a year earlier, reflecting mostly the deceleration in imports. Exports of services continued to improve in 2009 with tourism arrivals to Lebanon increasing by an extensive 39 per cent during that period.

The target for Lebanon is to maintain a cautious approach to economic management, even though its growth in the financial sector it is significant. Because of the high deficits and public debt, Lebanon is exposed. Therefore, careful monetary management to sustain the confidence of all depositors and investors both domestic and foreign remains critical for Lebanon's economic forecasts. Continued careful monetary policies are also critical managing of risks and safeguarding Lebanon from the effects of the global crisis.

To succeed that implementation of key structural reforms are needed. Some of them include: improvement of the performance of the country in terms of growth and employment creation, initiation of structural reforms (particularly energy, water, telecom and private sector development) that would improve the business/investment environment, competition, the entry and operation of Small- and Medium-Enterprises (SMEs), and service delivery, which collectively would raise the long-term growth potential of the Lebanese economy. Moreover in 2010 the World Bank suggested a program called "Country Partnership Strategy (CPS)", in order to help Lebanon overcome any economic difficulties.

The CPS has a flexible approach and focuses on five strategic points over the next four years: sustained fiscal stability and improved public financial management governance, competitive business environment, improved basic infrastructure services, quality public education system and an expanded, sustainable and inclusive social protection system (social safety nets, pensions, health insurance, and other forms of income protection for the most vulnerable).

The CPS also addresses gender and integration within the region. The major industries of Lebanon are banking, tourism, food processing, jewellery, cement, textiles, mineral and chemical products, wood and furniture products, and metal fabrication. In order to enchase its economic growth on these sectors and to increase exports, Lebanon has signed bilateral investment treaties with Canada, China, Cuba, France, Germany, Spain, Romania, Russia, Armenia, Ukraine, Egypt, Syria.

It has also initialled bilateral investment treaties with Czech Republic, Poland, Finland, Italy, United Kingdom, Switzerland, Kuwait and Zanzibar. Lebanon has signed agreements on avoidance of double taxation with Egypt, France, Romania, Russia and Syria. Similar agreements have been initialled with Canada, the Czech Republic, Poland, Turkey and the Ukraine. Negotiations underway between Lebanon and the EU for Lebanon to join the Euro-Mediterranean partnership agreement are at an impasse as of June 1997.

Economy Forecast

Lebanon went through a period of recession during the world financial crisis. However the country's economy experienced an almost 9% GDP growth.

GDP Real Growth Rate (%)	GDP - per capita (PPP) (US$)

At the end of 2008, the country's GDP was reported at $29.49 billion in US dollars but then with a slight increase of 13.91%, 2009 ended at 33.585 billion and a world ranking at number 80. For 2010, the most recent forecasts put year-end numbers for GDP at $37.04 billion. By the end of 2015 GDP is reported to reach $51.819 billion in US dollars. As far as it concerns the inflation rate the forecasters are optimistic. In 2015 the rate is expected to close at 2.215%.

Business Environment

Lebanon has a very strategic location in the Middle East since is the link of East and West. Lebanon is characterised by a stable political system, a well-developed legal framework, an excellently skilled workforce, and a special lifestyle, Lebanon offers a large number of investment opportunities in all sectors of the Lebanese national economy.

Lebanon has an agency called IDAL, which is responsible for promoting investments in Lebanon, identifying marketing opportunities, guiding international companies to establish major business positions, and assisting investors in accessing a wealth of unexploited economic potential. Moreover, Lebanon is characterised by a free enterprise system and exceptional investment legislation system.

The fundamental principles that the Lebanese economy is laying on are: • The protection of private ownership possessions with no discrimination between foreign and local ownership.

Foreign investors may entirely own and manage their business and private assets without any restriction or requirement that will in any way work as a frontier or weaken their control over their resources.

• The freedom of industrial activity, which implies that no law or regulation maybe designed to excessively influence business decisions. This means that, though there are priorities in the private and the public sectors, legislation do not require from the investors to engage in any particular sector or project.
• Lebanon's economic legislation has unlimited competition in the business sector.

The legislation is designed so there is no discrimination against any business unit, group or sector of activity. Any discriminatory tax breaks incentives or levies do not slow down competition. Additionally the low rate of the taxation system, which does not affect any business, plans it's another important factor that encourages investments.

As far as it concerns the trade sector Lebanon never had any restrictions on the free flow of goods and capital, has never imposed any discriminatory tariffs or regulations and has never erected any administrative obstacles to trade.

Therefore Lebanon offers the most moderate investment climate in the Middle East, with no significant restrictions on foreign investment, liberal trade and investment policies.

Local investment guarantee coverage, bank confidentiality and free exchange system with no control on capital flows, low taxes with a flat ten per cent corporate tax and a five per cent withholding tax, well-defined legal rights for property and a wide business law with several different types of companies.

Additionally the government is also issuing Dollar-Denominated Euro bonds, and Deutsch Mark-Denominated Euro Bonds, to finance major projects. With little exceptions, there is no discrimination between national and foreign investment and no discrimination against foreign investors. Foreign-owned firms have the same investment opportunities as local firms.

Market Opportunities

• Strategic Geographical Location: At the Centre of the Eastern Mediterranean, Lebanon is uniquely positioned at the crossroads of Africa, Asia, and Europe.
• Free Market Economy: Based on a long tradition of liberal investment policies, free enterprise and private initiative are the drivers of the Lebanese economy.
• Liberal Financial Environment: With a free foreign exchange market, full currency convertibility policies, no restrictions on the inward or outward movement of capital, and banking secrecy, Lebanon is truly ideal for conducting business.
• Developed and Non-Discriminatory Legal Framework: Lebanon offers a well-developed legal framework that protects private property and grants Lebanese and Non-Lebanese equal rights.
• Available Investment Opportunities: Lebanon offers investors a wide array of investment opportunities in all sectors of the economy. Furthermore, Lebanon represents a point of entry to a large regional market.
• Moderate Tax Rates: With maximum tax rates of 15% for companies and 20% for individuals, Lebanon’s fiscal charges are among the most moderate worldwide.
• Qualified and Competitive Workforce: Lebanon’s workforce is well educated and multi-talented. Skilled labour is widely available, yet at moderate fees.
• New and Expanding Infrastructure: With state-of-the-art telecommunications, a modern electricity network, a new airport, expanding port facilities, and an ambitious road rehabilitation program, Lebanon’s infrastructure is quickly becoming one of the best in the region.
• Unique Living Environment: Thousands of years of history, optimal climatic conditions, a very rich culture, and a vibrant nightlife justify Lebanon’s “Pearl of the East” surname.
• Facilities and services for Investors: IDAL’s “One-Stop-Shop” Service offers investors a fast and seamless way to obtain the official permits and licenses needed to implement their projects.