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Lebanon | 25.05.2007
After delays brought on by political instability and a rapidly changing situation, the government has released its draft budget for 2007, though the delays in producing it may be nothing compared to trying to get it approved.


Emerging Lebanon 2006 While last year brought political upheaval to Lebanon, the country’s economy continued to surprise with its resilience. Now, with many analysts predicting further growth in the year ahead, Emerging Lebanon 2006 takes a look at this most complex yet compelling of Middle Eastern countries. With interviews and viewpoints from, amongst others, Prime Minister Fouad Siniora, Minister of Finance Jihad Azour, Minister of Economy and Trade Sami Haddad, Banque du Liban Governor Riad Salameh, and Beirut Stock Exchange President Fadi Khalaf.




2005 brought the most serious political upheaval since the end of the Lebanese Civil War. The assassination of former Prime Minister Rafik Hariri on February 14, 2005 opened the proverbial Pandora’s box, sparking a wave of violence, protests and counter-protests, and giving rise to the ‘Cedar Revolution’ which hastened the end of 29 years of Syrian occupation. Despite the country’s newfound political freedom, old rivalries remain and the long hand of Syria still casts a shadow over domestic politics. This chapter analyses the year’s events in detail, including the 2005 elections, the Siniora government and the debate over pro-Syrian President Emile Lahoud. Other features cover the return of old faces Michel Aoun and Samir Geagea, the UN investigation of the Hariri assassination, the question of Palestinian arms and ongoing tensions with neighbours Israel and Syria. Interviews with Prime Minister Fouad Siniora and Michel Aoun, leader of the Free Patriotic Movement, provide the inside story. Viewpoints from Edward Walker Jr., President of the Middle East Institute; Alastair Crooke, former advisor to EU High Representative Javier Solana; and Andy Love, MP and Chair of the British-Lebanon All-Party Parliamentary Group, add additional insight. A photo-chronology of the year’s events is also included.


2005 was set to be another year of strong growth, until the events of February 14 intervened and the country was thrown into a period of bloody turmoil. Much of the economy was thrown into neutral as GDP growth dropped to zero, although some sectors, notably banking and capital markets, still managed to post impressive growth figures. In this chapter, expert-written articles and interviews with leading government and business figures survey the state of the Lebanese economy. Major topics include the overarching burden of the national deficit, the government’s fiscal austerity programme and improvements in the trade balance. Other articles examine the surprisingly good health of the Lebanese pound, plans for the upcoming donor conference and efforts to relaunch the long-shelved privatisation programme. Interviews with Minister of Finance Jihad Azour and Minister of Economy and Trade Sami Haddad are also featured. Viewpoints by Marwan S. Barakat, Head of Research at Banque Audi-Saradar, and Zafiris Tzannators, advisor to the World Bank Institute, flesh out the story.


Despite the turbulent year, most Lebanese banks managed to shine throughout 2005, building on their solid reputations, record Gulf liquidity and the country’s strict banking secrecy laws. This chapter surveys the banking sector, highlighting its structure, lending patterns, market players, impressive 2005 profits, new issues, overseas expansion and mergers and acquisitions activity. In-depth features cover the rise of Islamic banking, the breakdown of the sector’s top-10 banks and the Banque du Liban’s 2005 sale of turnaround success story BLC. An interview with Riad Salameh, the Governor of the Banque du Liban, is also featured. Saad Azhari, Vice Chairman and GM of BLOM Bank, caps off the chapter with a look at Lebanese banks’ ambitious plans for foreign expansion.


In a sign of the market’s immunity to political shocks, 2005 was a year of record growth on the BSE, driven by surging Gulf liquidity and impressive banking profits. This chapter takes a look at the state of the bourse, including the continued domination of Solidere, the fixed-income market, new GDRs and issues from listed firms and market p/e ratios. The major challenges facing the BSE are also highlighted. The chapter concludes with an interview of Fadi Khalaf, President of the BSE.


Like much else in the Lebanese economy, the insurance sector was hit hard by the political turmoil of 2005, as the overall downturn constricted spending on insurance products. As this chapter points out, though, the sector proved its mettle and resilience during the lean years of the civil war and should enjoy solid future growth, especially with a new insurance law in the works. The life and motor insurance segments are also examined, along with prospects in the Syrian market and the need for further industry consolidation and more comprehensive government regulation. An interview with Elie Nasnas, General Director of AXA Middle East, concludes the chapter.


Lebanon’s infrastructure is something of a jumbled mess, running the gamut from the world-class Beirut Airport to overcrowded, dilapidated roads and public transport. This chapter provides an overview of the transport sector, including the success of MEA as well as plans to list it on the BSE, developments at the Port of Beirut, recent expansion of Beirut Airport and plans to improve the country’s roads, ending with a paean to the indispensable Beirut service, or shared taxi.


Lacking oil or gas, Lebanon is reliant on increasingly costly energy imports. The main problem facing the energy sector, though, is not price, but the government’s lack of a central energy strategy. This chapter examines developments in the sector, including off-shore exploration, the problem of red diesel, efforts to restart the long-shuttered Tripoli refinery and plans for a regional gas grid. An analysis piece takes a closer look at state energy giant EDL and the benefits of privatisation. An interview with Maurice Sehnaoui, the former Minister of Energy and Water, is also featured.


Hit hard by the chaos of 2005, the tourism sector in Lebanon still retains significant, if incompletely realised, potential, though stability is a prerequisite for future development. This chapter examines the sector’s annus horribilis, the luxury hotel and resort boom, Beirut’s transportation woes, developments at the Ministry of Tourism, national flagship airline MEA and efforts to develop tourism in the south. Sandro Saade, CEO of Wild Discovery, touches on efforts to appeal to non-Gulf tourists in an viewpoint at the end of the chapter.


While the construction and real estate sector took something of a tumble in 2005 due to the country’s political turmoil, the underlying fundamentals look solid for strong, long-term growth. This chapter covers the sector’s major trends, including public works projects in infrastructure, the boom in high-end residences and hotels, and growing problems with the supply of raw materials. The red-hot Beirut property market is also examined, as are the role of foreign buyers and up-and-coming developments outside the capital. Other features cover the cement industry, foreign property acquisition and major developments in the Beirut Central District (BCD). Raja Makarem, partner at RAMCO, analyses the Lebanese real estate market in a viewpoint at the end of the chapter.


Despite hopes that 2005 would finally be the year for telecoms privatisation, both the fixed-line and GSM markets remain firmly in state hands. This chapter takes a look at the telecoms sector, which remains in urgent need of reform, with sky-high prices, limited competition and a crumbling, dated infrastructure. This section also examines Lebanese telecom firms international acquisitions and the TRA, the new industry regulator. In spite of government neglect, private IT firms have managed to carve out a profitable and growing niche, although much more needs to be done to speed the spread of new technologies like DSL and crack down on endemic software piracy. An interview with Ineke Botter, CEO of Alfa, concludes the chapter.


The first overview in this chapter take a look at the challenges facing Lebanese industry, including limited natural resources, excessive red tape, high levels of corruption, increased foreign competition, as well as the need to develop more niche markets along the lines of jewellery and wine. The second overview highlights recent trends in the retail sector, including the rise of shopping malls and the importance of the apparel business, as well as the impact of 2005’s political turbulence on local businesses, particularly in Beirut’s Downtown area. Other features cover the problem of endemic software piracy and the government’s steps to curb it, the move to rein in trade in ‘conflict diamonds’, the impact of closures of Syrian border crossings on exports and the world-renowned Lebanese wine industry. Interviews with world-famous jeweller Robert Mouawad and Raymond Abou Adal, President of Holdal, are also included.


Lebanese media has flourished in the freer environment following the end of Syrian occupation in 2005. This chapter takes a closer look at the country’s richly developed print and television markets, as well as the role the Lebanese media played in helping to end Syrian occupation An in-depth features examines the spate of attacks on outspoken journalists in 2005 which resulted in the tragic deaths of Gibran Tueni and Sami Qassir. Michael Young, the Opinion Editor at The Daily Star, provides an outlook on the Lebanese media. A second chapter overview outlines developments in the Lebanese advertising market, including the effects of budgetary cutbacks and domestic political turmoil on the sector.


Though the country may lack large quantities of arable land, Lebanese agricultural products are known the world over for their high quality. This chapters focuses on efforts to develop high-end niche markets for Lebanese agricultural exports. The Ministry of Agriculture’s new programme for sector development is examined, as are recent promotional forays to regional and international trade fairs, the Export Plus initiative and the challenges presented by WTO membership, the EU Association Agreement and GAFTA.


An object of contention for over 1000 years, Beaufort Castle embodies Lebanon’s rich yet troubled history. From the Crusaders and Saladin to the IDF and Hizbullah, Beaufort has seen more than it’s fair share of conflict. This chapter takes an in-depth look at the history and legacy of this south Lebanese fortress.


International accountancy wizards PricewaterhouseCoopers survey the ins and outs of the Lebanese tax system. The section includes a look at personal income taxes, deductibles, payroll taxes, business income taxes, exemptions, reinvestment incentives, estate & gift taxes, capital gains as well as regulations specific to foreign firms operating in the country. Also covered in other articles are proposed changes in offshore investment regulation, the social security payments and VAT. The chapter concludes with a viewpoint written by PricewaterhouseCoopers Senior Partner Camile Sifri.


Legal experts at the Badri and Salim El-Meouchi Law Firm provide a comprehensive overview on Lebanese law, touching on business partnerships, arbitration, holding and offshore companies, and foreign investment. In-depth features explore banking regulations, anti-money laundering legislation, Islamic banking, intellectual property laws and real estate acquisitions by foreigners. An interview with Salim el-Meouchi, the Managing Partner of Badri and Salim el-Meouchi Law Firm, closes the chapter.


In-depth features cover the weekend ski getaway at The Cedars, as well as the latest up-and-coming neighbourhoods in Beirut. Also inside are listings for the best restaurants, hippest hotels and hottest bars and clubs in Lebanon’s steamy capital city. The chapter finishes with a profile of Michel Hayek, Lebanon’s leading clairvoyant.


All the numbers you’ll need to know, including chambers of commerce, embassies and consulates, airlines, car hire, hospitals and taxis. Plus web sites and tips on enjoying your stay in Lebanon.

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