“ Lebanon: Opportunities and Challenges ”

“Lebanon: Opportunities and Challenges” Presented by Dr Maen Huneidi Honorary Consul of Lithuania in Lebanon December 4th,2007

Geography of Lebanon

Geography of Lebanon • Area and boundaries • total: 10,452 km²land: 10,280 km²water: 170 km² • Land boundaries:total: 454 kmborder countries: Israel 79 km, Syria 375 km • Coastline: 210 km • Maritime claims:territorial sea: 12 nautical miles • Elevation extremes:lowest point: Mediterranean Sea 0mhighest point: Qurnat as Sawda' 3,088 m

Geography of Lebanon • Climate: Lebanon has a Mediterranean climate characterized by: -Summer: long, hot, and dry -Winter: cool and rainy. -Fall: transitional season with a gradual lowering of temperature and little rain -spring: occurs when the winter rains cause the vegetation to revive.

Population • Population: 3,826,018 (July 2005 est.) • Population growth rate: 1.26% (2005 est.) • Birth rate: 18.88 births/1,000 population (2005 est.) • Death rate: 6.24 deaths/1,000 population (2005 est.)

Population • Lebanese Ethnic groups: Arab 95%, Armenian 4%, other 1% • Religions: -Muslim 59.7% (Shi'a, Sunni, Druze, Isma'ilite, Alawite or Nusayri), -Christian 39% (Maronite Catholic, Greek Orthodox, Melkite Catholic, Armenian Orthodox, Syrian Catholic, Armenian Catholic, Syrian Orthodox, Roman Catholic, Chaldean, Assyrian, Copt, Protestant), other 1.3% note: seventeen religious sects recognized • Languages: Arabic (official), French, English, Armenian

Economy of Lebanon • Currency: Lebanese pound (LBP) • Fiscal year: calendar year • Trade organisations: GCC, WTO, GAFTA, EFTA, and others

Economy of Lebanon • Satistics: • GDP : $21.45 billion (2006 est.) • GDP growth: -5% • GDP per capita: $5,500 • GDP per sector: -Agriculture:7% -Industry: 21% -Services: 72% • Inflation: 4.8% • Population below poverty line: 28% • Unemployment: 20%

Economy of Lebanon • Agriculture- products: -Citrus, grapes, tomatoes, apples, vegetables, potatoes, olives, tobacco, sheep, goats…

Economy of Lebanon • Main industries: -Banking -Tourism -Food processing -Jewelry -Cement -Textiles -Mineral and chemical products -Wood and furniture products -Oil refining -Metal fabricating

Economy of Lebanon • TRADE: Lebanon has: -competitive trade -free market regime -strong laissez-faire commercial tradition -no restrictions on foreign exchange or capital movement -no restrictions on foreign investment -bank secrecy is strictly enforced

Economy of Lebanon • Trade • Exports: $1.881 billion f.o.b (2005 est.) • Export goods: -Authentic jewelry -inorganic chemicals -miscellaneous consumer goods -fruit -tobacco -construction minerals -electric power machinery and switchgear -textile -fibers -paper

Economy of Lebanon • Main exports country: -Syria (25.3%) -UAE (11.4%) -Switzerland (8.1%) -Turkey (6%) -Saudi Arabia (5.4%)

Economy of Lebanon • Imports: $9.34 f.o.b • Imports goods: -Petroleum products -Cars -Medicinal products -Clothing -Meat and live animals -consumer goods -paper -textile fabrics -tobacco

Economy of Lebanon • Main imports partners: -Italy (11.1%) -Syria (10.7%) -France (9.2%) -Germany (6.4%) -China (5.4%) -USA (5.3%) -UK (4.4%) -Saudi Arabia (4.3%)

Economy of Lebanon • Public finances: -Public debt: $31.1 billion (209% GDP) -Revenues: $4.444 billion (2006) -Expenses: $7.429 billion (2006) -Economic aid: recipient $2.3 billion (2003 est.)

Economy of Lebanon • Business and investment opportunities: • Tourism: Arab tourism, health and wellness tourism, convention and business tourism, amusement parks, etc. • ICT: software development, common services, back office services, call centres, etc. • Industry: agro-food, furniture, jewellery, cosmetics, clothing, paper and packaging, etc. • Agriculture: fruits & vegetables, organic products, dairy products, tobacco, olive oil, wine, canned fruits, honey, etc. • Health & education: private schools and universities, cosmetics, healthcare services, etc. • Financial and professional services: insurance, communication, advertising, financial services, consulting services, etc.

Economy of Lebanon • Business and investment opportunities: -The majority of foreign investments go to tourism and real estate (luxury hotels, villas, etc.), mainly catering to wealthy Arab tourists suddenly wary of traveling to the US or Europe. -Profits earned by Solidere, the company established to rebuild downtown Beirut after the civil war, reflect the real estate boom.

Economy of Lebanon • Business and investment in Lebanon: -The travel and tourism industry is a catalyst for construction and manufacturing. Large international companies have been awarded contracts for future hotel projects like Hyatt, Express by Holiday Inn, Rotana and Intercontinental Hotels, which has just signed an agreement with Hotels of Lebanon -Beyond hotels, trade and leisure facilities (amusement parks, casinos, etc.), new activities are booming thanks to affluent customers interested in luxury activities, real estate and communications.

Economy of Lebanon • The privatization process offers many opportunities, especially with the transfer of 40 percent of Lebanon Telecom’s fixed telephony lines and other privatization transactions scheduled for 2006.

Economy of Lebanon • Lebanon agrees EU trade deal Beirut's airport's new runway: the city is open for business • Lebanon has signed an association agreement with the European Union, becoming the eighth player to join a jigsaw the EU hopes will eventually become a Mediterranean free-trade area.

Economy of Lebanon • Challenges : To further build an enabling environment for investment, the government carried out additional key steps, among which was: - the amendment of the 1969 law on the acquisition by foreigners of real estate and real estate rights; - the enactment of the law fighting money laundering; - the amendment of the arbitration law; - the enactment of the law ratifying the 1965 Washington Convention on the Settlement of Investment Dispute between States and National of other States; - the enactment of the Privatization Law; as well as relinquishing government's protection of Exclusive Agents.

Economyof Lebanon • The challenges facing Lebanon revolve around four angles: Governance, Public Finance, Perception and Geopolitical Conditions. 1-Lengthy bureaucratic procedures remain one key impediment to foreign investment: The government's current public sector reform program is trying to improve governance and remove hidden obstacles to investment through cutting red tape and simplifying approval procedures;

Economy of Lebanon 2- Lebanon's public finance conditions are also an overriding concern to investors: -In 2003, the government was able to reschedule 32% of the public debt through a $10 billion financial package that included soft loans from donor countries after the Paris II meeting, a $3.6 billion agreement with commercial banks and a $4.1 billion scheme with the Central Bank.

Economy of Lebanon 3- In addition, Lebanon’s current perception in investment circles has been somewhat obscured by misconceptions of what it can offer to investors: -The Lebanese government has been and is currently exerting all efforts to showcase Lebanon and raise awareness about the virtues and the attributes of the business environment. However, many businesspeople in Europe and North America seldom realize the business opportunities for investment in Lebanon.

Economy of Lebanon 4- On the other hand, investors also highlight regional stability as an important stumbling block before investing in Lebanon: -This problem is not exclusive to Lebanon. The region has had a history of volatility – which has dampened investment. Caught in the middle of different conflicts, Lebanon has paid a high price for the region’s instability in the form of lost investment opportunities.

Economy of Lebanon • Do I need permission to invest in Lebanon? • No. There is no permission of any kind required for investing in Lebanon. Generally speaking, there are very few restrictions imposed on foreigners, and investors of all nationalities are free to undertake any project in compliance with existing regulations. • · Is it easy to establish a company? • Yes. With simple incorporation procedures, an absence of administrative constraints (except for banking, financial, and insurance firms), and seven types of companies to choose from, it is very easy to establish a company in Lebanon in less than a week.

Economy of Lebanon • · What is the tax rate? • The corporate tax rate depends on the type of company. It ranges from a flat rate of 1,000,000 LBP for offshore companies to a maximum of 15% of profits. Distribution of dividends is subject to a 10% tax rate. Salaries and wages of employees are progressively taxed from a minimum of 2% to a maximum of 20%. • · Is it difficult to obtain the required permits and licenses? • No. The “One-Stop-Shop” Service recently established in IDAL’s premises facilitates and streamlines the permitting and licensing process and allows investors to obtain the various permits and licenses they require with minimal time and effort.

Economy of Lebanon • Are there any investment guarantees? • Yes. A number of national and international organizations including the National Investments Guarantee Corporation (NIGC), IAIGC (Arab Consortium), COFACE (France), HERMESM (Germany), ECGD (UK), OPIC, the Export Import Bank (US), MIGA and others ensure investments against non-commercial risks

Economy of Lebanon • · Is there a mechanism for dispute settlement? • Yes. A Lebanese Arbitration Center has recently been established in close affiliation with the Chamber of Commerce and Industry and Agriculture of Beirut. Lebanon has also ratified the New York Convention of 1958 relating to international arbitration. • · Where can I find help and information on setting up a business in Lebanon? • Whether you are looking for general information about the investment climate and the investment opportunities in Lebanon or specific information about how to establish a company and obtain the required permits and licenses, your best reference is IDAL. Through its “Investors and Businessmen Information Center” and its newly established “One-Stop-Shop” Service for Permitting and Licensing. IDAL is most able to guide and help you.

Thank you

“ Lebanon: Opportunities and Challenges ”