Is Lebanon worth investing in?
Lebanon: a country where top notch designer brands and mammoth multinationals are only a street away from refugee camps.
Despite Parliamentary elections that were held earlier in 2018; the yet-to-be appointed government has failed in improving the economic conditions during the past year.
Speaking to Al Arabiya; a leaked source said that external organizations such as the International Monetary Fund (IMF) have been providing the Lebanese government with recommendations since 1999 to avoid severe budget deficits.
However, the government hasn’t complied and Lebanon is currently the third most indebted country in the world with a debt-to-GDP ratio of 150 percent, according to the World Bank.
As a result, the paradox stirs confusion for both local and foreign investors willing to receive returns from possible economic progress.
Three main reasons come into play regarding the lack of stability with investments in Lebanon, according to Therese Abu Rjeily, a branch manager at Creditbank, one of Lebanon’s leading banks.
“Foreign direct investments (FDI) are highly fluctuating but there is no single reason, but a combination of them such as the narrow and undifferentiated investment pool, fear brought up through political turmoil and the monopolized commerce sector,” she said.
Looking deeper; the private sector seems to be the corporate leader in comparison to the government’s financial and economic contribution.
However, during early 2018 the government put effort into securing funds for the country through the CEDAR Conference held in Paris, which was aimed at international support for infrastructure projects in Lebanon to resuscitate the economy.
In response to the proposed Capital Investment Plan discussed in the conference, a Chinese company has recently set forth with financing the reconstruction of the Silk Road extending between Tripoli; a once port city in North Lebanon; and Syria.
China has a deep interest in investing in Lebanon following the government’s inability to cope with the influx of Syrian refugees; based on the Chinese Outbound Investment Guide published by the International Financial Review.
The interest makes sense since Lebanon scores first in achieving FDIs as a percentage share of their GDP, in comparison to other Middle Eastern countries.
From an analytical lens, the comparison shows that FDIs are integral to the country’s growth and progress as well as encouraging the Lebanese to have a positive outlook towards investment due to the importance it adds to the country’s economy as well as their personal situation.
Camille Haddad, former assistant general manager of Lebanese Swiss Bank, said that the spectrum will change because there are more outflows of FDIs, ever since the Gulf population was warned of the political situation in Lebanon.
However, other than China, many foreign investors are rethinking investing in Lebanon. “FDIs are not stable on a month-to-month period because we are rated a B- country, making us a high risk one, then investments largely depend on the situation we are in,” said Hilda Mardelli, Budget Control Officer at SGBL.
To objectively understand whether investments should be encouraged in the country in the country or not, it is important to highlight the World Bank’s breakdown of investments across different sectors in the country.
The education level is another factor to inspect.
According to UNICEF, the Lebanese population has a literacy rate of approximately 99 percent amongst the youth; with the vast majority of them being both mobile and internet users.
The young and creative population allowed for the flourish of the new hub of technology innovation, the Beirut Digital District; dubbed BDD; which has attracted much attention and support both locally and internationally.
BDD is home to over 100 individual startups, accelerators and investors; resembling what you see in Silicon Valley.
In order to attract youth’s investment, the Central Bank of Lebanon created a program ensuring that the country’s most prominent banks would invest in startups.
Doing so, they have been increasing the availability of jobs for the youth, especially since the International Labor Organizations recorded an 18 percent rate of youth unemployment in Lebanon this year.
As a start, 2015 was the year where the Central Bank of Lebanon responded by presenting $400 million to invest in startups lead by young entrepreneurs; as a way to benefit from their drive towards technology and knowledge.
Despite the proof of versatility in investments in different branches of the economy, numbers show that investments have been held back and fluctuating.
The compilation of Lebanon’s credit account released by the World Banks shows the debt both to the International Bank for Reconstruction and Development (IBRD); which offers loans to middle-income developing countries; and the International Development Agency (IDA); which offers concessional loans and grants to the poorest developing countries.
However, the point of conclusion is presented in the form of a question. Is the fact that a country that is full of educated, tech-savvy and ready youth who want to abolish their country’s instability and corruption worth investing in or should the due diligence focus on the corrupt elite that seem to be casting their shadow over the future of this country?
