Lebanon has managed to draw reasonable foreign direct investments since 1997 despite the numerous difficulties and challenges facing the country, according to a report by UNCTAD. The 106-page report, entitled “Investment Policy Review,” showed Lebanon can lure even bigger foreign investments if certain measures were adopted by the government to facilitate the lives of investors.
The report was presented during a conference organized by the Investment Development Authority of Lebanon and attended by the Information Minister Jamal Jarrah and head of IDAL Nabil Itani Wednesday.
Itani said security concerns and political events that have engulfed the Middle East in recent years have naturally affected the flow of FDI to Lebanon. He added that for this reason, IDAL started looking for new effective ways to confront these challenges and difficulties.
“Lebanon has attracted significant amounts of FDI. From 1997 the country started to attract rising levels of FDI, with inflows consistently surpassing $2 billion per year since 2003, and reaching a record-high of $4.4 billion in 2009. This is a strong performance for a post-conflict, developing economy with a population of just 6 million in 2016 of which an estimated 1.5 million are refugees with limited natural resources, and where manufacturing accounts for less than 10 percent of gross domestic product,” the report said.
UNCTAD added that FDI has also played a leading role in the development of Lebanon as a services hub in the region, and has contributed significantly to employment generation.
“In recent years, notwithstanding a decline from their peak, FDI flows into Lebanon have shown resilience, despite several challenges affecting investment worldwide and in the region,” the report said.
FDI inflows over the period 1990-96 stood at an average of $24.4 million per year.
But as of 1997, a second phase began when FDI inflows increased rapidly, propelled by real estate projects associated with the reconstruction effort, the privatization of the postal system, the lifting of travel restrictions by the United States on their citizens and companies, as well as the introduction of a pegged exchange rate with the dollar, which significantly reduced inflation.
The report said in 2001, Lebanon also passed a new investment law (Law 360 of Aug. 16), which introduced new incentives and assigned to IDAL superseding authority to grant investment licenses and permits.
It noted that from 2003 until 2009, FDI flows boomed, helped by significant FDI attraction into tourism and telecommunications, and the lifting of FDI restrictions for offshore companies.
However, the flow of FDI to Lebanon drastically fell between 2010 and 2017 due to the effects of the international financial and economic crisis, political instability in the region, a drop in oil prices affecting some of the traditional countries of origin of FDI to Lebanon, as well as an influx of refugees resulting from the conflict in Syria.
In this context, FDI inflows declined to an average of $2.9 billion per year.
“Despite the recent slowdown, the FDI performance of Lebanon remains above that of its main comparator economies in the region.
While Lebanon represents 1.5 percent of the Middle East population of 384 million, it has attracted 5 percent of FDI inflows to the region over the period 2007-11 and 8 percent between 2012-17,” the report explained.
It added that average FDI inflows to the MENA region more than halved in the aftermath of the international financial and economic crisis of 20082009 and the start of the Arab Spring in 20102011.
“Investors from the region account for the lion’s share of FDI projects, but new routes are opening up. Project data indicates that most investors over the period 20032015 come from the region, notably the United Arab Emirates (50 percent), Kuwait (14 percent) and Saudi Arabia (13 percent,” UNCTAD said.
The Daily Star