INVESTMENT PROJECTS Q2 2011

The second quarter of the year proved to be important for several local Lebanese companies striving for business success as four new investment applications are currently in the pipeline to secure final approval:

Algorithm Expansion (Industry/Pharmaceutical) - A 12.4 million dollar investment aiming at increasing the production capacity of this pharmaceutical company located in Zouk Mosbeh (Mount Lebanon) to cater for a growing market. 100 new jobs would be created as a result of this expansion, which would help in introducing new pharmaceutical products to the local and regional markets.

Vendome Hotel Expansion (Tourism) - A 31.8 million dollar investment targeting the expansion of the 5-star boutique hotel "Intercontinental Vendome" in Ain Al Mrayseh (Beirut). 70 new jobs would be created as a result of this expansion, which would enhance the luxurious experience of personalized services and fine dining for both leisure and business travelers.

Front D'Or (Media) - A 4.1 million dollar investment to help establish Front D'Or in Beirut as the provider of exclusive post-production services. 25 new jobs would be created as a result of this project, which contribute to the development of a regional hub for all media, music production companies and television directors.

Matelec (Industry/Transformers) - A 21.1 million dollar investment targeting the expansion and diversification of the company's industrial facilities in Jbeil (Mount Lebanon). 105 new jobs would be created as a result of this expansion, which would increase the quantity of electrical distribution, power transformers, pre-fabricated package substations, medium voltage switchgears and low voltage panels made available for the local market.

Also worth mentioning is the approval of the Council of Ministers for the Arwan Pharmaceuticals investment in Jadra (Mount Lebanon) - a 17 million dollar investment for the development of biotechnology products. 83 new jobs would be created as a result of this project, which will be considered as a landmark in Lebanon and the region for its products and the advanced technology used to produce them.

In addition to investments mediated by IDAL, the national economy has witnessed a series of activities from foreign companies, mainly:

• ZTE Corporation (ICT sector - China): distributes a wide range of products such as headsets and electronic systems in addition to various services including software support

• iFusion Labs L.L.C. (ICT sector - USA): offers programming services such as Woopra, launched in 2008 to generate live detailed statistics about website visitors

For more information on IDAL's incentives and to request an application form kindly refer to our website.

IDAL HITS THE ROAD WITH WORKSHOPS

The first stop was in Tripoli at the

Chamber of Commerce, Industry and Agriculture of the North where emphasis was given on the potential of the area in attracting investments in key sectors such as industry and agro food, in addition to the support that IDAL can offer to interested investors.

This was followed by a workshop at the Lebanese Banking Association where the role of IDAL as a key partner in the investment value chain was discussed.

The last workshop of the month was held at the Chamber of Commerce, Industry and Agriculture of Beirut where the focus was on the high investment potential in the ICT sector.

The workshops also aimed at informing investors of the various types of financial and non-financial incentives provided by Investment Law No. 360 along with getting feedback on how to enhance the law and make it more suitable to today's realities of local and international investment.

AGRO FOOD: AN INDUSTRIAL SECTOR WITH EXPORT POTENTIAL

A series of workshops were held during the last week of June at our premises gathering stakeholders in the agro food sector to get their feedback on their issues in accessing markets and to examine the options and means available for IDAL to help promote the growth of the sector. 

Throughout these workshops, IDAL aimed to achieve the following:

(1)  Identify key issues facing exporters across various dimensions, mainly: access to foreign markets and buyers; knowledge of market trends; and need for promotional support;

(2)  Understand the sector and sub-sectors needs plus any technical requirements needed for accessing new markets;

(3)  Emphasize the role of IDAL in providing the agro food companies with the appropriate mix of programs to support the promotion of the sector.

The ultimate goal of these workshops is to develop a comprehensive program of support for promoting the agro food sector. Today, various programs are already in place to provide the sector with an optimal infrastructure to become competitive regionally and internationally.

WHY THE AGRO FOOD SECTOR

• The agro food sector is one of the country's top sector performers, with agro food exports registering double digit growth figures (10% in 2010) and a compounded annual growth rate of 13% over the 2007-2010 period;

• Exports of agro food products (mainly Oil & Fats, Confectionary, and Canned Food products) have been increasing over the last 2 years despite a general slowdown in overall industrial sector exports;

• The potential in accessing new markets is vast given the sector's underlying competitive advantages, mainly: quality products; "Made in Lebanon" brand; ability to tap from a diverse range of agricultural products; ease of access to international markets as per the country's geographical location; and an increasing local demand for agro food products.

Upon the seasonal return of Lebanese expatriates to Lebanon for the summer, estimated in tens of thousands, we have launched advertisements highlighting Lebanon as a worthy investment destination, presenting IDAL as a reliable investment facilitator and encouraging successful Lebanese expatriates to consider investing in their country to expand their businesses and help create new job opportunities.

The campaign was launched in early July in time for  the "Worldwide Lebanese 2011" conference (20-21 July) where we moderated a session entitled "Investing in Lebanon: Towards a More Competitive Lebanese Market" discussing the development of entrepreneurship and growth opportunities available for small and medium enterprises in Lebanon. More information on the event will be available in our August newsletter.

FINANCING YOUR BUSINESS IN LEBANON

Financing innovative ideas remains an integral part of getting business off the ground in Lebanon. Lately, investors along with banks and incubators are beginning to take more and more interest in assisting Lebanese startups. There has been a strong collaboration between the government and private entities committed to provide entrepreneurs with a pro-business environment.

Kafalat, a Lebanese financial company assisting small and medium sized enterprises (SMEs) to access commercial bank funding, has supported 1,528 SMEs in 2010. Since 1999, Kafalat has been providing financial guarantees for loans granted by commercial banks to SMEs engaged in the following economic sectors: (1) Industry, (2) Agriculture, (3) Tourism, (4) Traditional Crafts, and (5) High Technology.

More entrepreneurs have been resorting to the business incubators expanded across the country as well. Berytech, South Business Innovation Center,  Business Incubator Association in Tripoli (BIAT) and AGRIPOLE have overseen the establishment of hundreds of startups, facilitating access to capital, creating networking opportunities and providing business development services including marketing and promotion plans, R&D, legal and IT support. SMEs have also benefited from business hosting facilities, reducing risk and cost in the early stages of their business projects.

Bader's Young Entrepreneur Program has been a popular reference since 2010, in terms of accommodating new start-ups through counseling and providing all necessary tools for the successful launching and development of high impact entrepreneurial projects. Bader's initiative aims at fostering a stronger entrepreneurial culture by providing specific and targeted support to Lebanese startups.

The viability and creativity of emerging business plans are also reflected in the recent surge of Venture Capital Funds (VCF) in the Lebanese financial sector, which provide  entrepreneurs with much needed seed capital. The Carlyle Group, The Building Block Equity Fund;, Middle East Venture Partners, and Cedrus Ventures are examples of VCF that invested in the early and growth stages of innovative Lebanese companies.

Yet commercial banks remain major providers of credit to businesses in Lebanon. Loans to the private sector were sustained in 2009 and increased by 13.3% to reach a value of USD 28.4 billion, while growth in bank lending dropped by 80% regionally and suffered net term contraction globally. The stable, highly liquid and exceptionally sound banking sector continues to be the backbone of the Lebanese economy, ranking 4th worldwide in terms of the "Soundness of Banks" indicator. 2010 figures further prove this status with commercial bank loans reaching a total value of USD 34.93 billion equivalent to a 23% annual growth.

National and foreign investors can also benefit from sector-specific credit incentives set by the Central Bank in addition to highly competitive interest rates and flexible payment terms. Entrepreneurs in Lebanon would also benefit from a transparent and effective legal framework that protects the rights of both borrowers and lenders, facilitating lending decisions and expanding access to credit. According to the Doing Business 2010,  Lebanon has a strong credit information system and a higher degree of security than the average of the MENA economies, scoring 5 out of 6 in terms of depth of credit information index.

Package Deal Contract Scheme 

Under this scheme, investors receive a package of incentives, exemptions

and reductions. Incentives provided include:

• exemption on land registration fees;
• exemption from income tax for a certain period of time;
• exemption from taxes on project dividends;
• reduction on construction permits and residence permit fees

To qualify for this scheme, a media project needs to have a minimum investment value of 200,000 USD and should generate 25 job opportunities.  

Investment Project by Zone  Scheme 

Incentives provided include:

• exemptions on income tax over a certain period of time;
• the provision of work permits

The Investment Project by Zone scheme divides Lebanon into three geographical zones (Zones A, B and C) and grants incentives according to these zones.

To qualify for this scheme, a           media project needs to have a minimum investment value of 200,000 USD irrespective of the geographical zone.

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