FEBRUARY 2014

DEAR READERS,

With the dawn of a new government we are hopeful that trust in the country's ability and resilience will be restored and reflected through an increase in investments to the country. With a new cabinet in place, we are looking forward to the ratification of the amendments that we have drafted to the decrees pertaining to Investment Law No.360, and whose aim is to provide lucrative incentives to various projects with a lower investment size than what we have deemed as eligible when the law was approved 10 years ago. The new decrees will impact the incentives granted to the newly launched private industrial zones in various regions in Lebanon and will ensure that more factories will benefit from tax exemptions and free land registration among others. Reflecting on 2013, and as part of our yearly review, we were able to analyse the flow of foreign companies to Lebanon; it came to our attention that there is a growing interest of European investors in the country, making up as much as 50% of foreign companies that registered in Lebanon in 2013. Consequently, we believe that much could be done to maintain and enhance business relationships between Europe and Lebanon, whether through joint economic conferences, investment and trade missions, as well as tailored treaties and conventions that are mutually beneficial, especially that Lebanon has a booming business process outsourcing industry that European businesses in the ICT and digital media sectors could take advantage of.

I hope you will find the information useful, for any feedback please do not hesitate to contact us.

Best Wishes,

Nabil Itani

Chairman-General Manager

IIF: IMPROVED SECURITY KEY TO GROWTH REVIVAL IN LEBANON

While the International Monetary Fund has estimated Lebanon's GDP Growth at 1.5% for 4 consecutive years since 2011, the Institute of International Finance's (IIF) research note published in January 2014 hinges on an improvement in the Lebanese economic situation in the event of formation of government - which occurred on February 15, 2014 - and improvement of the security conditions in the country.

Under this scenario, real growth would accelerate to 5% in 2014 and 6% in 2015. Government revenues would recover, leading to narrower fiscal deficits and a shift in the primary balance from a deficit of 2.5% in 2013 to a surplus of 3% in 2015. Furthermore, private investments by residents, FDI, construction, and the number of tourist arrivals are assumed to rebound in the second half of 2014 and 2015. This scenario also promises as a lower debt to GDP ratio, estimated at 137.3% for 2014.

According to the IIF, sustaining such a recovery would require a stable political environment and structural reforms (including addressing the problems of the electricity sector and improving governance). The recent discovery of significant gas reserves offshore could also boost business confidence and improve prospects further, according to the same source.

FOREIGN COMPANIES IN LEBANON IN 2013

While instability caused by regional turmoil prevails, a considerable number of foreign companies continue to show faith in the Lebanese economy with around 60 foreign companies that registered in Lebanon in 2013, a number slightly higher than that of 2012. The companies are either opening branches, subsidiaries or representative offices to cater for the Lebanese or regional markets.

2013 reflected the growing interest of European investors in Lebanon, with more than 50% of the foreign companies that registered in Lebanon in 2013. The UK remains on top of the list with 17% of total foreign companies, followed by Spain and Italy with 7% and 5%, respectively. On the other hand, Arabs' share of foreign companies declined considerably this year, to reach 25%, compared to 44% in 2012. As usual, the UAE is the leader with 12% of total foreign companies in Lebanon, followed by Egypt and Syria with 5% and 3% respectively. Syrian investments are considerably higher this year and are expected to further increase, due to the massive influx of Syrians into the country.

Figure 1: Distribution of Foreign Companies in Lebanon by Region (% share - 2013)

Source: Ministry of Economy and Trade, ANIMA

As for the main sectors of activity, the Services sector has shown the greatest number of companies involved in financial services, consulting, research and education, transport and logistics, and healthcare, accounting for 28.3% of total foreign companies in Lebanon in 2013. The Trade/Industry sector has also retained a big share of the foreign businesses with 16.7% of the foreign companies trading pharmaceutical & chemical products, machinery and equipment as well as food and beverages. Lebanon also witnessed, an increasing interest in Media with 15% of companies investing in that sector (mainly TV) in 2013, followed by the Real estate and Retail sectors, both at a 13.3% share of total businesses. The remaining of the businesses were scattered across Tourism, Information Technology, Telecommunication and Agriculture.

Figure 2: Distribution of Foreign Companies in Lebanon by Sector of Activity

Source: Ministry of Economy and Trade, ANIMA

LAUNCH OF FOUR PRIVATE INDUSTRIAL ZONES

The Association of Lebanese Industrialists launched four private industrial zones in Tyre, Jezzine, Zahrani, and Terbel. The four zones provide access to skilled labour force, competitive rates, advanced infrastructure and many other benefits including IDAL's services and incentives which can amount to a tax break for up to 10 years.

The national benefits of the newly launched private industrial zones include; an increase in capital attraction towards the productive industrial sector, attachment of the Lebanese citizen to his/her homeland and the reduction of rural migration, optimization of the labor force in the region and the positive economic activity within the region.

The professional benefits of the zones include exposure to health and professional safety conditions and criteria, exposure to an environment that improves efficiency and encourages expertise and know-how exchange, and to be able to attract new businesses by providing an integrated infrastructure in one location.

Download the report for more information.

ACTIVITIES

MEETING WITH STAKEHOLDERS FROM THE BPO INDUSTRY

Within its overall strategy to support the Business Process Outsourcing industry, IDAL held a stakeholders meeting with representatives from the Lebanese call center industry on February 18. The meeting is one of a series of meetings aimed at identifying the dynamics within the local outsourcing industry and setting a tailored sector strategy for 2014. IDAL has set a dual objective for the industry in the coming year: The promotion of Lebanon as an outsourcing destination worldwide, and the creation of business linkages between local and international companies. The stakeholders voiced their recognition for the government's efforts to support the sector through infrastructure development while at the same time highlighting the need for continued efforts in this field to further allow the sector to provide seamless service to international clients. They equally stressed the importance of promoting Lebanon internationally in order to raise the interest of international companies in exploring the country as an outsourcing destination.

DOING BUSINESS IN CANADA

As part of our Business Linkages Program, which aims at fostering the growth of companies in the ICT and Agro-Food sectors through supporting them in identifying new markets and establishing links with foreign companies, we took part in a conference organized by the Union of Canadians in Lebanon and the Canadian Embassy in Lebanon to understand the process of Doing Business in Canada on 24 February.

SYMPOSIUM OF INVESTMENTS IN IRAQ

We attended in Beirut a symposium on Investments in Iraq, with 35 attendees from Iraq's Investment Promotion Agencies representing 18 states. Chairman of IDAL, Mr. Nabil Itani, presented at the symposium IDAL's own experience in building an administrative framework that encourages investments.

INAUGURATION OF OPERATIONS IN ARWAN

PHARMACEUTICALS

We were present at the inauguration of operations of Arwan Pharmaceuticals, a USD 35 million investment project located in Jadra (Mount Lebanon) which aims to develop biotechnology products.It will be considered a landmark in Lebanon and the region for its products, and the advanced technology used to produce them. 83 jobs are expected to be created out of this business. The project benefited from IDAL's Package Deal Contract.

ABOUT US

The Investment Development Authority of Lebanon (IDAL) is the national investment promotion agency of Lebanon. Established in 1994, IDAL aims to promote Lebanon as key investment destination and attracting, facilitating and retaining investments in Lebanon. IDAL reports to the President of the Council of Ministers which exercises a tutorial authority over it.

www.investinlebanon.gov.lb

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