APRIL 2014


We have witnessed a significant flow of investor traffic since the start of the year with 12 investment projects being deemed eligible to benefit from IDAL's incentives so far across various sectors. This is an indication of the faith of investors and business people in Lebanon, a resilient country with an emerging economy that is lucrative to companies who are looking for high returns. This upsurge is also a reflection of the increase in confidence levels witnessed subsequent to the formation of a new government. Interestingly enough, following our attendance at the Annual Investment Meeting in Dubai, we have put together an abridged version of a white paper on the subject of political and economic risk management which we have shared with you in this issue.

On the activities front, this month has witnessed a lot of outreach programmes and meetings with consular and diplomatic bodies in order to look together for enhancing trade relations across countries and continents.


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


The first four months of the year have witnessed a lot of interest from investors wishing to open or expand their businesses in Lebanon. Among those are 12 projects that are deemed eligible to receive financial and non-financial incentives from IDAL such as a total exemption from corporate income tax for up to 10 years.
Among the projects that were deemed eligible, 4 are from the Agriculture sector, 3 from the Agro-food sector, 3 from the Industrial sector, and 2 from IT and Tourism respectively. 

Agriculture Projects
The total investment size of upcoming projects in this sector amounts to around USD 6 million with three greenfield investment projects and one brownfield. They include a poultry farm and a packing and cold storage house in the south of Lebanon, and an expansion of a duck farm in the North. 130 new jobs are expected to be created from these new projects.
Agro-Food Projects
An Italian company is willing to invest in a Mineral Water Bottling Factory in the North of Lebanon with an investment size of USD 5 million. Also in the north is a plan to set up a factory for certified Bio Dairy Products with a USD 3 million investment size. A USD 5 million winery project is being planned for the Chouf region . 190 job opportunities are expected to be created out of those projects.
Industrial Projects
This sector is taking the lion share in the size of investments with USD 14 million being pumped into this sector through 3 upcoming new projects. The biggest involves the development of an Aluminum and Copper factory in the North with 70 new job opportunities in the pipeline. Similarly, an Aluminum factory is expected to also set up in the South of the country with 50 promising job opportunities. Finally, a Syrian investor has plans to open a Printing Services and Books' Publishing Company in Mount Lebanon with 30 new job opportunities. 150 job opportunities are expected to be created out of those projects.
Other Projects
On the IT front, a Software Development and IT Serviced brownfield project of USD 1.5 million is expected to open in Mount Lebanon with 100 new potential job opportunities. On a larger scale a USD 25 million Beach Resort is planning to open in Mount Lebanon.
The projects are currently in the process of preparing their files to apply for IDAL's incentives. If you too have a project in mind, do not hesitate to let us know as you can benefit from our support services and package of incentives.



IDAL  recently took part in the Annual Investment Summit which was held in Dubai where many issues related to fostering investments to emerging markets were discussed. One of the topics that stood out, was the impact of political and economic risk in attracting investments in emerging markets and on the strategies adopted by investors to mitigate those risks.


Key Findings


One of the key findings from the panel which included representatives from Indonesia and Nigeria is that foreign investment flows are not directly related to political risk in emerging markets. This statement might sound counterintuitive at first,  but what people tend to forget is that emerging markets are inherently risky, and that despite the risk, they have been growing at double digit rates, much higher than those of developed economies in some years, and generating high returns for investors. Risk is business as usual in these countries, including several destinations in the MENA region. This has not prevented them, however, from attracting big conglomerates looking for high return.  Countries such as Ukraine, North Africa and Thailand have high political risk but have been very appealing to investors due to the long-term opportunities. Indonesia for example has been one of the top 20 prospective  host economies as per UNCTAD World Investment Report, despite the high political risk in the country. A best case example is Lebanon which was able to achieve sustained flow of FDI over the last 3 years amidst the repercussions of the Syrian crisis and the Arab Spring.

More specifically foreign investment flows witnessed a slight increase in 2012 compared to 2011 at the prime of the Arab spring while FDI flows to the region registered their 4th consecutive year of decline. This performance was achieved at a time when Lebanon's country and political risk fluctuated between negative and stable as rated  by rating agencies. In fact, despite the prevailing political risk, Lebanon remained one of highest recipients of FDI amongst non-oil economies, highlighting the continued confidence of investors in the economy and the potential of Lebanon as gateway to the MENA region.



What can we learn from this?


The main message here is that political risk is but one part of the equation for investors looking for returns. Over the years, investors have learned how to cope with risk and to factor it in their decision. At a time when growth in the EMEA is subsiding, (growth in EMEA or in Europe) companies are looking to have a footprint in new promising markets. The MENA region in particular is an important region for investors, not only given its growth potential but also due to the size of its markets and its proximity to the Asian market. 

Another important nuance is that it is often misleading to look at risk as a national phenomenon as risk is usually a regional one.  For instance,when media channels hammer a country's image with political risk messages, they are mostly focusing on events that are taking place at a local / regional level in a country, rather than a country in its entirety.

To add to these findings, an empirical study conducted by the Institute of Developing Economies (Discussion paper No.281) using a sample of 93 countries concludes that political risk doesn't have a significant impact on FDI. Political risk encompasses many variables including institutional quality, internal conflict, external conflict, corruption, law and order, and investment profile, among others. The most important factor that seems to influence FDI flows is institutional quality. Institutions are a robust predictor of FDI and property rights security is the most important aspect of institutions in determining FDI flows.


How do investors then manage political and economic risk?


The FDI process is divided into many stages mainly decision making, project implementation and management. At the decision making level, investment promotion agencies (IPA) have become the key entry points for investors in the local market. By providing accurate and transparent information on the local market (e.g. information on cost, regulatory framework, arbitration / conflict resolution entities, credit risk agencies, experience of other investors, etc..), IPAs already remove a good chunk of the uncertainty factor that investors face. Effective institutions such as IPAs reduce the uncertainty and provide a predictable framework for investments.  In the Lebanese context, IDAL has been actively playing that role and has put in place a transparent platform on the doing business parameters.

On the project implementation front, investors are resorting to localization to manage risk. Instead of serving a region from their headquarter, foreign companies become local, and by doing so, are better able to assess risk as they are closer to their customers. Localization is usually taking place through Joint Venture Agreements with local companies. Partnerships are usually formed not only to counter political risk but also to promote long term relations in a country. We are now seeing decoupling as companies are focusing on the bottom line and not the top line .

On the management front, investors can mitigate political risk through regulatory risk insurance or guarantees. Many institutions provide these insurance products in emerging markets including MIGA, a World Bank group arm. The US Overseas Private Investment Corporation (OPIC), also provides investors with financing, guarantees, political-risk insurance and support.


In summary, political risk remains  but one variable in companies' investment decisions. Empirical evidence has shown that whenever countries present real opportunities and display competitive advantages, they are still able to attract foreign capital.  Companies ultimately learn to swiftly adapt to the new environment and risk is underwritten in their decision when they invest.






We participated at the Lebanese Week in Jeddah event which was organized by the Chamber of Commerce and Industry and Agriculture in Beirut and Mount Lebanon in collaboration with the Chamber of Commerce in Jeddah from 4-9 April. Itani also emphasized on the importance of Saudi investments in Lebanon which so far have created investment opportunities in several economic sectors. Mr. Itani met on the margins of the event many officials and Saudi businessmen.






We took part in the workshop organized by the OECD, and which was held at the League of Arab States Headquarters in Cairo on April 7 & 8 to discuss ''The amended Arab League Investment Agreement: key improvements and ratification process". 







Our staff has attended the Annual Investment Meeting which took place in Dubai from 8-10 April. The workshop gathered key policy makers to discuss means to increase investments to emerging markets. Many topics were discussed including the following: (1) The role of Incentives in attracting investments: more specifically the experience of other countries highlighted the limited role that incentives currently play in impacting investor decisions. Incentives have often been used by policy makers to offset a sub-optimal investment environment thus creating short term solutions which are not sustainable in the long-run. 

The Scottish Development Agency for example shifted its strategy from promoting incentives to focusing on local talent base, cost of labor and level of universities. The other topic which was discussed is (2) the importance of information in attracting investments and more specifically the role of investment promotion agencies in that regard. Finally, the workshop addressed the (3) policy options available to investors to counter political risk in emerging markets.




We have met with the newly appointed Chinese Economic and Commercial Counselor for Lebanon. Chairman of IDAL, Mr. Nabil Itani, discussed with the Counselor means of boosting economic and trade relations between both countries; emphasizing on IDAL's readiness to support Chinese companies in setting up their businesses in Lebanon and access the regional market.

Chairman of IDAL, Mr.Nabil Itani, has met with the Minister of Economy and Trade Dr. Alain Hakim to discuss means of cooperation between both public entities. The meeting also covered ways of promoting Tripoli as an investment destination.  






Chairman of IDAL, Mr. Nabil Itani received at IDAL's premises the Turkish Ambassador to Lebanon, Mr. Inan Ozyildiz. During the meeting, they discussed methods for boosting Turkish-Lebanese investments and encouraging businessmen to invest in Lebanon and in Turkey. This visit was a chance to deliver an invitation for Mr. Itani to attend "The actions of the World Investment meeting" organized by  the World Association of Investment Promotion Agencies (WAIPA) in Istanbul from 13 to 15 May 2014. Senior government representatives will meet in order to talk with economic experts in investment activities, their effect on the investment strategies and the attraction of  FDI in addition to methods in handling the work nature of each IPA. 




We took part in the BIFEX this year through their sessions on roles of diplomatic missions in economic development  in partnership with the Ministry of Foreign Affairs. Our panel which included the intervention of Chairman of IDAL, Mr.Nabil Itani, revolved around how government institutions are working with the various embassies in Lebanon and abroad to enhance economic and trade relations.


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 LebanonIDAL reports to the President of the Council of Ministers which exercises a tutorial authority over it.



Like us on Facebook   Follow us on Twitter   View our profile on LinkedIn