Economy

Plugging Away

FDI

While FDI was down in 2013, Lebanon still put in a good show all things considered, proving its status as a popular regional investment destination. FDI was down 26.6% YoY […]

While FDI was down in 2013, Lebanon still put in a good show all things considered, proving its status as a popular regional investment destination.

FDI was down 26.6% YoY in 2013, at $2.83 billion, according to UNCTAD. ICT and agrifood proved to be significant pulls over a year when GDP growth posted in at 1.5%. The drop, meanwhile, can be attributed to a lack of flows from the Gulf region into real estate. The 26.6% drop follows an increase in 2012 over 2011, from $3.5 billion to $3.78 billion, indicative of the deteriorating security situation in neighboring Syria. That said, and according to UNCTAD data, Lebanon was still the seventh top receiver of FDI in the MENA region following the UAE ($10.5 billion), Saudi Arabia ($9.3 billion), Egypt ($5.5 billion), Morocco ($3.4 billion), Sudan ($3.1 billion), and Iraq ($2.8 billion). That made it one of the top non-oil recipients of FDI in the MENA region, and the largest recipient in relative GDP terms at 6.3%, followed by Jordan (5.3%), Sudan (4.4%), Morocco (3.2%), and Bahrain (3.1%). FDI stock, meanwhile, is worth 126% of GDP, putting Lebanon third in the world following Singapore (283%) and Belgium (182%), and ahead of the UK (63%).

Lebanon’s drop in FDI, however, was far ahead of the West Asia regional decline of 9% overall. Of the $2.83 billion that flowed into the country, only $104 million was categorized as greenfield, putting Lebanon fourth in that respect in the region, according to Byblos Bank data. Greenfield FDI was down 48% YoY in 2013, and accounted for just 0.2% of GDP.

Leading the charge to draw in FDI is the Investment Development Authority of Lebanon (IDAL). And despite regional troubles, Nabil A. Itani, Chairman of IDAL, has a clear grasp on why investors haven’t abandoned the country. “Most investments in Lebanon in 2013 [came] from Lebanese business people working in partnership with foreign investors,” he commented, adding that, “we are now encouraging big industry and ICT firms to outsource to Lebanese IT companies, particularly in software engineering and customer support services, such as call centers.” Also according to Itani, 60 European companies took the plunge and opened branches in Lebanon over 2013, while “the bulk of the FDI comes from Arab countries, mainly from Saudi Arabia and Kuwait. The rest is spread between Europe and the US,” concluded Itani.

Remittances are also worthy of a mention, with Lebanon’s vast diaspora a constant source of capital for the economy. According to the World Bank, $7.6 billion in remittances was recorded in 2013, up 4.4% on the previous year. That makes the country the 18th largest receiver of remittances globally and the 12th largest among developing economies.

With all said and done, Lebanon can be thankful for its FDI haul in 2013, far from the disaster some could have predicted. Centered in the eye of a storm, the country has done remarkably well to maintain its investment appeal and looks set to continue being a solid base of operations for foreign companies that are ready for the challenge.

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