Market Overview
- Lebanon, with a population of 3.8 million, is the 68th largest market for U.S. exports. During the first nine months of 2008, the United States exported $1.1 billion worth of goods to Lebanon, representing a year-on-year increase of 81percent. In 2008, the top five U.S. exports to Lebanon were vehicles, mineral fuel and oil, machinery, agricultural commodities, and medical instruments.
- Real GDP growth is estimated at six percent in 2008, according to the central Bank of Lebanon. Nominal GDP is estimated at about $29 billion in 2008, with inflation estimated at around eight percent. The Central Administration of statistics estimates Lebanon’s population in 2007 at 3.75 million, excluding Palestinians in the camps and the seasonal workers.
- Lebanon’s economy is based on laissez-faire philosophy. An overwhelming majority of the economy is dollarized. The country has very few restrictions on the movement of capital across its borders. Foreign investors are allowed to manage and hold business and private assets without any restrictions, and the Lebanese Government does not require investors to engage in any particular sector or project. The Lebanese Government’s intervention in foreign trade is minimal. Since 1999, Lebanon has observer status at the WTO, and is preparing for full membership in 2009. In 2006, Lebanon signed an Association Agreement with the European Union, Lebanon’s largest trading partner.
- In May 2000, parliament adopted a privatization law that established a framework for the privatization of state-owned enterprises. However, privatization of state institutions has been delayed because of internal political strife. New privatization plans have been laid out in the government’s master plan for reform and include the privatization of the two mobile phone companies, the fixed line Liban Telecom, the electricity sector, the water sector, the national airline as well as other sectors
- According to the IMF, the impact of the global financial crisis on Lebanon has been limited so far. The effective shielding of the domestic financial sector from exposure to international financial risks, helped by prudent regulation and effective supervision, has contributed to strengthening confidence in the exchange rate peg to the dollar and the financial system. However, despite these important achievements, Lebanon is still facing challenges, notably a very high level of public debt and large external financing needs.
- Major competitors of U.S. companies in Lebanon include French, Italian, German, British, Korean, and Chinese companies.
- • The U.S. has neither a bilateral investment treaty (BIT) with Lebanon nor an agreement on the avoidance of double taxation. However, on December 1, 2006, the U.S. signed a Trade and Investment Framework Agreement (TIFA) with the Government of Lebanon to help promote an attractive investment climate, expand trade relations, and remove obstacles to trade and investment between both countries.
Market Challenges
- Starting a new business in Lebanon is relatively simple and open to all, but petty corruption is an issue. Lebanon was ranked 102nd in Transparency International's most recent Corruption Perceptions Index, despite stated efforts by the country's government to reduce graft in the public sector. According to the World Bank, opening a business in Lebanon requires 11 days while in advanced countries it takes 13 days. Also, at times, foreign companies have complained about impediments such as arbitrary licensing decisions, complex customs procedures, archaic legislation, an ineffectual judicial system, high taxes and fees, high telecommunications and power charges, varying interpretation of laws and a lack of adequate protection of intellectual property.
- In 2007, the Unites States Trade Representative moved Lebanon from the “Priority Watch List” to “Watch List” due to improvements in intellectual property rights (IPR) enforcement efforts by the police. However, problems persist with the widespread availability of pirated optical discs and rampant cable piracy. Registration of copycat and counterfeit pharmaceuticals has remained problematic, although the GOL is working on increasing the protection of undisclosed information. Counterfeiting of trademarked goods continues. Furthermore, the judiciary needs to improve the enforcement of IPR laws. Three major IPR awareness campaigns were undertaken during 2008 by the private and public sectors. New IPR laws and amendments to increase IPR protection still await parliamentary ratification. Lebanon has not yet joined the latest text of the Berne Convention or ratified the WIPO Copyright Treaty or the WIPO Performances and Phonograms Treaty.
Market Opportunities
- U.S. exports to Lebanon increased by 81 percent in the first 9 months of 2008 to reach $1.1 billion compared to $599 million during the same period in 2007, primarily due to the increase in oil prices.
- According to the Council for Development and Reconstruction (CDR), there are 1,074 projects in progress valued at $2.472 billion. Public infrastructure opportunities mainly lie in roads and highways, ports, electricity, education, solid waste, wastewater and water supply. CDR projects are listed at http://www.cdr.gov.lb.
Best prospect sectors
- Information and Communication Technology (ICT): Lebanon has the fundamental building blocks needed to become a regional center for technology: a highly-educated and multilingual workforce, a strong private sector, world-class advertising firms, and multi-lingual media content providers and web portals. In the last quarter of 2008, the government moved forward towards privatizing the telecommunications sector. The Telecommunications Regulatory Authority (TRA) made available an online data-room for potential bidders for the country's GSM network. Information on the auction for the two cellular licenses is available online at http://www.lebanonmobileauction.com. Moreover, the Government of Lebanon has plans to regulate and upgrade its outdated and costly ICT infrastructure. These plans, which are expected to take place in the near future, will offer significant opportunities to foreign investors.
- Pharmaceuticals: Lebanon is the leading importer of pharmaceutical drugs in the Levant region and has over 50 pharmaceutical importing firms. The pharmaceutical market generates around $400 million every year in retail sales. The local pharmaceutical manufacturing industry is weak. Imports constitute between 92 and 95 percent of total consumption. IPR enforcement in the pharmaceutical industry remains a problem, mainly because of lack of transparency in the registration of drugs, and inadequate protection of undisclosed information. A recently passed decree related to the conditions of registering and importing pharmaceuticals is expected to improve this process.
- Insurance: The Lebanese insurance market has always been open and liberal. The Lebanese government has never owned insurers, and private companies do not have to compete with state entities or worry about government monopolies. This characteristic has helped the sector to respond to market forces and avoid the distortions associated with state ownership of insurers. Insurers predict that a need for all kinds of policies, especially health and life, will increase. Moreover, due to a large number of reconstruction projects that are already underway, policies covering construction work are also in great demand.
Market Entry Strategy
- U.S. companies interested in doing business in Lebanon are recommended to hire a Lebanese agent or distributor. Networking and lengthy investigation are necessary to find an appropriate partner. U.S. companies do not need to come to Lebanon to find the agent. The U.S. Commercial Service of the U.S. Department of Commerce can be helpful through the International Partner Search (IPS) service, which is a customized search for qualified Lebanese representatives, agents or distributors for US firms. More information on IPS can be found at http://www.buyusa.gov/lebanon/en/internationalpartnersearch.html.
- The Investment Development Authority of Lebanon (IDAL), a public agency responsible for promoting investments in Lebanon, has a “One-Stop Shop” service to issue permits and licenses for investors. Further information about IDAL and its services is available at http://www.idal.com.lb.