Doing Business in Lebanon
Market Overview
Lebanon, with a population of about 3.8 million, is the 58th largest market for U.S. exports. According to Lebanese customs statistics, total imports to Lebanon reached approximately $17.9 billion in 2010, out of which the United States exported $1.9 billion worth of goods to Lebanon, constituting 10.6 percent of Lebanon’s total imports.
In 2010, the United States ranked as Lebanon’s number one trading partner ahead of China, Italy, Germany and France. Major U.S. exports to Lebanon were mineral fuel and oil ($882 million), machinery ($248 million), vehicles ($242 million), pharmaceutical products ($69 million), cereals ($60 million), medical equipment ($58 million), and electrical equipment ($50 million).
Real GDP growth is estimated at 5 percent in 2011, according to the International Monetary Fund. Nominal GDP is estimated at about $42.5 billion in 2011, with inflation estimated at around 3.5 percent.
According to the IMF, the impact of the global financial crisis on Lebanon has been limited. However, Lebanon is still facing challenges, notably a very high level of public debt and large external financing needs.
Lebanon’s economy is based on a laissez-faire philosophy. Most of the economy is dollarized, and the country has no restrictions on the movement of capital across its borders. The Lebanese government’s intervention in foreign trade is minimal.
The Special Tribunal for Lebanon, which was created by the United Nations in 2007 to prosecute those responsible for the 2005 assassination of former Prime Minister Rafik Hariri, is expected to issue an indictment in 2011. Many Lebanese fear that an indictment might have negative impact on the business and economic environment in Lebanon.
The U.S. has neither a bilateral investment treaty (BIT) with Lebanon nor an agreement on the avoidance of double taxation. However, the U.S. has 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 the two countries. Since 1999, Lebanon has observer status at the World Trade Organization (WTO). In 2006, Lebanon signed an association agreement with the European Union.
Market Challenges
Starting a new business in Lebanon is relatively simple and open to all, but petty corruption is an issue. The World Bank noted improvements in Lebanon's mechanisms for paying taxes and business start-up procedures. According to the World Bank's Doing Business 2011 report, opening a business in Lebanon requires 5 steps, while in Organization for Economic Co-operation and Development (OECD) countries it takes 5.6 procedures.
Lebanon ranked 127 out of 178 countries worldwide in Transparency International's most recent Corruption Perception Index. 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.
Market Opportunities
The Council for Development and Reconstruction (CDR) is the government’s executive body responsible for tendering major projects, procuring financing for these projects, and supervising their execution. Major projects lie in transportation, electricity, telecommunications, education, solid and water waste. These projects are listed at http://www.cdr.gov.lb. CDR, in coordination with the concerned ministries, launches these projects.
In May 2000, parliament adopted a privatization law that established a framework for the privatization of state-owned enterprises, but privatization of state institutions has been delayed because of lack of political consensus. At the Paris III Donor Conference in 2007, the government presented a master plan for reform that included the privatization of the two mobile phone companies, the fixed line network, the electricity sector, the water sector, the national airline, and other government-owned entities.
The Ministry of Post and Telecommunications issued a tender for broadband connectivity in last quarter of 2010. Investments in this project are expected to exceed $200 million.
The Ministry of Energy and Water announced a four-year master plan aimed at solving the severe electricity crisis in Lebanon. Investments in this plan are expected to exceed $4 billion. Moreover, the ministry is expected to invest over $1 billion for water and waste water projects in the coming few years. For more information about these projects, visit the Ministry of Energy and Water website.
Market Entry Strategy
U.S. companies interested in doing business in Lebanon are advised to hire a Lebanese agent or distributor. Although working through an agent is a very common practice in Lebanon, networking and lengthy investigation are key to finding an appropriate one.
U.S. companies don’t need to visit Lebanon to find an agent. The U.S. Commercial Service can help U.S. companies find the right partner through the International Partner Search (IPS) service.
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.
