U.S. report praises Lebanon’s investment climate but slams bureaucracy

By Will Rasmussen

BEIRUT: A report by the U.S. Commerce Department praised Lebanon’s liberal economy and attractive investment climate but slammed the country’s excessive bureaucracy. The 2005 Country Commercial Guide for Lebanon listed red tape and corruption, arbitrary licensing decisions, complex customs procedures, an ineffectual judicial system, and lack of adequate protection for intellectual property as main impediments for attracting foreign investment.

“Some foreign companies have left the market or relocated their regional offices to neighboring countries, or refrained from investing in Lebanon at all, because of frustration resulting from these impediments,” the report read.

Yet the U.S. Commerce Department, which is charged with promoting economic growth, praised Lebanon’s “free market, highly dollarized economy, the absence of controls on the movement of capital and foreign exchange, a highly educated labor force, good quality of life and limited restrictions on investors.”

Lebanon’s potential for growth in the IT sector, according to the report, is strong.

“Despite its outdated and costly ICT infrastructure, Lebanon has the fundamental building blocks needed to become a regional center for technology: a highly educated and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.”

The report also identified opportunities for U.S. businesses in Lebanon’s tourism industry, which boomed in 2004. Hotel projects worth over $200 million are under construction in Beirut, involving the Hilton, Four Seasons and Starwood hotel groups according to the report. 

Investors from the U.S. and around the world use the Commerce Department’s report to decide how and whether to invest in Lebanon.

The Lebanese government has increased efforts recently to encourage investment. The Investment Development Authority of Lebanon (IDAL) in 2003 launched an “Investor Matching Service” to create international-local business partnerships through joint venture, equity participation, acquisition, and others.

The U.S. is Lebanon’s fifth largest source of imports, behind Italy, France, China and Germany. U.S. exports to Lebanon doubled in 2004, reaching $434 million at the end of November, due largely to a strong Euro and a weak dollar. Lebanese exports to the U.S. dropped by 19 percent in 2004, reaching $69 million at the end of November. U.S. market share in Lebanon reached 6 percent in 2004.

Lebanon and the U.S. are working toward signing a bilateral investment treaty (BIT) with Lebanon. The U.S. and Lebanon still do not have an agreement on the avoidance of double taxation. U.S. companies, which could only operate in Lebanon after a travel ban was lifted in 1997, have been increasingly setting up shop here. Intel opened in 2004 and Computer Associates recently announced plans to open a Beirut office