Planet Lebanon | The Networking Opportunity of the Year

Strengthening the Diaspora role in growing the Lebanese Economy

RAYMOND W. AUDI

Chairman and General Manager

Bank Audi s.a.l – Audi Saradar Group

With the resumption of Planet (Lebanon) in Beirut this year, we are more and more confident that Lebanon is increasingly regaining its privileged position on the economic and financial arenas in the region and in the world. The country has promptly risen from its ashes, providing a viable model for countries across the globe. May be the most fascinating about the Lebanese economic model is the noticeable sustainability over time despite the volatile operating environment on one hand and the persisting acute imbalances on the other hand. Lebanon’s long track record of historical sustainability in the goods market, money market and currency market rises as a noticeable appealing investment drive on the radar screen of investors and analysts carefully looking at Lebanon. This paradox of noticeable sustainability amid uncertainties has increasingly intrigued a large deal of keen observers in business and financial circles worldwide.

The large Lebanese Diaspora and its strong ties with the home economy lie at the heart of such an intriguing model. With a non-resident population of three times the resident population and offshore monetary holdings of more than 3 times GDP, the Lebanese economy today represents a typical model of an open economy with extensive links with abroad. Such a significant non-resident dimension represents important buffers to the domestic economy, translating into recurrent capital inflows, making up on a continuous basis at least a quarter of the country’s GDP. With annual remittances of above US$ 7 billion, Lebanon has the highest ratio for remittances per capita in the World. Such remittances did not receive any significant hit as a result of global and domestic turmoil episodes.

These remittances, which empirically proved to be non-volatile in nature, originate from a large pool of non-resident Lebanese well diversified by sector of activity and country of residence around the globe. Most importantly such a Diaspora has been able to reconcile between its Lebanese roots and its commitment to its new countries through its presence in important key positions in the political and civil communities. It has maintained as well important ties with the home economy as can be seen through the important flows of people and capital constantly observed between the new countries of presence and the natal country.

The Diaspora thus represents the main resource of the country. The Diaspora is for Lebanon what oil is for Saudi Arabia. The annual remittances from such a Diaspora grew by a yearly average rate of 17% over the past decade, providing an important support to the country’s domestic consumption and investment needs. It is such remittances that were the funding engine of real economic growth over the past four years, a growth that has emerged recently among the top 5 growing countries worldwide.

Indeed, Lebanon has been able to report buoyant performance in atypical times: Real growth averaged above 8% per annum since the outburst of the global financial crisis, with all real sector indicators on the upside. Inflation was paradoxically contained at less than 5%. Private capital flooded back to the country, encouraged by a strictly regulated highly liquid banking system. Bank deposits subsequently grew by circa 22% per annum, the largest in the MENA region and among the largest worldwide. International reserves exceeded US$ 30 billion, driven by massive unprecedented conversions from foreign currency holdings to Lebanese Pound holdings.

This is not to say that there are no challenges, especially those related to persisting economic imbalances and public finance vulnerabilities in an era where such vulnerabilities emerged to the fore again for a number of countries in Europe and across the World. The Lebanese private and public authorities are yet aware of all these challenges and are apt to undertake all required actions and measures in these realms. Their efforts success would be dependent, among others, upon an intense interaction and solid collaboration with Lebanon’s non-resident sector, accompanied by an in-depth involvement of this sector in the Lebanese economy.

We believe that the Diaspora’s perception of Lebanon's potentialities and prospects is an important prerequisite for Lebanon’s further development and outgrowth. We are actually confident about the crucial role it can play, given the importance of the community it represents and the importance it enjoys in international business and financial circles. Hopefully, the interaction with distinguished Lebanese officials and executives in this conference and in other similar initiatives would improve further such perception and convictions. We finally do believe that such an involvement on behalf on non-resident Lebanese in their native country cannot but provide them with numerous strategic advantages, in view of the crucial role that Lebanon is foreseen to play again in the Region and in the World at large.

Dr. Joseph Torbey

CHAIRMAN, ASSOCIATION OF BANKS IN LEBANON | CHAIRMAN GENERAL MANAGER CREDIT LIBANAIS GROUP

Investment in Lebanon

Notwithstanding the long history of political tensions, hostilities and unfavorable economic deadlock that stroke Lebanon for decades, the Lebanese economy has demonstrated a strong resilience in the face of internal and external economic shocks, with a sustainable flow of foreign investments, an increasing level of capital inflows and foreign remittances from Lebanese expatriates. Lebanon, known to many as Switzerland of the Middle East, enjoys an investment environment that fosters a free-market economy, lack of paralyzing regulations and red tape, liberal policies for investment and commerce and ease and speed of entrepreneurial activities with an average time interval of 9 days to start a business compared to the MENA region’s average of 20.7 days according to the World Bank 2010 Doing Business report. Another pillar that fueled investments in Lebanon even during periods of intense turmoil is the solid and sound banking sector, being the backbone of the Lebanese economy, characterized by an efficient banking secrecy law, a promulgated law that combats money laundering, a strong correspondent banking network and an increasing regional and global presence. With a rating equivalent to that of the Lebanese government, the Lebanese banking sector’s consolidated assets have grown at a sharp compounded annual growth rate (CAGR) of 11.20% over the 2004-2009 period, nearing $120 billion as at the end of the first quarter of 2010. There is a set of inherent investment drivers underlying the business environment and the business culture of Lebanon, from the protection of private ownership of assets, with no discrimination between foreign and native ownership, to the freedom of entrepreneurial activity and unobstructed competition in any specific business sector. Lebanon enjoys a set of investment incentives that attract investors’ appetite including but not limited to the lack of barriers on foreign investments, the absence of capping on foreign ownership, an efficient fiscal system that protects investors from double taxation, a solid legal and judicial system, risk mitigation schemes offered by some investment guarantee corporations for inter-Arab investments, and a free mobility and repatriation of invested capital into and out of the country. In addition, there are some tax shields, levies and incentives offered to investors, taking into consideration that Lebanon enjoys a moderate tax system. Lebanon stands as a free-enterprise country offering a business environment that embraces advantages and incentives to foreign investors, and is perceived as one of the strong financial, commercial, communications, education and healthcare players in the region. This has resulted in a tertiary sector contributing to over 65% of Lebanon’s GDP. Lebanon’s constitution, on the other hand, emphasizes the respect for freedom of speech, human rights, parliamentary democracy, private ownership, a “laissez-faire” economic environment and a peaceful cohabitation between the various religious sects. Investments made in Lebanon are also protected by the efficient monetary policy of the Lebanese Central Bank, who has been the subject of praise by international rating agencies for its ability to preserve a stable exchange rate against the U.S. Dollar since the year 1997 in addition to taming inflationary pressure with annual inflation hovering between 4% and 5%, and continuous engineering of monetary instruments and promulgation of circulars that alleviated sovereign risks. To conclude, I would like to take this opportunity to invite the Lebanese community and Diaspora around the globe to weigh more favorably their investment portfolio in Lebanon and contribute to the country’s thriving journey on the road of success.