Openness to Foreign Investment
Lebanon is a country that, by tradition, remains open to foreign direct investment. Over the last nine years, the Government of Lebanon (GoL) has passed several laws and decrees to encourage such investment. The Investment Development Authority of Lebanon (IDAL) possesses the authority to award licenses and permits for new investment in specific sectors. IDAL also has the authority to grant special incentives, exemptions, and facilities to large projects, whether implemented by local or foreign investors. IDAL has further expanded its support to encourage agricultural exports through a new program, the Agri-Plus program, providing financial incentives and different promotional and marketing activities to qualified exporters. IDAL also facilitates the creation of strategic international-local partnerships through joint ventures, equity participation, acquisition, and other vehicles. It provides legal and administrative advice as well as sectoral studies to support potential investors. IDAL received more than 60 inquiries for potential investment projects in 2012, and processed 13 of these projects deemed eligible to benefit from incentives based on the Investment Law no. 360 (an increase of 30 percent over 2011); the 13 projects are in the fields of tourism, industry, agriculture and technology, have a cumulative value of $480 million, and are estimated to generate 1,500 jobs.
Lebanon has several investment-enabling strengths that have encouraged foreign companies to set up offices in the country. Lebanon's key advantages include a free-market economy, the absence of controls on the movement of capital and foreign exchange, a well-developed banking system, a highly-educated labor force, good quality of life, and limited restrictions on investors. Political risk perceptions remain high in 2013, however, given the continuing turmoil in Syria and in the region, and its adverse impact on Lebanon.
The Lebanese economy recorded a sluggish performance in 2012 for the second consecutive year, though it continued to avoid a contraction in real terms and maintain monetary and financial stability. Many attributed the economic slowdown to spillover from the Syrian crisis into the domestic political and security environment, which discouraged investment and tourism and negatively affected some Lebanese exports. Some mitigating factors, such as an influx of returning Lebanese expatriates and increased spending by Syrians in Lebanon, helped to partially alleviate these negative trends. The IMF forecasts a real GDP growth of two percent for 2012 and 2.5 percent for 2013. Growth continues to be driven mostly by household consumption, as investors adopt a wait-and-see attitude, delaying major investment decisions. Financial inflows recorded a slight increase over the corresponding period of 2011, but for the second year in a row were not enough to offset the country’s rising trade deficit. Lebanon recorded a balance of payments (BoP) deficit of $1.85 billion over the first 11 months of 2012 – similar to the BoP deficit in 2011.
While the public deficit and public debt could be a major issue of concern for investors, the debt-to-GDP ratio has remained nearly stable over the last two years at close to 135 percent, reversing the downward trend that otherwise prevailed since 2006. Banking and economic organizations are worried about a worsening of the public deficit in 2013 due to an anticipated increase in public sector wages in the absence of corresponding revenue enhancement measures. Given the high liquidity in the domestic banking sector, the GoL should not face difficulties in rolling over sovereign maturities in 2013. The Central Bank publicly asserted that it will continue to maintain monetary and financial stability – reassuring investors that there will be no debt defaults and no currency depreciation.
Banking sources believe that prospects for the medium-term would be encouraging in the event of a settlement of the Syrian crisis and implementation of structural reforms. The expected launching of the first bid round for offshore oil and gas exploration in 2013 opens the door for foreign investment, and in the long-term has the potential to expand output levels and income per capital and reduce Lebanon’s public debt.
Some issues continue to cause frustration among local and foreign businessmen. Impediments include red tape and corruption, arbitrary licensing decisions, complex customs procedures, archaic legislation, an ineffectual judicial system, high taxes and fees, flexible interpretation of laws, and weak enforcement of intellectual property rights. These factors have pushed the World Bank/International Finance Corporation (IFC) in its 2013 report to rank Lebanon 115 out of 185 countries worldwide and 11 out of 19 MENA countries in terms of ease of doing business. Lebanon improved in only one out of the ten indicators considered: registering property (up three spots). Lebanon’s scores fell in the categories of starting a business, dealing with construction permits, getting electricity, getting credit, protecting investors, paying taxes, and trading across borders. Its ranking remained unchanged in the categories of enforcing contracts and resolving insolvency.
The government continues to express a strong commitment to improving the business environment as well as encouraging domestic and foreign investment and public-private partnerships, but some efforts have slowed. The Ministry of Economy and Trade’s (MoET) amendments to the Code of Commerce to further streamline business and intellectual property legislation are still pending parliamentary approval. The MoET has revitalized efforts to support micro and medium-sized enterprises and start-up firms. It also introduced e-registration for trademarks. A revised Public-Private Partnership (PPP) Law is being discussed in the Budget and Finance parliamentary committee, and official sources hope it will be approved by the parliament within the next few months. Ratification of the PPP legislation could open new opportunities for local and international private sector investment in Lebanon. In 2012, 55 foreign companies, including three U.S. companies, opened offices or branches in Lebanon, according to statistics from the MoET.
Lebanon received mixed results in the World Bank's 2011 World Governance Indicators. The results showed minor improvement year-on-year, but still reflected a weak level of governance in Lebanon. Regarding individual indicators used in the survey, Lebanon’s ranking improved in terms of government effectiveness, and regressed in terms of voice and accountability (measuring citizens’ ability to participate in government selection, freedom of expression, freedom of association, and a free media), political stability, regulatory quality (measuring market-friendly policies and laws),rule of law, and control of corruption. Meanwhile, The World Economic Forum's 2012-2013 Global Competitiveness Index ranked Lebanon 91 out of 144 countries worldwide in terms of the level and quality of institutions, policies, and factors that determine the productivity of a country. According to the report, the top five most problematic factors for doing business in Lebanon include inadequate supply of infrastructure, inefficient government bureaucracy, governmental instability, corruption, and policy instability.
While the priority for the GoL is to maintain stability given regional political turmoil, it recorded progress on sectoral fronts: work continued to upgrade and expand telecommunications services; the Ministry of Energy and Water (MoEW) launched tenders to increase electricity production by 700 megawatts (MW) and contracted two barges to provide 280 MW of additional power; and the cabinet appointed the Petroleum Authority (PA) Board and endorsed the plan launching the licensing round of bids for oil exploration. These projects offer opportunities for U.S. technology and investors.
Lebanon is consistently rated near the bottom of the world in terms of internet download speed, but the sector saw some notable improvements during 2012. The Ministry of Telecommunications (MoT) finalized Lebanon’s connection to the submarine IMEWE (India-Middle East-Western Europe) ultra high capacity fiber optic submarine cable, which has gradually resulted in higher internet speeds across the country. The MoT is preparing a comprehensive plan for the telecommunications sector that it expects to launch by mid-2013. The plan includes amendments to Law 431 (on the privatization of telecommunications, endorsed in 2002) taking into consideration new developments in the information technology (IT) sector such as mobile virtual network operators, liberalization of services, content providers, and other issues. The ministry’s new plan for the sector appears to represent a retreat, however, from the scope of earlier privatization commitments it made under previous governments; it keeps ownership of underlying infrastructure and control over telecommunications revenues firmly in the ministry’s hands. The plan will need cabinet approval before it can be implemented, while the amendments to Law 431 will require action by the Parliament.
Meanwhile, the MoT continued its expansion plan for mobile networks. The MoT is implementing projects to improve landline and mobile network infrastructure, to enhance coverage and quality of service, and to expand internet bandwidth. The MoT started broadband expansion, contracting with two companies to connect local telephone centers with fiber optic networks, while Lebanon started negotiations with Cyprus for the construction of a new cable, Europa, to upgrade an older cable and further improve the country’s connectivity. In the mobile sector, the MoT launched 3G services in October 2011, with services now available across the country and already began testing 4G technology. In September 2012, Beirut Digital District, a pilot project for a state-of-the art business incubator and accelerator was launched, while the MoT hopes to set up additional hubs outside the capital. . Meanwhile, the GoL continues to contract the management of the two government-owned cellular companies to private operators, whose management contract were renegotiated in January 2012 for one year. In December 2011, the Telecommunications Regulatory Authority (TRA) renewed a total of 22 licenses for data and service providers, and there is potential for additional licensing when political conditions improve.
As for the power sector, the MoET tendered in 2012 three projects to increase power production by 700 MW for a total cost of $850 million, implementing Law 181 dated September 2011. The ministry contracted two projects providing a total of 270 MW and announced that it will re-tender the construction of a 450 MW power plant in Deir Ammar (north Lebanon) in the first quarter of 2013. . These projects are part of the MoEW policy paper for the power sector endorsed by the cabinet in June 2010, which aims to reach gradually 4000 MW generation capacity in 2014.
On November 7, 2012, the cabinet appointed the six members of the Petroleum Authority Board and endorsed on December 27 launching the first bid round of licensing for offshore oil exploration starting with prequalifying interested companies in the first quarter of 2013, issuing the bid proposal in the second quarter of 2013, and announcing the contract awards in early 2014. Lebanon submitted a unilateral claim of the southern limit of its EEZ to the United Nations in July 2010. Lebanon endorsed the Maritime Law, covering delimitation of maritime borders and its entire EEZ, in August 2011. Despite a maritime dispute between Lebanon and Israel over some 860 square km, the GoL is moving forward with exploratory activities in waters that are not claimed by Israel, which constitute the vast majority of Lebanon’s declared exclusive economic zone.
In March 2012, the cabinet approved the national water sector strategy that included construction of dams, hill lakes, transmission and distribution networks, storage tanks and consumer meters presented by the MoEW. Moreover, on October 2012, the cabinet passed the national strategy for the wastewater sector. The ministry is keen to attract private sector participation to water and wastewater projects. If implemented, both plans offer good opportunities for U.S. technology.
Other infrastructure projects also offer opportunities to foreign investors. The Council for Development and Reconstruction (CDR) is responsible for tendering and procuring funding for government physical infrastructure projects (electricity, telecommunications, roads, and public transport); social infrastructure (education, public health, social and economic development, land use, and environment); basic services (water supply, wastewater, and solid waste management); and productive sectors (agriculture, irrigation, ports, airports, tourism, and government buildings). Public infrastructure opportunities lie primarily in roads and highways, ports, electricity, education, solid waste management, wastewater, and water supply. As of the end of 2012, the CDR possessed a total of $1.5 billion in loans and protocols ratified by parliament but not yet disbursed.
A foreigner can establish a business under the same conditions that apply to a Lebanese national, provided the business is registered in the Commercial Registry. Foreign investors who do not manage their business from Lebanon do not need to apply for a work permit. However, foreign investors who own and manage their business from Lebanon must apply for an employer work permit and a residency permit. The employer work permit stipulates that the investor's share in the capital not be less than $67,000 and that the investor pledge to hire three Lebanese and register them at the National Social Security Fund (NSSF) within six months. All companies established in Lebanon must abide by the Lebanese Commercial Code and regulations and are required to retain the services of a lawyer. The judiciary upholds the sanctity of contracts. There are no sector-specific laws on acquisitions, mergers, or takeovers, except for bank mergers. Bidding criteria are clear and non-discriminatory, but the evaluation process is often opaque.
Lebanese law does not differentiate between local and foreign investors, except in land acquisition (see property section below). Foreign investors can generally establish a Lebanese company, participate in a joint venture, or establish a local branch or subsidiary of their company without difficulty. Specific requirements apply for holding and offshore companies, real estate, insurance, media (television and newspapers), and banking.
The establishment of joint-stock corporations, limited liability, and offshore and holding companies is allowed under Lebanese law. A joint-stock corporation (Societe Anonyme Libanaise - SAL) is governed by Legislative Decree No. 304, dated January 24, 1942, under the Commercial Code. Limitations related to foreign participation include a general limitation on management participation (Article 144 stipulates that the majority of the board of directors should be Lebanese); indirect limitation with regard to acquisition of capital shares (Article 147); limitation on capital shares with regard to public utilities (Article 78); and limitation on capital shares and management with regard to exclusive commercial representation (Legislative Decree No. 34/67, dated August 5, 1967). In the financial sector, most establishments, including banking and insurance, must take the form of a joint-stock company.
A limited liability company (Societe a Responsabilite Limitee - SARL) is governed by Legislative Decree No. 35, dated August 5, 1967. It can be fully owned by non-Lebanese, and the management of the company can be controlled by non-Lebanese.
Holding and offshore companies follow the legal form of a joint-stock corporation and are governed by Legislative Decree No. 45 (on holdings) and Legislative Decree No. 46 (on offshore companies), both dated June 24, 1983, and amended by Law No. 19, dated September 5, 2008. A foreign non-resident chairman/general manager of a holding or an offshore company is exempt from the obligation of holding work and residency permits. Law No. 772, dated November 2006, exempts holding companies from the obligation of having two Lebanese persons or legal entities on their board of directors. All offshore companies must register with the Beirut Commercial Registry. Offshore banking, trust, and insurance companies are not permitted in Lebanon.
Law No. 296, dated April 3, 2001, which amended the 1969 Law No. 11614, governs foreign acquisition of property. The new law eased legal limits on foreign ownership of property to encourage investment in Lebanon, especially in industry and tourism; abolished discrimination for property ownership between Arab and non-Arab nationals; and lowered real estate registration fees from six percent for Lebanese and 16 percent for foreigners to five percent for both Lebanese and foreign investors. The law permits foreigners to acquire up to 3,000 square meters of real estate without a permit; acquiring more than 3,000 square meters requires cabinet approval. Cumulative real estate acquisition by foreigners may not exceed three percent of total land in each district. Cumulative real estate acquisition by foreigners in the Beirut region may not exceed 10 percent of the total land area. The law prohibits acquisition of property by individuals not holding an internationally recognized nationality. This restriction is primarily aimed at preventing Palestinian refugees residing in Lebanon from permanently settling in the country.
Measure Year Index/Ranking
Conversion and Transfer Policies
There are no restrictions on the movement of capital, capital gains, remittances, dividends, or the inflow and outflow of funds. The conversion of foreign currencies or precious metals is unfettered. Foreign currencies are widely available and can be purchased from commercial banks or money dealers at market rates. There are no delays in remitting investment returns except for the normal time required by the banks to carry out transactions. There are no surrender requirements for profits earned overseas.
Expropriation and Compensation
Land expropriation in Lebanon is relatively rare. The Law on Expropriation (Law No. 58, dated May 29, 1991, Article One), as well as Article 15 of the Constitution, clearly specifies that expropriation must be “for the public utility” and calls for fair and adequate compensation. Compensation is paid at the time of expropriation and is often perceived as below market value. The government does not discriminate against U.S. investors, companies, or their representatives in expropriation.
The government, with the agreement of the parliament, established three real estate companies to encourage reconstruction and development in Greater Beirut: private corporation "SOLIDERE" for Beirut's downtown commercial center, public company "ELYSSAR" for the southwest suburbs of Beirut, and public company "LINORD" for northern Beirut. While LINORD has been dormant for years, Elyssar’s projects have stalled for the last six years. These companies have been granted the authority to expropriate certain lands for development, although in doing so they have faced serious legal challenges from landowners and squatters. Several court cases are still pending against SOLIDERE after 17 years of litigation.
Over the last few years, the government has faced problems with previously awarded contracts and resorted to international arbitration to resolve them. In 2005, the International Chamber of Commerce's Arbitration Court issued rulings favorable to the two private operators of the cellular network, Cellis (which is two-thirds owned by France Telecom) and Libancell, whose contracts were terminated by the government in 2001. The government negotiated a settlement and paid them compensation. The government has also recently settled a dispute with a Chinese contracting company working to expand the northern port of Tripoli.
Cases in Lebanese courts are not settled rapidly because of archaic procedures, a shortage of judges, inadequate support structures, and a traditional slowness in the handling of cases. Commercial litigation in Lebanese courts takes, on average, eight to ten years. Politicians and powerful lobbying groups sometimes interfere in the court system. Local courts accept investment agreements drafted subject to foreign jurisdiction, if they do not contradict Lebanese law. Judgments of foreign courts are enforced subject to the "exequatur" obtained.
The commercial code (Book No. 5, Articles 459-668) and the penal code govern insolvency and bankruptcy. By law, a secured creditor has a right to share in the assets of a bankrupt party. Verdicts involving monetary values in contract cases are made according to the currency of the contract or its equivalent in Lebanese Lira at the official conversion rate on the day of the payment. Workers can resort to the Labor court and the National Social Security Fund to recover pay and benefits from local and foreign firms in bankruptcy.
International arbitration is accepted as a means for settling investment disputes between private parties. The Lebanese Center for Arbitration was created by local economic organizations, including the four Lebanese chambers of commerce, industry, and agriculture. The Center acts as an arbitrator in solving domestic and international conflicts related to trade and investment. Its statutes are similar to those of the International Chamber of Commerce in Paris.
Lebanon has an administrative judicial system that handles all kinds of disputes involving the state. The government accepts binding international arbitration of investment disputes related to contracts between foreign investors and the state. In the case of a concession or a project granted by contract by the state, the government does not accept binding international arbitration unless the contract includes an arbitration clause that obtained prior approval by cabinet decree. However, there is an exception for investors of countries that have achieved a signed and ratified investment protection agreement with Lebanon that stipulates international arbitration in case of dispute. Lebanon is a member of the International Center for the Settlement of Investment Disputes (ICSID - Washington Convention). In 2007 Lebanon ratified the New York Convention of 1958 on the recognition and enforcement of foreign arbitral awards. Lebanese law is in conformity with both conventions.
The law imposes no performance requirements on investments. There are no requirements on foreign investors regarding geographic location, amount of local content, import substitution, export expansion, technology transfer, offset requirements, or source of financing. Investors are not required to disclose proprietary information as part of the regulatory approval process, except in the case of banks, which must obtain the Banque du Liban’s (BdL) approval for transfer of ownership of shares in most cases (BdL circulars are posted on www.bdl.gov.lb).
Foreign investors enjoy the same incentives as local investors. Foreigners doing business in Lebanon through a company, factory, or office must have work and residency permits. There are no discriminatory or excessively onerous visa, residence, or work permit requirements. Registration with a chamber of commerce is required for the import and handling of a limited number of products that are subject to control requirements for safety reasons, but products with special import requirements constitute less than one percent of total tradable goods. Registration at the chambers of commerce is required for ensuring that established facilities meet safety, handling, and storage requirements.
The Investment Law divides Lebanon into three investment zones, with different incentives provided in each zone, and it encourages investments in the fields of technology, information, telecommunications and media, tourism, industry, and agriculture and agro-industry. Incentives include facilitating issuance of permits for foreign labor, tax incentives ranging from a 50 percent tax reduction for five years on income tax and tax on the distribution of dividends to total exemption of these taxes for ten years starting from the date of operation (tied to the issuance of the first invoice), and exempting companies that list 40 percent of their shares on the Beirut Stock Exchange from income tax for two years. The Investment Law also allows for the introduction of tailor-made incentives through package deals for large investments projects, regardless of the project's location, including tax exemptions for up to 10 years, reductions on construction and work permit fees, and a total exemption on land registration fees. IDAL may exempt joint-stock companies that benefit from package deal incentives from the obligation of having a majority of their board of directors be Lebanese (Law No. 771, dated November 2006). Investors who seek to benefit from facilities in the issuance of work permits under "package deals" must hire two Lebanese for every foreigner and register them with the NSSF.
Other laws and legislative decrees provide tax incentives and exemptions depending on the type of investment and its geographical location. Industrial investments in rural areas benefit from tax exemptions of six or ten years, depending on specific criteria (Law No. 27, dated July 19, 1980, Law No. 282, dated December 30, 1993, and Decree No. 127, dated September 16, 1983). Exemptions are also available for investments in south Lebanon, Nabatiyeh, and the Bekaa Valley (Decree No. 3361, dated July, 2, 2000). For example, new industrial establishments manufacturing new products will benefit from a 10-year income tax exemption. Factories currently based on the coast that relocate to rural areas or areas in south Lebanon, Nabatiyeh, and the Bekaa Valley benefit from a six-year income tax exemption.
The government reduces to five percent the tax on dividends for companies listed on the Beirut Stock Exchange (BSE), companies that open up 20 percent of their capital to Arab companies listed on their country's stock exchange or foreign companies listed on the stock exchange of OECD countries, and companies that issue Global Depository Receipts (GDRs) amounting to a minimum value of 20 percent of their shares listed on the BSE.
Domestic and foreign investors may benefit from a 4.5 percent subsidy on interest on new loans granted after 1/1/2012 amounting to up to $10 million per project (with a ceiling of $40 million) provided by banks, financial institutions, and leasing companies to industrial, agricultural, tourism, and information technology establishments. The subsidy extends for a maximum of seven years, with a grace period of two years. Investors can also benefit from loan guarantees from Kafalat, a semi private financial institution that assists small and medium-sized enterprises (SME) in accessing subsidized commercial bank loans, with a grace period of two years.
Domestic and foreign investors may also benefit from new regulations issued by the BdL in summer 2009 and valid until December 31, 2013, exempting commercial banks from obligatory reserves on Lebanese Lira and U.S. dollar deposits against new loans for housing, business and educational premises, education, and environmentally friendly projects. This change enables banks to grant loans at lower interest rates, and in the fall 2010, the BdL expanded this program to help lending for all projects that save energy. The BdL launched in January 2013 a financial package of approximately $1.33 billion in Lebanese Lira loans to commercial banks to boost economic growth; this new program of incentives aims to stimulate lending at a reduced cost for housing loans, investment in productive sectors, and energy-saving and renewable energy projects for a one-year term.
Customs exemptions are granted to industrial warehouses for export purposes. Companies located in the Beirut Port or the Tripoli Port Free Zone benefit from customs exemptions and are exempt from the value-added tax (VAT) for export purposes. They are also not required to register their employees with the NSSF if they provide equal or better benefits.
Right to Private Ownership and Establishment
The right to private ownership is respected in Lebanon. Foreign private entities can establish, acquire, and dispose of interests in business enterprises and can engage in all kinds of remunerative activities.
Protection of Property Rights
The concept of a mortgage exists, and secured interests in property, both movable and real, are recognized and enforced. Such security interests must be recorded in the Commercial Registry and the Real Estate Registry. The Real Estate Law governs acquisition and disposition of all property rights by Lebanese nationals, while Law No. 296, dated April 3, 2001, governs real estate acquisition by non-Lebanese (see 1 - property section).
Lebanon’s legislation generally aims to provide Trade-Related Intellectual Property Rights (TRIPS) intellectual property rights (IPR) protection, although Lebanon is not a member of the World Trade Organization (WTO). The MoET Intellectual Property Protection Office (IPPO) has spearheaded efforts to improve the IPR environment, but increased political will and additional resources are needed. In collaboration with WIPO, MoET conducted several public and in-house seminars in 2012, focusing on raising awareness and improving technical capabilities. The IPPO is also collaborating with the European Patent Office to publish registered patents in Lebanon and implement a new industrial property automation system for administrative processes from application reception to registration, including post-registration actions such as amendments, assignment, renewal, and annuities. The MoET officially launched online trademark registration in January 2013 as part of its overall efforts to enhance its online services portal.
In 2011, the GoL and the U.S. Government began work on developing an action plan and setting a bilateral IPR working group to foster communication and sharing of best practices on IPR issues, although the working group has not convened since. The U.S. Trade Representative’s Special 301 annual review of intellectual property protection worldwide has kept Lebanon on its watch list since 2008. The establishment of the Cyber Crime and Intellectual Property Unit at the Internal Security Forces (ISF) in 2006 has led to moderate progress in IPR enforcement. During 2012, the government raided a number of shops and warehouses and seized counterfeit material. Although cable television piracy persists, following a series of lawsuits from major cable TV operators, illegal cable providers are now paying a fee to the respective right holders. Meanwhile, the International Intellectual Property Alliance (IIPA) noted that the level of software piracy reached 72 percent in 2010 with losses totaling $28 million. The IIPA has noted incremental progress in copyright protection in recent years, although serious problems remain.
According to the Business Software Alliance (BSA), Lebanon’s piracy rate reached 71 percent in 2011, a slight improvement from 72 percent the prior year. Piracy-related losses were valued at $52 million in 2011, up from $49 million in 2010. Unauthorized copies of internationally patented pharmaceuticals continue to be approved by the Ministry of Public Health, although Decree No. 571 issued in 2008 contains requirements on the treatment of undisclosed information in registration applications.
Existing intellectual property rights laws cover copyright, patent, trademarks, and geographical elements.
-- Lebanon's 1999 Copyright Law largely complies with WTO regulations and needs only minor amendments to become fully compatible. Amendments to the current law remain under discussion by the relevant ministries. Registration of copyrights in Lebanon is not mandatory, and copyright protection is granted without the need for any registration.
-- A modern and TRIPS-compatible Patent Law, approved in 2000, provides general protection for semiconductor chip layout designs and plant varieties, but no adequate coverage is provided for trade secrets. Amendments to the Patent Law, regarding undisclosed information, are still being studied by the relevant ministries. The Lebanese legal regime does not require examination, prior to registration, of patents for novelty, utility, and innovation. Simple patent deposit is required at the MoET, where the application is examined only for conformity with general laws and ethics.
-- The Council of Ministers approved the draft of a new industrial design and trademark law in October 2007 and a geographical indications law in May 2007, and both now await parliamentary ratification. While the 1924 Law on Industrial Property does not require examination of trademarks and calls for simple deposit, partial examination of trademarks prior to registration became the norm starting in 2001. Registration of industrial and commercial trademarks takes about two weeks.
-- Lebanon signed the Singapore Treaty on Trademarks in December 2006, and the treaty is awaiting parliamentary ratification.
-- Lebanon's parliament ratified the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty (WPPT) in February 2010. Ratification documents have not yet been deposited with WIPO, however, because implementation of these treaties requires an amendment to Lebanon's copyright law that has been submitted and is still awaiting parliament's ratification.
-- Lebanon signed a Trade and Investment Framework Agreement (TIFA) with the United States in November 2006. (See section B.)
-- Lebanon began pursuing WTO accession in 1999, but has done little in recent years to advance this process. A USAID-funded technical assistance project staffed by consultants from PricewaterhouseCoopers and Booz Allen Hamilton worked with the GoL from May 2000 to October 2007 (and with Middle East Partnership Initiative funding from November 2007 to September 2009) to revise, update, and draft appropriate laws to facilitate WTO accession. In December 2009, USAID renewed this project, contracting Booz Allen Hamilton to continue providing support for Lebanon's WTO accession for the next three years, with an emphasis on bolstering the private sector’s capacity to hold the government accountable for needed trade reforms. The project officially ended in October 2012.
Transparency of the Regulatory System
Private sector companies should be wary when bidding for public projects. Transparency, clear regulations, and fair consideration of bids have never been the rule in Lebanon. There is no one specific law regulating all aspects of government procurement in Lebanon. Government administrations often award contracts by mutual agreement, without calling for a tender, and the government does not always establish clear rules of the game.
In Lebanon, the procedures necessary for business entry, operation, and exit are not streamlined. However, the process does not discriminate against foreign investors.
Red tape plagues bureaucratic procedures. International companies are faced with an unpredictable, opaque operating environment and often encounter unanticipated obstacles or costs late in the process. Even so, according to the World Bank's Doing Business 2012 report, it still takes entrepreneurs five steps and nine days to start a business in Lebanon, compared to the average of 8.2 steps and 20.9 days in the MENA region. The report may be accessed at http://www.doingbusiness.org.
The MoET launched in December 2011 a project to assess and redesign the overall business processes of the ministry, expected to be finalized in mid-2012. The purpose is to improve the quality of the services offered to citizens, reduce the number of complaints and automate value-added processes.
The government does not publish proposed laws and regulations in draft for public comment. Even so, the normal practice when preparing legislation is to form a drafting committee composed of both public and private sector stakeholders. However, Telecom Law No. 431 requires the TRA to issue regulations in draft for public consultation in an effort to ensure full transparency and enable the general public to play a role in shaping future regulations. In general, legal, regulatory, and accounting systems are consistent with international norms.
Lebanon still lacks an access to information law that aims at promoting transparency at both the private and public sector levels. According to Transparency International (TI)’s Lebanon chapter, the Lebanese Transparency Association (LTA), several ministries took initiatives to promote transparency, while the Lebanese Parliament failed to enact new legislation. In 2012, the MoF updated its website to include a section on e-taxation allowing citizens to acquire an electronic tax ID to assist them in facilitating tax declarations. Citizens with a tax ID are no longer obliged to physically visit the tax departments to declare their taxes. The new tax inquiry section also allows citizens to identify the amount of tax on their properties without visiting the tax departments. The Ministry of Tourism inaugurated the first one-stop shop to process licensing requests from private developers of touristic facilities. Initiated in collaboration with the Minister of State for Administrative Reform, the office will be fully operational as of early 2013. The Ministry of Economy and Trade continued publishing its consumer protection newsletter, inaugurated in 2010.
The Ministry of Finance (MoF) has increased disclosure and publication of information building up to ten regular publications by 2011 on public finance, debt, foreign trade, and foreign aid, in addition to thematic reports and annual budget brief notes, all available online. The monthly report “Salaries, Wages and Related Benefits” was launched in February 2011. The “Citizen Budget 2010,” developed in collaboration with the Lebanese Transparency Association (LTA) to facilitate the ordinary citizen’s understanding of the government budget revenues and spending was also published and disseminated in 2011.
As part of the National Network for Access to Information, the LTA, MoF and other stakeholders, helped draft laws on access to information and whistleblower protection, both which still await parliamentary ratification. In July 2012, LTA was commissioned by the World Bank Institute to implement a three-month quick win project aimed at promoting access to information in Lebanon, in collaboration with the Lebanese Development Network (LDN), Maharat Foundation and The Lebanese Parliamentarians Against Corruption (LEBPAC).
Under its Lebanon Anti-Bribery Network, the LTA also launched the Code of Ethics and Whistleblower Protection for small and medium enterprises (SMEs) and provided a workshop for owners and directors of companies on the importance of ethics and on ways of applying the code.
Efficient Capital Markets and Portfolio Investment
Lebanon places no restrictions on the movement of capital in or out of the country, whether for investment or other purposes. The government permits the free exchange of currencies, precious metals, and monetary instruments, both domestically and internationally. According to the World Bank’s latest estimates, remittance inflows to Lebanon remained almost constant at $7.6 billion for 2011, or 19.1 percent of total remittances to the MENA region. Lebanon is considered by the World Bank to be one of the top recipients of remittances relative to the size of its economy. Remittances as a share of GDP reached 18 percent in 2011, the highest in the region and one of the highest among developing countries.
Credit is allocated on market terms, and foreign investors can get credit facilities on the local market. The private sector has access to overdrafts and discounted treasury bills, in addition to a variety of credit instruments, such as housing, consumer, or personal loans, and loans to SMEs. The International Finance Corporation (IFC) and the European Investment bank (EIB) have been separately extending financial facilities through the Lebanese banking sector to help SMEs in specific productive sectors, such as high-tech, industry, and tourism. Since 2007, the Overseas Private Investment Corporation (OPIC) has extended $300 million in credit line guarantees through Citibank to select Lebanese banks for private sector lending.
The Beirut Stock Exchange (BSE) quotes six commercial banks, one investment fund, 25 sovereign Eurobond issues (23 in U.S. dollars, one in euros, and one in Lebanese Lira), and four companies, including "SOLIDERE," one of the largest publicly held companies in the region. Trading is a combination of auction and continuous trading. In spring 2008, the BSE authorized e-trading. Legislation allows the listing of tradable stocks or papers on the BSE. On August 4, 2011, the Parliament endorsed both the Insider Trading Law and the Capital Markets Law to regulate and supervise capital market activity. The BSE suffers from lack of liquidity and efficiency with low trading volumes in the absence of significant institutional and foreign investors and an annual trading volume of only 4.1 percent of market capitalization. The weak market turnover is discouraging investors from committing funds to the market and is discouraging issuers from seeking listings on the BSE. On June 27, 2012, the cabinet appointed the National Council for Financial Markets in Lebanon, which would act similarly to the U.S. Securities and Exchange Commission, in an attempt to provide more confidence to foreign investors and stimulate market activity. The Capital Markets Law calls for the corporatization and then privatization of the BSE within a two-year period from the date this Council is appointed. Lebanon hosts the headquarters of the Arab Stock Exchange Union.
The banking regulatory system is transparent and consistent with international norms. Banks conform to Bank for International Settlement (BIS) standards and International Accounting Standards (IAS). In 2011, the BdL issued three circulars for corporate governance in the banking sector.
Lebanon has legislation regulating issuance of and trading in bank equities. Law No. 308 on unification of bank shares allows banks to increase their capitalization and shareholder base, as well as to optimize trading of bank shares on the BSE. Parliament has ratified a law on asset securitization. There are no restrictions on portfolio investment, and foreign investors can invest in Lebanese equity and fixed income paper.
The banking system enjoys a high financial standing with a capital adequacy ratio of 11.6 percent in September 2012 (compared to eight percent as set by Basel II) and sound liquidity, with a foreign currency prime liquidity ratio exceeding 45 percent of foreign currency deposits. The Lebanese banking sector has complied with Pillar I and II of the Basel II Accord (new capital adequacy ratio and supervisory review process on economic capital of banks respectively). The BdL and the Banking Control Commission (BCC) will continue issuing new circulars requiring banks to comply with Pillar III (transparency and market discipline) of Basel II. The BdL and the BCC have established a steering committee to follow up on the new Basel III Accord. In December 2011, the BdL issued a circular that sets an agenda for the implementation of Pillar I of Basel III with more conservative rules, such as raising total equity capital adequacy ratio to reach progressively 12 percent in 2015 (compared to the eight percent required by Basel III). Lebanese banks are preparing to be FATCA compliant.
International banks established in Lebanon, such as Standard Chartered Bank, Emirates Lebanon Bank, HSBC, and Citibank, remain active. Many sectors are dominated by traditional businesses in the hands of commercially powerful families. The government is trying to improve the transparency of such firms in order to help solidify an emerging capital market for company shares.
The total domestic assets of Lebanon's five largest commercial banks reached about $80.3 billion in 2011 (or about 53.6 percent of total banking assets) and $83.3 billion by the end of September 2012, according to BdL data. Meanwhile, the total consolidated assets of Lebanon’s five largest commercial banks reached about $95.3 billion in 2011 (or 57 percent of total banking assets) and $99.1 billion by the end of September 2012. About 3.3 percent of total loans were estimated as non-performing by end-October 2012, compared to 3.5 percent in 2011. Banks maintained around 79.1 percent provisions against non-performing loans as of October 2012, while the remaining 20.9 percent are covered by adequate collateral.
Lebanon is a member of the Middle East and North Africa Financial Action Task Force (MENAFATF) and received its first MENAFATF Mutual Evaluation during the Tenth Plenary held November 9-11, 2009, in Beirut. Lebanon was upgraded from "partially compliant" to "largely compliant" on several core recommendations, including timely feedback by Lebanon’s financial intelligence unit (FIU). As a result of this improvement, Lebanon was subject to only a normal review, and presented its first Follow Up report highlighting progress achieved during the Fourteenth MENAFATF Plenary in September 2011. The next Follow Up report will be submitted to the 17th MENAFATF Plenary in the first half of 2013.
Competition from State-Owned Enterprises (SOEs)
The GoL has a monopoly in the utility sector (Ogero for telecom landlines, and two mobile companies; Electricite du Liban-EDL for electricity production and transmission; and four water authorities); for a casino (Casino du Liban, a mixed public-private enterprise); in tobacco procurement, manufacturing, and sales (La Regie des Tabacs et Tombacs); as well as for the national airline (Middle East Airlines-MEA), whose monopoly was extended by the cabinet on September 5, 2012, for twelve years ending in 2024. Other major SOEs or public institutions include the Beirut, Tripoli, Sidon, and Tyre ports; the Rashid Karami International Fair (in northern Lebanon); the Sport City Center; and two real estate development entities, ELYSSAR and LINORD. The GoL also owns shares in Intra, a mixed public-private investment company.
While, by law, electricity production is restricted to EDL, there are numerous private investors operating generators across the country that sell electricity to citizens at much higher prices than EDL during power cuts. This sector remains unregulated. EDL has awarded a few concessions to privately-owned companies for power distribution in specific regions, and these companies have expressed interest in producing electricity to meet customer demand.
The SOEs and public institutions are subject to oversight by the concerned ministries. Public institutions need the approval of concerned ministries for major business decisions. They have independent boards staffed primarily by politically-affiliated individuals appointed by the cabinet in public institutions and by shareholders in SOEs. The SOEs and public institutions are required by law to publish an annual report and submit their books for independent audits as well as send their books to the Court of Audit.
The GoL currently has no plans to privatize SOEs or public institutions. MEA has put on hold its plans to list 25 percent of its shares on the BSE as a first step toward privatization pending an improvement in investor confidence in order to ensure that its shares will not be undervalued when traded on the BSE.
Corporate Social Responsibility
In the last four years, Lebanese firms and member firms of the American-Lebanese Chamber of Commerce have become increasingly aware of corporate social responsibility (CSR), good governance, and the value of providing information to customers. Firms who pursue CSR are viewed favorably. The LTA reports that more companies are approaching it for corporate governance assessments and its corporate governance guidelines and toolkits for family-owned enterprises and listed companies.
Political violence spiked in 2012, especially in the north. The massive car bomb explosion that killed Wissam al-Hassan, a senior official in Lebanon’s Internal Security Forces, along with two others and wounded more than 100 bystanders on October 19, 2012 represented one of the largest and most deadly attacks against a public official since the 2005 assassination of former Prime Minister Rafiq Hariri. Sporadic clashes were witnessed across the country, but especially in Tripoli, where supporters and opponents of the Syrian regime sometimes employed heavy weaponry in upsurges of violence that have left at least 44 dead since March 2012. Demonstrators in Tripoli protesting the controversial “Innocence of Muslims” video burned to the ground a co-located Kentucky Fried Chicken (KFC) and Hardee’s restaurant on September 14, 2012. Lebanese security forces have repeatedly deployed to areas of violence to stop fighting, and provided additional security to American franchise restaurants in the weeks following the KFC/Hardee’s attack. The public feared, however, that as the crisis in Syria continued to worsen, it would further spill into neighboring Lebanon, and there were numerous instances of incursions by Syrian forces across the border into Lebanese territory (much of the border is not demarcated, contributing to further instability on the border).
Lebanon is one of several countries for which the U.S. Department of State has issued Travel Warnings because of long-term, protracted conditions that make a country dangerous or unstable. U.S. companies and visitors are advised to assess carefully the situation in Lebanon by consulting the Department's Travel Warning and its Consular Information Sheet at http://travel.state.gov/. These documents contain essential security and safety information on travel to Lebanon.
The U.S. government considers the potential threat to U.S. Embassy personnel assigned to Beirut sufficiently serious to require them to live and work under significant security restrictions. These practices limit, and may occasionally prevent, the movement of U.S. Embassy officials and the provision of consular services in certain areas of the country. U.S. citizen visitors are encouraged to contact the Embassy's Consular Section for the most recent safety and security information concerning travel to Lebanon.
There is rampant corruption when dealing with the public sector. According to TI’s 2012 Corruption Perception Index (CPI), Lebanon ranked 128 out of 174 countries worldwide and 14 out of 21 MENA countries. Although this ranking represented an improvement of six spots in TI’s worldwide ranking compared to 2011, Lebanon remained among the top 50 most corrupt countries in the world.
TI noted that the country’s “deeply entrenched nepotism networks” made civil society efforts against corruption very difficult, while anti-corruption legislation exists but is not properly enforced. The LTA blames political paralysis for preventing the passage of various legal reforms (including draft laws against illicit enrichment, access to information, and whistleblower protection) on which the organization has been closely involved to combat corruption. The index measures the perception of corruption by public officials and politicians and focuses on corruption in the public sector, defined as an abuse of official power for private interests. LTA’s website: http://www.transparency-lebanon.org/
The International Finance Corporation (IFC) and the LTA signed an MOU on October 11, 2007, to establish the Institute of Directors (IoD, on Corporate Governance) in Lebanon, which became operational in 2010. The IFC provided a $250,000 grant for the institute, which will provide training courses on corporate governance, offer consultancy services, carry out research and educational activities, and organize awareness-raising private sector events in Lebanon and the MENA region. In 2011, the IoD launched a guidebook focused on Corporate Governance stories and solutions in the MENA region.
The Ministry of Tourism launched the Lebanese Observatory for Transparency in December 2012, which is aimed at fighting corruption, raising the level of transparency, and identifying achievements and practices in transparency that would constitute a role model for the community. The observatory hopes to attract Lebanon's youth to discuss and debate methods and policies that would help fight corruption and, therefore, raise confidence in the county's institutions and values.
Lebanon has laws and regulations to combat corruption, but these laws are not always enforced. According to Lebanese law, it is a criminal act to give or accept a bribe. The penalty for accepting a bribe is imprisonment for up to three years, with hard labor in some cases, and a fine equal to at least three times the value of the bribe. Bribing a government official is also a criminal act. The Central Inspection Directorate is responsible for combating corruption in the public sector, while the public prosecutor is responsible for combating corruption in the private sector. In April 2009, Lebanon ratified the UN Convention against Corruption. Lebanon is not a signatory to the OECD Convention on Combating Bribery.
Corruption is more pervasive in government contracts (primarily in procurement and public works), taxation, and real estate registration than in private sector deals. It is widely believed that investors routinely pay bribes to win government contracts, which are often awarded to companies close to powerful politicians. The MoF has implemented reforms aimed at enhancing transparency and fighting corruption including requiring taxpayers to file exclusively through mail and to pay through banks or Liban Post. In 2007, an automated document tracking system for taxpayers’ inquiries was implemented and a 24/7 call center was launched, as well as a service enabling taxpayers to handle the Built Property Tax transactions through Liban Post. In 2008, the Tax Procedures Code was ratified, unifying tax procedures, specifying deadlines for tax transactions and defining taxpayers’ rights and obligations. The MoF launched a portal in 2010, providing access to economic, financial and fiscal information. E-registration and e-filing were launched but are yet to be implemented. The MoF also initiated the development and distribution of the tax calendar in order to increase taxpayers’ awareness of their rights and obligations. In 2011, the Revenues and VAT Directorates were merged at the MoF and the collection function was transferred to the regional tax offices. In August 2012, the MoF launched the Built Property Tax online service on its portal enabling inquiries for due Built Property Tax. Also, starting September 2012, taxpayers were able to register to the e-services through the MoF portal. These services are expected to decrease corruption in the tax sector.
On the customs front, and to ensure trade facilitation, transparency, and security, remote filing of manifests and declarations was introduced in 2011. A new version of the ASYCUDA WORLD software (Automated System for Customs Data) was implemented to fill the gaps of the previous version. Transit trade applications can also be now filled online. Work has begun for Lebanon’s Industrial Research Institute to submit its certificate of conformity online to further facilitate trade procedures Customs also established an Intelligence Unit to detect counterfeiting and fraudulent operations. Nonetheless, there were press reports in 2012 of corruption and bribery in the operations of Lebanese Customs at major facilities such as the Port of Beirut. Members of the business community reported that bribery was sometimes the only way to avoid lengthy and expensive delays in the processing of imported products at the ports. Lebanese Customs hopes to implement e-payment of customs operations in the near future, a step that many hope will help combat corruption.
Bilateral Investment Agreements
The U.S. has neither a bilateral investment treaty (BIT) with Lebanon, nor an agreement to prevent double taxation, although Lebanon has expressed an interest in signing both. Preliminary discussions for a BIT began in 2001 but have been pending ever since.
In November 2006, the United States Trade Representative (USTR) and the MoET signed a Trade and Investment Framework Agreement (TIFA). Apart from pledging to foster an environment conducive to mutual trade and investment, the TIFA requires both parties to set up a United States-Lebanon Council on Trade and Investment that would meet twice a year or more to consult on trade and investment impediments and any other issues of concern. The council, which has not yet been set up, will seek and consider the views of private sector representatives in both countries. Under the TIFA, the United States and Lebanon agreed to a consultation mechanism that may be activated by either party within 60 days in the event of a dispute or other development affecting trade relations.
Lebanon signed the Euro-Mediterranean Partnership (ENP) agreement in 2002, and the interim agreement entered into force in March 2003. The final agreement came into force in April 2006 and the tariff reductions on imported products from the EU started in 2008. In 2012, Lebanon and the EU reviewed the ENP action plan and agreed on a new one covering the 2013-2017 period. In 2004, Lebanon and the European Free Trade Association (EFTA) signed an FTA. In November 2010, Lebanon and Turkey signed an association agreement establishing a free trade area that will reduce barriers to the free movement of goods, services, capital, and people between the two countries over the next ten years. Lebanon has also signed the Greater Arab Free Trade Agreement, which gradually replaced the bilateral FTAs signed with Arab countries including Tunisia, Morocco, Egypt, Iraq, Jordan, Syria, and the Gulf Cooperation Council states. A regional Economic and Trade Association Council between Lebanon, Syria, Jordan, and Turkey was announced in July 2010.
Lebanon has signed bilateral investment agreements with the following countries (in alphabetical order): Armenia, Austria, Azerbaijan, Bahrain, Belarus, Belgium/Luxemburg, Benin, Bulgaria, Canada, Chad, Chile, China, Cuba, Cyprus, Czech Republic, Egypt, Finland, France, Gabon, Germany, Greece, Guinea, Hungary, Iceland, Iran, Italy, Jordan, Kuwait, Malaysia, Mauritania, Morocco, Netherlands, OPEC Fund, Pakistan, Qatar, Romania, Russia, Slovakia, South Korea, Spain, Sudan, Sultanate of Oman, Sweden, Switzerland, Syria, Tunisia, Turkey, Ukraine, the United Arab Emirate, the United Kingdom, and Yemen.
Lebanon has signed bilateral tax conventions with 32 countries, but not with the United States.
OPIC and Other Investment Insurance Programs
On February 10, 1981, Lebanon and the United States signed an OPIC agreement in Beirut, but no investment using OPIC insurance coverage was undertaken until 1996. OPIC is currently engaged with Lebanon in three areas: insurance, financing, and investment funds. Since 2006, OPIC has worked with Citibank on a program that offers loans to the private sector (SMEs, retail, and housing) through selected Lebanese commercial banks. This program began in January 2007, and to date, OPIC has provided $300 million in credit line guarantees.
The Lebanese government's National Investments Guarantee Corporation (NIGC) continues to insure new investments against political risks, riots, losses due to non-convertibility of currencies, and transfer of profits. Other major trade/investment insurance programs operating in Lebanon include COFACE (France), ECGD (UK), HERMES (Germany), SACE (Italian), and IAIGC (Arab Consortium). Lebanon has been a member of the Multilateral Investment Guarantee Agency (MIGA), part of the World Bank, since 1994.
The average U.S. dollar value of the local currency has been pegged by the BdL at Lebanese Lira (LL) 1,507.5 to the dollar for the last 17 years; however, the dollar continues to trade in the business market at LL 1,500. The GoL has repeatedly expressed its commitment to maintaining a stable currency. With record high foreign assets (excluding gold) of $37.5 billion as of the end 2012, the BdL has the ability to maintain a stable $/LL rate for some time. Lebanon has one of most heavily dollarized economies in the world; as of October 2012, 64.7 percent of bank deposits were dollarized, and businesses commonly accepted payment (and returned change) in a combination of LL and U.S. dollars.
The 1946 Labor Law provides for written and oral contracts and specifies a maximum workweek of 48 hours (with several exceptions, notably in agriculture corporations). The law provides for the right of association and the right to organize and bargain collectively. Lebanon is a member of the International Labor Organization (ILO) Convention.
Lebanon's working population (aged 15 and above) totals 1.2 million, including foreign residents but excluding the seasonal work force, according to CAS’s 2011 Labor Market in Lebanon report. CAS estimated Lebanon's population in 2007 at 3.75 million, excluding Palestinians in the refugee camps and seasonal workers. Based on this, the IMF has extrapolated the population estimate to reach 3.96 million for 2011. According to CAS, unemployment (aged 15-64) reached 6 percent in 2009, and rates were higher among women (10 percent) than men (5 percent). The unemployment rate is somewhat attenuated because large numbers of Lebanese citizens seek work outside Lebanon, including in Arab countries and the Gulf.
Local unskilled labor is in short supply. Arab (mainly Syrians, Egyptians, and Palestinian refugees), Asian, Indian, and African laborers are hired to work in construction, agriculture, industry, and households.
Lebanon has a General Labor Confederation (CGTL), recognized by the government, whose membership is limited exclusively to Lebanese workers. The CGTL's activities are mainly limited to demanding cost-of-living increases and other social benefits for workers. The general labor-management relationship remains difficult and the Labor Law is not always properly enforced. Given its own political bias, the CGTL has been sometimes accused of working for its political interests and of being ineffective in fighting for workers' rights.
Foreign Trade Zones/Free Ports
Foreign-owned firms have the same investment opportunities as Lebanese firms. Lebanon has two free zones in operation, the Beirut Port and the Tripoli Port. The WTO-compatible Customs Law issued by Decree No. 4461 fosters the development of free zones. The GoL also passed Law No. 18, dated September 5, 2008, to set up a Special Economic Zone (SEZ) in Tripoli to attract investment in trade, industry, services, storage, and other services and granting investors’ tax exemptions and other privileges. By the end of 2011, USAID had provided technical assistance to the GoL for preparing a feasibility study for Tripoli SEZ (TSEZ). The next steps for the GoL include appointing the TSEZ Authority, amending some laws and decrees, and implementing them to develop the zone.
Foreign Direct Investment Statistics
There are no official statistics available on foreign direct investment (FDI). IDAL estimated inflows of $4 billion, close to the 2011 level but 20 percent less than in 2010. Banking sources estimated that construction and real estate account for the largest part of foreign investment.
The World Bank estimated FDI in Lebanon at $3.96 billion in 2011 amounting to 9.6 percent of GDP, constituting a decline of 20.5 percent from $4.98 billion or 12.7 percent of GDP in 2010. Separately, the According to the Arab Investment and Export Credit Guarantee Corporation projected that FDI flows in Lebanon would reach $3 billion in 2011, down from $5 billion in 2010, which represents a 39.5 percent drop. Lebanon had been the top per capita recipient of FDI in the region, receiving flows worth an estimated 12.6 percent of GDP in 2010 (versus only 7.2 percent in 2011). FDI inflows to Lebanon were estimated to account for 5.4 percent of total FDI in Arab countries in 2011, down from 7.5 percent of aggregate inflows in 2010. Lebanon is expected to post the fifth steepest drop in FDI in the Arab world and to be among 13 Arab countries that will post a decline in FDI in 2011.
European and Asian companies have won most of the government contracts in the fields of electricity, water, telecommunications, transportation, and infrastructure. This could be attributed to the unstable political and security situation in Lebanon that discouraged U.S. companies from bidding on projects, bilateral financial protocols signed between Lebanon and some European countries that provide grants and soft-term loans, or corruption and/or undue influence in bidding and contracting processes. However, U.S. companies have won contracts in solid waste treatment and landfill and some contracts in the power sector, air transport, and media.
The U.S. Embassy in Beirut tracks U.S. companies' activities in the Lebanese market. The Embassy actively lobbies to support U.S. companies bidding on projects, providing equal support to all U.S. bidders via letters and direct meetings with senior Lebanese government officials and demanding fair consideration of U.S. companies that are bidding on business opportunities in Lebanon. In some cases, the Embassy and the U.S. Department of Commerce have provided higher-level advocacy from Washington. The Embassy encourages U.S. companies bidding on projects to contact the Embassy's Economic/Commercial Section for assistance and advocacy.