The Economy: Lebanon ‘s economic system and markets are best described at the morning of the new millenary by a private and broad economic activity and an openness to abroad with perfect capital and labour mobility. The private sector contributes to around 75 % of aggregative demand, a well-diversified sector that covers the entirety of economic sectors and is a major pillar for growing and recovery.
The Lebanese economic system is besides a typical unfastened economic system with a big banking sector equivalent to more than 2.5 times its economic sector and supplying an of import support to aggregate demand.
Major Sectors of the Economy
Lebanon ‘s broad economic system is based on competition and private ownership. Servicess and banking sectors predominate, stand foring 70 % of the state ‘s gross national merchandise. Agriculture constitutes 10 % and the industrial sector constitutes the staying 20 %.
Servicess
The Lebanese economic system is based chiefly on the service sector, which accounts for about 60 per cent. of GDP ( down from about 70 per cent. in the 1970 ‘s ). Major subsectors are commercialism, touristry and fiscal services. Other constituents include wellness attention and higher instruction.
Commerce
The Port of Beirut plays an of import function in Lebanon ‘s commercial activities. After World War II, Beirut became the most of import Arab port on the Eastern Mediterranean functioning the Arab universe. A free-port country for re-exports added to Beirut ‘s success. During the struggle, the Port of Beirut virtually closed down and related commercialism land to a arrest.
Work has been completed on the Reconstruction of the Duty Free Zone at the Port of Beirut to reconstruct its pre-war capacity and a undertaking for the rehabilitation and enlargement of the Port of Beirut is underway.
Tourism
The strategic place of Lebanon, its mild clime and natural beauty, dwelling of snow-capped mountains, vales and the Mediterranean Sea, make it a natural tourer attractive force. Apart from its privileged geographical and natural state of affairs, Lebanon benefits from qualified and experienced human resources in the touristry industry.
Prior to the eruption of the struggle, touristry ( including hotels and eating houses ) contributed about 20 per cent. to Lebanon ‘s GDP. This is noteworthy given that, at that clip, the international touristry industry was non every bit developed as it is today.
Significant private investing is presently being made in the modernisation and enlargement of this sector and international hotel companies have returned to Lebanon. Casino du Liban, which historically constituted a major tourer finish, reopened in 1996. Lebanon is the lone state in the Arab universe that offers skiing and related winter athleticss activities.
The largest ski resort in the state has been expanded and modernized. The Government believes that, because of the return of peace and stableness to the state and with the development of the necessary substructure, touristry will once more lend significantly to Lebanon ‘s economic system. Lebanon ‘s touristry industry besides relies on the big figure of Lebanese life abroad, who return on a regular basis to the state during the summer season.
Financial Services
From the 1950s to the start of the struggle in 1975, Beirut was the part ‘s fiscal services centre. At the oncoming of the oil roar starting in the 1960s, Lebanon-based Bankss were the chief receivers of the part ‘s petrodollars.
Presently, the chief fiscal services offered are commercial banking, investing banking and insurance. Despite the struggle and a crisis in the late 1980s affecting a little figure of Bankss, the commercial banking sector remains a centrepiece of the Republic ‘s service-oriented economic system. The Lebanese banking sector witnessed unprecedented growing during the period from 1992 to the present. Entire sedimentations with commercial Bankss increased from U.S. $ 6.5 billion at the terminal of 1992 to U.S. $ 33.9 billion at the terminal of 1999.
In add-on, since 1996, Lebanese Bankss have been successfully accessing the international capital markets. Specifically, since 1996, several Bankss raised over U.S. $ 2 billion on the international debt markets and three Bankss raised about U.S. $ 300 million through the issue of planetary depositary grosss on the international equity markets. The banking system is seen as holding a cardinal function by being the entry point for capital influxs for the part ‘s development.
- Construction: Prior: to the struggle, the belongings sector had ever been of import, with a significant part of the activity concentrated in Beirut, where the lodging demands of the metropolis ‘s quickly increasing urban population had to be met. Beirut saw an about uninterrupted roar from the late fiftiess to the early 1970s, when it expanded dramatically, finally to house half of the state ‘s population. Mountain towns and small towns near to Beirut favored by tourers, such as Aley and Bhamdoun, besides experienced a roar.
Industry
In 1995, the industrial sector ( mainly production of cement, furniture, paper, detergents, cosmetics, pharmaceuticals, batteries, garments and processed nutrients ) accounted for 17.3 per cent. of GDP, an addition from 15.9 per cent. of GDP in 1972. Virtually all industry is in private owned.
Exchange rate and monetary value stableness: coupled with the gradual autumn in Lebanese Pound involvement rates have contributed to a better environment for investing and growing in industry. Infrastructural constrictions ensuing from the struggle are being addressed as betterments in roads, telephones and electricity supply are realized.
IDAL is in the procedure of set uping free industrial zones in several countries around the state. The Government provides assorted inducements for the constitution of industrial installations in Lebanon, including financial inducements in the signifier of decreased imposts responsibilities and revenue enhancement freedoms.
From 1993 to December, 1999, the International Finance Corporation ( “ IFC ” ) carried out 31 investing and funding undertakings in Lebanon in an aggregative sum of U.S. $ 316 million, with an extra U.S. $ 256 million raised by the IFC through loan engagements. Investings during 1999 included loans to three companies for U.S. $ 50 million. As of December 31, 1999, U.S. $ 237 million stand foring IFC loans, loan engagements and equity investings had been disbursed and remained outstanding.
Energy
Lebanon has no known dodo fuel resources. Apart from comparatively modest hydroelectric resources and the import of 50-100 megawatts of electricity semi-annually from Syria, all energy demands are met with imports of crude oil merchandises, which represented over 4.2 million TOE ( metric tons of oil equivalent ) in 1995. Two state-owned refineries ( one in Tripoli and one in Zahrani ) are presently non-operational. The power sector histories for about tierce of fuel imports.
Lebanon ‘s energy sector is dominated by the state-owned Electricite du Liban ( “ EDL ” ) . EDL is a vertically incorporate public-service corporation with about 900,000 clients. Lebanon ‘s energy production installations include three thermic power Stationss, two gas turbine Stationss in each of Baalbek and Tyre and seven hydroelectric Stationss.
In add-on, two new combined rhythm power workss have been constructed. Besides its ain workss, EDL purchases power from four independent hydroelectric power manufacturers and sells sweeping to four private distributers. EDL is besides the bulk stockholder in the antecedently private-owned Kadisha company, a thermic and hydro power manufacturer and distributer to about 100,000 clients in North Lebanon.
Agribusiness
Approximately one tierce of the Republic is cultivable. The most fertile countries are located along the coastal strip and in the Bekaa vale. The diverseness of the Republic ‘s topography and clime enables cultivation of a broad assortment of veggies, fruits, industrial harvests and cereals. In 1995, agribusiness contributed about 12 per cent. to the Republic ‘s GDP, as compared to about 9.9 per cent. in 1972. Food and agricultural exports, which include forestry merchandises, provide about 10 per cent. of ware export net incomes
Civil War and Partial Recovery, 1974-82
Lebanon traditionally has had a dynamic economic system. In the old ages taking up to the Civil War, the state enjoyed high growing rates, an inflow of foreign capital, and steadily lifting per capita income. Although imports were frequently five or six times greater than exports, net incomes from touristry, theodolite trade, services, and remittals from abroad counterbalanced the trade shortage.
In 1973 ( the last prewar twelvemonth for which elaborate figures were available in late 1987 ) , GDP at current monetary values totaled US $ 2.7 billion, compared with merely US $ 1.24 billion in 1966. In 1974 GDP rose to around US $ 3.5 billion because of an addition in the value of the Lebanese lb. Per capita GDP rose from around US $ 560 in 1966 to US $ 1,023 in 1973 because productiveness increased faster than population growing and because the Lebanese lb gained land against the dollar.
Invasion and Trauma, 1982-87
Lebanon, torn by its sectarian and political differences, was further cursed by invasion and a apparently eternal intermingling of internally and externally divine struggle from 1982 onward. Beirut suffered grievously between June 6, 1982, when Israeli troops foremost crossed the Lebanese boundary line, and September 16, when they completed their ictus of West Beirut. Normal economic activity was brought to a deadlock.
Factories that had sprung up in the southern suburbs were damaged or destroyed, main roads were torn up, and houses were ruined or pitted by heavy weapon fire and projectiles. Close to 40,000 places — about one-quarter of all Beirut ‘s homes — were destroyed. Eighty-five per centum of all schools south of the metropolis were damaged or destroyed. The drawn-out closing of Beirut ‘s port and airdrome drastically affected commercialism and industry. By 1984 the World Bank and the CDR agreed that Beirut would necessitate some US $ 12 billion to replace or restitute damaged installations and to reconstruct services that had non been decently maintained since 1975.
Balance of Payments
Before the early 1900s, Lebanon by and large had a balance of payments excess. After that, nevertheless, the balance of payments state of affairs fluctuated well. In 1983 the Central Bank reported a shortage of US $ 933 million ; a twelvemonth subsequently, the shortage was set at about US $ 1.4 billion. But in 1985 there was an overall current history excess of US $ 381 million as Central Bank foreign assets rose and the authorities purchased fewer arms.
Advancement was non maintained, nevertheless ; by the terminal of May 1986, the Central Bank estimated a US $ 407 million shortage, consisting a US $ 583 million Central Bank deficit and a US $ 176 million excess at the commercial Bankss. Central Bank governor Edmond Naim complained that the deficit was caused by force per unit area from the authorities to finance runaway public outgo and a failure to make anything about the province ‘s atrophy gross base.
Government Grosss
In the pre-Civil War yearss, grosss from imposts responsibilities accounted for about half of entire authorities income. In 1984 imposts grosss fell to US $ 69.4 million, hardly one-third their 1983 degree. The Ministry of Finance stated that imposts grosss should be ten times higher than they were in 1984 to run into its marks for this gross beginning.
Alternatively, they fell farther — to US $ 24.3 million in 1985. In 1986 entire authorities disbursement was estimated at US $ 413 million against income of hardly US $ 23 million. Of this already paltry amount, imposts grosss amounted to merely US $ 9.7 million.
In the mid-1980s, the authorities still had assets to cover its fiscal duties. A November 1985 study listed as the state ‘s chief assets its gold militias ( about US $ 10 billion in foreign exchange militias ) and retentions in its Intra Investment Company.
In add-on, the study said, there were more than US $ 440 million in public sector sedimentations with the Central Bank, about US $ 200 million in secured debts owed to the province, and about US $ 86 million in assorted Central Bank assets. Against this, nevertheless, domestic public debt totaled US $ 2.5 billion, while foreign debt totaled US $ 200 million.
External Debt and Foreign Exchange
Lebanon had many economic jobs in the 1980s, but foreign debt was non one of them. Equally tardily as 1986, the entire official foreign debt was estimated at no more than US $ 250 million. The Bank of International Settlements put the state ‘s external bank liability at US $ 1.7 billion at the terminal of 1985, a diminution from US $ 1.78 billion in 1984 and US $ 1.8 billion in 1983. Of the 1986 sum, US $ 356 million was short-run ( annual ) debt.
The Organization for Economic Co-operation and Development put entire external debt, excepting International Monetary Fund ( IMF ) credits, at US $ 938 million at the terminal of 1984. Long-run debt amounted to US $ 481 million, and entire debt service, excepting IMF recognition, amounted to US $ 268 million.
Entire foreign militias greatly exceeded debt. Throughout the 1980s, the Central Bank maintained a tight clasp on the state ‘s gold militias and tried to make the same with its foreign currency militias. The authorities held 9,222,000 ounces of gold, officially valued on the bank ‘s books at US $ 42.23 an ounce and apparently worth merely US $ 389 million. In world, nevertheless, it was deserving at least US $ 3 billion.
Inflation
Statisticss from the General Labor Federation of Lebanon showed that for the first three months of 1985, there was a cost of populating addition of 30 per centum. The statistical board of directors at the premier curate ‘s office, nevertheless, put the increased cost for a individual individual populating at subsistence degree at 100 per centum over the same period. The federation ‘s statistics showed an 86- per centum rising prices rate in the 12 months stoping June 1986, with nutrient monetary values demoing the highest additions.
At the terminal of 1986, the federation estimated that during the first 10 months of 1986, the cost of life for a household of 5 had risen by 150 per centum. Monthly outgo on basic points — excepting instruction, rent, and medical disbursals — had risen from L?5,652 to L?14,083. Overall, the federation estimated that 1986 had witnessed a 226-percent addition in monetary values. By March 1987, the federation was describing a 250-percent rising prices rate, with nutrient monetary values holding increased 300 per centum over the old 12 months.
The Budget
The authorities of Amin Jumayyil had to confront the apparently insurmountable job of procuring grosss and restricting outgos in 1987. Sectarian political relations made the job even more complicated. On the gross side, the authorities lost its power to roll up imposts grosss because the reserves forces controlled the unofficial, or illegal, ports. ( Illegal ports are those non under the control of the Lebanese authorities ; no functionary imposts responsibilities are collected at these ports. )
Militia activity besides hampered the authorities ‘s ability to roll up direct revenue enhancements and even to roll up public-service corporation fees for electricity, H2O, and telecommunications. During good old ages, nevertheless, the authorities was successful at roll uping grosss in some countries around Beirut.
But in other parts of the state, and sometimes in the Beirut country, the reservess were the lone gross aggregators, enforcing their ain revenue enhancement systems on countries under their control. This state of affairs was extended in the country controlled by the LF. The LF set up an organisation in 1980 to oversee gross aggregation from about eight illegal ports under its control. The LF besides imposed levies on a assortment of private retail constitutions, from hotels and eating houses to gasoline Stationss and stores.
Drumhead
Lebanon ‘s economic system is broad and unfastened, and traditionally to a great extent oriented toward services. Lebanon served historically as a oasis for Arab capital and as a Middle East theodolite point and enjoyed a vibrant and mostly unregulated private sector. Lebanon ‘s banking and touristry sectors flourished between the Gulf oil roar of 1973 and the beginning of Lebanon ‘s civil war in 1975 by functioning regional demands. Real GDP growing was 6 % per twelvemonth from 1965 to 1975.
Despite the civil war and mounting authorities budget shortages ensuing from an inability to roll up revenue enhancements, Lebanon kept its currency stable and rising prices rate manageable until the early 1980s. Expatriate workers ‘ remittals, the flow of capital from abroad to back up assorted reservess, the PLO ‘s economic activities, and the narcotics trade all contributed to a positive balance of payments.
