Lebanon Essay ⋆ Business Essay Examples ⋆ EssayEmpire

Lebanon has a liberal economy with free transfer of capital and goods. It is a small and service-based economy—services account for approximately 71 percent of its gross domestic product (GDP), which was estimated at $24.6 billion in 2007. The main economic sectors are financial services, tourism, commerce, manufacturing, and agriculture. In particular, agriculture is the main source of employment in rural areas, but it is relatively underdeveloped with inefficient production techniques. As a result, the sector represents only a small portion of the GDP. Main agricultural products include vegetables, potatoes, tobacco, and fruits.

The majority of Lebanese industrial firms are small family-owned entities, concentrated in the capital city of Beirut. Food and beverages are the main industrial subsector, with the highest workforce and number of firms. Other industrial sectors are furniture, textiles, clothing, leather, wood products, and metal goods.

Although the industrial sector has significantly recovered since the civil war (1975–90) and regained some of its regional competitiveness, it was badly hit during summer 2006, when a conflict with Israeli forces resulted in the destruction of many factories including dairy, steel, and glass facilities.

As a result of civil war, Lebanon suffered serious physical and infrastructural damage. This led to a boost in the construction sector in the postwar era. One of the major projects was the redevelopment of downtown Beirut. The massive reconstruction program was funded by a substantial amount of external and internal funds, which led to the accumulation of a huge debt. This debt still represents a major drain on public resources. In an effort to reduce the burden of public debt, successive governments sought support from existing creditors and the country’s foreign allies. Nevertheless, despite these efforts from the Lebanese government, public debt represents a long-term problem.

Lebanon was regarded as the regional financial hub during the 1960s and early 1970s due to its developed banking sector and particularly its banking secrecy law. However, the sector suffered a slowdown during the civil war, with capital moving outside the country. The sector recovered in the postwar period, with 131 commercial banks operating in the country under license from the central bank (Banque du Liban). These banks are supervised and regulated by the Banking Control Commission. Commercial banks are the main creditors to the Lebanese government, buying high-yield treasury bills and Eurobonds to fund the government reconstruction plan, which makes them highly exposed to public debt. Lebanese commercial banks are expanding regionally in the Middle East and north Africa.

Many investment houses and brokerages were established during the 1990s, offering investment opportunities to wealthy individuals, but they had limited success. The Beirut Stock Exchange, which closed in 1975 due to the outbreak of the civil war, reopened in 1995, and trading started in January 1996. The liquidity is low, and six banks are among the only 11 listed companies. Despite the efforts to regain Beirut’s role as a financial center in the region, the process has had limited success due to the growth of many financial centers in the region such as Bahrain and Dubai.

The mild climate of Lebanon and its location on the Mediterranean coast make Lebanon a popular tourist destination, particularly among Arabs from the Gulf region. Tourism, which played a vital role in the Lebanese economy before the civil war, is one of the fastest-growing sectors.

Due to limited agricultural and manufacturing machinery, and lack of mineral resources, Lebanon depends on imported products for economic activities. Main imports include mineral products, machinery, vehicles, chemicals, and oil. According to the Ministry of Economy and Trade, imports were estimated at $11.815 billion in 2007. At the same time, Lebanon’s main exports are fresh and processed food, textiles, finished jewelry, paper, and paper products. Exports were $2.816 billion in 2007.

With a reputation for little intervention in economic activities, the Lebanese government always encourages private investment initiatives (local or foreign). In its effort to boost investment in Lebanon, the government created the Investment Development Authority in Lebanon (IDAL) under the Investment Development Law 360. IDAL is entrusted to identify investment opportunities in Lebanon, to assist local and foreign investors in their investment projects, and to provide them with a wide range of investment incentives. Under the Lebanese Commercial Law, companies can be formed either as partnerships or limited liability entities; all Lebanese companies and branches of foreign firms must be registered with the Registry of Commerce. In this respect, Lebanon offers a wide range of investment opportunities across all sectors of the economy, coupled with a moderate corporate tax rate and a multilingual, skilled, and well-educated labor force.

Bibliography:

Byblos Bank, “Lebanon This Week” (v.64, 2008);
Julian Di Giovanni and E. H. Gardner, A Simple Stochastic Approach to Debt Sustainability Applied to Lebanon (International Monetary Fund, 2008);
Dima Jamali and Ramez Mirshak, “Corporate Social Responsibility (CSR): Theory and Practice in a Developing Country Context,” Journal of Business Ethics (v.72/3, 2007);
Axel Schimmelpfennig and E. H. Gardner, Lebanon: Weathering the Perfect Storms (International Monetary Fund, Middle East and Central Asia Department, 2008);
Philippe W. Zgheib, “Managerial Ethics: An Empirical Study of Business Students in the American University of Beirut,” Journal of Business Ethics (v.61/1, 2005).

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