Innholdsfortegnelse for January 2019 i Lebanon Opportunities

The economic outlook for 2019 seems to be mixed. The economic slowdown is expected to linger as the main drivers of growth remain in a slump. The balance of payments (BoP) is likely to witness a slight improvement as imports may drop a little due to weak economic growth and exports may continue to rise with the full resumption of international trade by land. The fiscal deficit is expected to widen further due to rising interest rates which would increase the debt service. Treasury transfers to Electricité du Liban (EDL) are expected to increase with rising oil prices and thus will also contribute to further widening the deficit. Amid these circumstances, the Central Bank (BDL) plans to carry out financial engineering operations in order to defend the national currency and…

The Ministry of Industry’s (MoI) efforts to finance three industrial zones are starting to bear fruit. Three international parties have agreed to finance $120 million to establish zones in Terbol, Baalbek, and Al Qaa: European Investment Bank (EIB), European Bank for Reconstruction and Development (EBRD), and the Italian government, according to Dany Gedeon, Director General of MoI. The Cabinet approved the projects last year, and referred them to the Council of Development and Reconstruction (CDR) to follow up. The MoI will begin working to provide funds for ten additional industrial zones across the country. It also launched projects to rehabilitate 17 industrial zones around Greater Beirut. “Investors from several countries, including China, showed interest in investing in these projects,” said Gedeon. “This is proof that there is still confidence in…

The past year has not been one of the best years for the retail sector. Despite this claim by many retailers, one company, Pimak, the franchisee of French beauty and cosmetics brands Yves Rocher, plans to open in at least two new locations this year. “We are going to focus on being present outside of Beirut, in cities like Saida, Tyr, and Jbeil,” major shareholder Pierre Ashkar said. Construction on a number of malls that were scheduled to open the past year were sidelined for now. “Any shopping mall takes up to one year for it to kick off,” said Rony Aoun, CEO of Shopping Mall Advisory Group (SMAG). It will take longer for new malls. “We expect the second half of 2019 to witness positive growth,” he said. Established…

At a time when investors and regulators are hoping that the planned Electronic Trading Platform (ETP) would invigorate the stock market, the political stalemate and the economic slowdown continue to keep the Beirut Stock Exchange (BSE) at a standstill. Share prices are highly undervalued and positive signals could trigger a rebound in their prices. “Any positive signal will trigger brisk share buying regardless of the country risk, because the negative impact has already been fully accounted for in the share prices," said Jean Hanna, Deputy General Manager at Fidus. "Holders of shares don’t have any interest to sell anymore because they are well aware that prices have hit a bottom and are not going to drop further.” Rising interest rates are a double-edged sword as far as the stock market…

The Ministry of Education and Higher Education (MEHE) will receive $300 million in grants and loans for children’s educational programs. The European Union (EU) will provide $114 million to cover students' enrolment fees in primary education, teachers' salaries to support the maintenance of public school infrastructure. Part of the support will be dedicated to enhance the quality of education and strengthening the ministry's capacity to collect data and monitor quality of education services. The World Bank and MEHE have signed a $204 million agreement for Reaching All Children with Education 2 (RACE 2). The program will allow 100,000 additional local and Syrian refugee children aged three to 18 years to go to school. The program also aims to improve teacher training and strengthen education systems. BOOSTING ENTREPRENEURSHIP The MEHE will…

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Efforts over the past two years to diversify the country’s touristic offerings have paid off. The ‘Visit Lebanon’ exhibition, which was organized by the Ministry of Tourism (MoT) with input from the private sector, drew more than 150 tour operators from around the world. The initiative emphasized many of Lebanon’s best points, such as its significant cultural and religious sites, the cuisine, and the many goods and services found across the country. “Tour operators are returning to their home countries and are sending tourists to the country, and we will see more of these visitors this year,” said Pierre Achkar, Chairman of the Lebanese Federation for Tourism. “We will see visitors from a wider variety of countries in Europe.” These tourists are showing a willingness to explore more of the…

The real estate market’s engines are still running and many developers are delivering. The top ten projects in terms of built-up area (BUA) will deliver half-a-million square meters this year. The top ten projects in terms of number of units are ready to hand over more than 1,500 units as well. These projects are spread over Beirut, Baabda, Metn, Kesrouan, and Aley. In the past, large projects would have been only concentrated in Kesrouan, according to data provided by InfoPro’s Properties magazine. Hassan Dergham, Partner at Dergham & Hamdar Associates, said that expats are currently the lifeline of the real estate market. “They have been our savior in these difficult times,” he said. The company sold around 70 percent of its Loueizeh Hills project, mostly to clients whose budgets are…

Insurance companies continue to search for opportunities in the local market. They are going to concentrate on the insurance needs of individuals, according to Antoine Issa, CEO of Allianz SNA. Infrastructure insurance products, such as property insurance, fire, and construction insurance, are potential opportunities for insurance companies this year. “The sector's performance is related to that of [the] whole economy. CEDRE projects are going to push demand for infrastructure insurance-related products,” said Issa. Banks and financial institutions, which work with a lot of sensitive data, will push demand for cyber insurance policies. The product is not expected to target other industries due to limited awareness of the risk of cybercrimes in the local market. The increase in gross written insurance premiums is not expected to exceed three percent this year…

The banking sector remains one of the main pillars of the economy, with its total assets accounting for more than four times the GDP. Commercial banks’ total assets stood at $ 242.6 billion at the end of October, up 12 percent compared with a year earlier. Customer deposits, which are the main resource for financing the economy, have been witnessing a slowdown in their growth rate since 2011. They increased 1.8 percent year-on-year to $172.1 billion at the end of October. Deposits are expected to grow at an annual average of nearly three percent over the next five years, according to U.S.-based global investment bank Goldman Sachs. Makram Sader, Secretary General of the Association of Banks, said that he expects deposits to grow by little more than three percent this…

The Ministry of Public Health (MoPH) will get $150 million in grants and loans from the World Bank and Islamic Development Bank (IDB), which will be used to beef up the country’s primary health care centers (PHC). Around $90 million will be dedicated for scaling up capacity. “The PHCs will play a key role in providing the necessary medical services for needy people,” said Bahij Arbid, Advisor to the MoPH. The Syndicate of Hospital Owners will work to link these PHCs electronically with hospitals. “Patients who visit the center will be able to communicate electronically with a physician, who will diagnose the patient, view test results, and suggest treatment,” said Sleiman Haroun, Chairman of the Syndicate. The remainder of the budget will be allocated for the provision of health care…

The Central Bank (BDL) and the banking system at large have enough ammunition to defend the lira. Foreign exchange stability can also be maintained in the long run thanks to both macro and monetary fundamentals. Past experience proves the resilience of the lira. Upholding the stability of the national currency is also an unwavering and solid pillar of the country’s monetary policy. BDL is both willing and able to defend the lira, according to Marwan Barakat, Chief Economist and Head of Research at the Bank Audi group. The root cause of the pressure on the currency is the widening fiscal deficit, which is depleting the banking system’s foreign currency reserves amid unfavorable regional circumstances and a local political stalemate. Barakat said that the deficit in the balance of payments and…

ALAIN BIFANI General Director, Ministry of Finance The deficit will widen further unless the required reforms to reduce it are implemented. It remains to be seen whether the new Cabinet will take serious steps to implement these reforms. The fiscal deficit for 2018 reached LL9,470 billion ($6.3 billion). The debt service is expected to grow to LL900 billion driven by the escalation of the debt and rising interest rates. Transfers to Electricté du Liban are likely to increase as the rise in oil prices in 2018 will reflect on these transfers this year. Budget revenues are expected to realize organic growth. We have managed to achieve over the last 12 years significant progress in improving tax compliance and a better targeting of taxpayers. The closing accounts for the 1997/2017 period…

Regional discoveries of high-quality oil and gas have increased interest in kicking-off a new round of prequalification. The new round will benefit from the legislative framework recently put in place, as it follows best practices in terms of transparency, according to Walid Nasr, Chairman of the Lebanese Petroleum Administration (LPA). These practices include an open, competitive licensing process, multiple monitoring measures, and clear accounting and financial procedures. Rabih Yaghi, oil and gas expert, believes that the second round should have been postponed until the results from the first well are revealed. “If we find something, we will have better negotiating power with interested consortiums in the second round,” he said. Exploratory drilling will start this year and will take up to six years. The consortium, made up of Total, ENI,…

Various ICT subsectors will benefit from the expected improvement in the telecommunication infrastructure, which will drive private investments in untapped subsectors. Businesses seek to continuously invest in their IT infrastructure to enhance their operations and differentiate themselves from competitors. This is also essential to reduce costs. OGERO is progressing in its four-year fiber optics project (FTTX) creating a data-enabler infrastructure for the private and the public sector, said Imad Kreidieh, General Director at the authority. This moves in parallel to, and is complemented by, the seventh phase of landline infrastructure plan deployed by the Ministry of Telecommunications (MoT). Concerning the mobile sector, both operators Alfa and Touch are expanding the country’s mobile network to improve 3G and 4G coverage. MoT’s plan is to expand its 3G/4G sites, at an estimated…

The private and public sectors are waiting impatiently for the kickoff of public-private partnership (PPP) projects, with the first expected to start at the end of the year. The first is the expansion of Beirut Rafik Hariri International Airport, whose capacity will double once complete. A number of roadshows are scheduled mainly in Europe to introduce the private sector there to the potential here. The Council for Development and Reconstruction (CDR) is currently executing $4.5 billion worth of projects in different infrastructure sectors. Main projects are works on the Eastern Ring Highway of Tripoli, Hadath-Dekouane Road, and Jamhour-Baalechmay Road, as well as the expansion of other roads. The restoration of several archeological and historical sites is in the pipeline. They include Khan El Saboun, Beiteddine Palace, and Tebnine Castle. The…

Clients pay more to ensure the practicality given by wireless devices Wireless connectivity between devices is no longer just an added value. Being able to connect devices in the home and office without the use of messy wires is critical for many. Individuals appreciate mobility in their lifestyle, whether for professional or personal activities. Technology enthusiasts want more than just quality and performance. They want devices to blend in cleanly with their surroundings. Tech buyers can expect an increasing number of wireless gadgets to be linkable to their mobile phones and computers, as well as peripheral devices such as Smart TVs, printers, and cameras. MOVING TREND Retailers will see increased demand for wireless devices as that technology improves, particularly Wi-Fi and Bluetooth. According to Ardziv Der Khatchadourian, General Manager of…